We’ve prepared a checklist for you to increase your chances of getting that one-shot approval on your applications.
1) Know your Credit Score and Take The Best Deal
Your credit score is one of the main determinants of your credibility. It reflects your responsibility towards paying back the credit previously obtained. This is the first thing that lenders check, on receiving your loan application.
Lenders consider a score between 700 to 750 as a good score, while 775 and above is always considered to be an excellent one. This shows high creditworthiness!
It is best to check your credit score once every year even if you are not planning to apply for any kind of credit, to make sure that your financial health is stable and considerable for credit.
2) Calculate your Loan to Income Ratio
Apart from your credit score, your income statements should also indicate your ability to service the EMI for the loan amount you wish to avail. While applying for a loan, you need to make sure that your repayment capability is high enough to maintain the regular repayment of EMI.
Lenders take into consideration your income after all tax and previous loan related EMI deductions to determine whether you would be able to pay your EMIs for the loan applied for, on time.
Lenders usually allow 40% to 50% of your net income as your EMI outgo. If your income is low ranged, then lenders insist on your EMI not crossing 40% of your income and for high ranged income groups, a concession is allowed to go up to 60%.
3) Avoid Sending Multiple Applications to Lenders
Each time a lender receives your application for a loan, it inquires about your credit score in the Credit Bureau. The Credit Bureau perceives these as hard inquiries and records them in your report.
When any lender checks your credit report and finds all the hard inquiries recorded, they get an image of you being someone who is hungry for credit and a constant borrower without any surety of paying it back. This reduces your chances of approval.
So instead of applying with multiple lenders, send an application to the one that has the best offer which you’re eligible for. Research does matter and if you do yours well, your one-shot approval won’t be missed!
4) Keep Your Documents Ready
Despite having a good credit score and a stable income, an error or mismanagement of your documents while applying, can get you in trouble and cause hindrance to the loan approval process.
Hence, always make a list of the documents required for the type of loan you need. For example, for a business loan, you would need KYC documents such as proof of ID and address, bank statement previous 6/12 months, ITR filings of two years, business continuity proof, amongst others.
Keeping these documents in check and ready, before submitting the application, provides you with an upper hand and increases your chances of receiving a faster approval on your loan.
Keeping all the above tips in mind, one must never confuse the idea of credit with money accessible in abundance whenever the slightest need be. Always know that issuing a need for credit is a call that you must take only after guaranteeing to follow through the responsibility of repaying it. This not only helps you fulfil your dreams fast but it also ensures your financial well-being.