Besides commercial financial institutions, NBFCs are also faring well in India’s current lending scenario, especially in the personal loan segment. As per a report, small-ticket NBFC personal loan dominates the market with 28.8% and 65.7% shares by value and volume, respectively.
However, getting approval for such loans often become difficult as NBFCs have tightened their eligibility criteria owing to rising delinquency in this segment. To avoid personal loan application rejection, individuals can follow some simple tips and boost their eligibility.
Seven best tips to get an instant approval for NBFC personal loan
Individuals prefer personal loans from NBFCs, thanks to its prompt loan turnaround time and availability of instant loan app and likes.
However, to get quick approval for this collateral-free credit at affordable interest rates, one can consider the following pointers:
- Maintain a healthy credit score
The credit score is one of the significant metrics to determine one’s creditworthiness as a borrower. Typically, a credit score of 750 and above is considered ideal to qualify for most financial products, including NBFC personal loans.
Individuals can further improve this score by paying credit card bills on time, clearing existing debts, keeping the credit utilization ratio below 30%, and so.
- Fulfilllender-specific eligibility criteria
One of the common reasons for personal loan rejection is not meeting the lender-specific eligibility criteria. Although it varies across lenders, the basic ones remain the same:
- Must be a residing citizen of India
- Age should range from 20 to 60 years
- Should be employed at an MNC or public or private organizationor have a business with required vintage meeting
- Must have a CIBIL score of 750+
Individuals may have to fulfill additional eligibility parameters as and when applicable.
- Keep the documents ready
Besides eligibility, individuals also need to complete the necessary paperwork to qualify for this credit. Following are some of the important documents required while applying for a personal loan.
- KYC papers
- Income proof
- Bank account statements
- Proof of employment or business
Note that the requirements for documents are also slightly different for salaried applicants to self-employed individuals. Thus, borrowers should remember that and keep required documents handy.
- Borrow only what is required
Individuals need to assess the exact credit requirement before applying for a personal loan from an NBFC or a financial institution. The high loan corpus increases the lending risk, and therefore getting sanctions in such cases often becomes difficult.
Lenders approve a high-value personal loan only after ascertaining the creditworthiness of individuals. In some cases, they also impose a higher rate of interest to cover the lending risk.
- Look for pre-approved offers
NBFCs like Bajaj Finserv extend pre-approved offers to existing borrowers. These are available on a host of financial products such as business loans, personal loans, etc. These offers simplify the loan application process and save time. Individuals can use their name and contact number to check their pre-approved offer online.
- Mention additional income sources
The monthly income of borrowers also plays a vital role in determining factors in NBFC personal loan approval. A higher-income indicates better repayment capacity and vice-versa. However, in this matter, the debt-to-income ratio (DIR) also comes into play.
Preferably, this ratio should not exceed 40% of the monthly income. For instance, an individual has a monthly income of Rs.50,000, and expenditure is Rs.30,000. Here, DIR is 60%. In such cases, most likely, the lenders will not approve a loan application.
One of the ways to avoid such a scenario is by mentioning all income sources on the loan application form. For instance, individuals can provide their rental income, interest-earning from various investments and likes.
- Choose a longer tenor
Individuals with low monthly incomes can improve their chances of getting approval by choosing a longer tenor. Since longer tenor ensures affordable EMIs, individuals can make monthly payments without financial burdens. A point to remember here is that a longer tenor may reduce the EMIs, but it will increase the total interest outgo. Prospective applicants can also use a personal loan EMI calculator to find the right personal loan tenor that works for them.
Besides the EMI calculator, individuals should also refer to the loan amortization schedule that shows the breakups of every EMI payable. It allows individuals to make part-prepayment plans as well.
These are the most valuable tips individuals can follow to improve their eligibility for NBFC personal loans. It becomes imperative, especially when the delinquency levels for unpaid personal loans for 30 to 180 days rose to 12.7% till March 2021. Besides, individuals should also plan the repayment to manage the debt responsibly.