How to increase your loan eligibility?

If you have taken a loan in past, you would know that loan approval process in not so easy as it is made to sound by the cheerful advertisements. A lender fully evaluates the creditworthiness of borrower and only then approves loan for any purpose. In such case, it is a good idea to make efforts beforehand to take care of various factors that will affect your loan eligibility. So that when it comes to loan approval, it becomes easier and you are in a better negotiating position. Some of the things that you can do to improve your loan eligibility are:

  1. Clear up previous loans: This sounds pretty obvious. If you have previous loans still being repayed, it means you will have less scope to accommodate one more EMI in your monthly budget. This will immediately lower your credit score and will definitely show on your credit report (like CIBIL report). Having a history of previous loans paid on time is an added advantage.

  2. Check your CIBIL report: Most banks/ credit institutions in India depend on CIBIL TransUnion Score to check borrower’s creditworthiness. If you are planning to take a loan in recent future, it is a good idea to check your report and clear up any discrepancies before applying for loans. This way, when banks enquire for your credit report while evaluating your loan application, it will be in perfect condition.

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  3. Make a joint application: This has in fact become a standard practice in most housing loans in India. Banks expect both husband and wife to become co-applicants. If your spouse is working, it increases your monthly income and thus your capacity to repay loan and hence your creditworthiness.

  4. Show accurate income figure: Many times people forget to show their variable pay, or income from other sources (like house rent) while applying for bank loan. This effectively reflects a lower monthly salary than actual and hence decreases a person’s loan eligibility. Reporting accurate monthly income will only help your case.

  5. Increase the tenure of loans that you cannot close: Sometimes, it is not possible to completely close previous loans. In such case, before applying for a new loan, you should increase the tenure of previous loans. This in effect will decrease EMIs against those loans and thus help you accommodate a new loan EMI in same monthly salary. This again helps increase loan eligibility.

  6. Go first to your own bank: A bank with which you have an account (preferably salary account) will be more willing to give you loan than a bank/ credit institution who do not know you at all. Hence to get better loan terms and conditions, it is always advised to check with your own bank first.

  7. Shop around: Do not be in a hurry to apply with multiple banks at same time. Too many apploan against property eligibilitylications, will lead to too many enquiries for your credit report. This will unnecessarily reflect credit hungry behaviour and work against you. It is better to first get all the information and offers from each bank, evaluate and then zero down on one or two best offers and then apply to only those.

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