How to get a personal loan if you don't meet eligibility criteria? Here are 8 easy steps
Are you struggling to get a personal loan due to eligibility criteria? Know how to improve your chances, explore alternative lenders, apply with a guarantor, or opt for secured loans to meet your financial needs.
Getting turned down for a personal loan can be frustrating, but not meeting the right standards doesn’t mean all hope is lost. Banks and financial institutions check a variety of factors such as your credit score, income, existing debts and documents before approving a loan. If you have been rejected or feel you may not qualify, here are steps to improve your chances or explore other options.
1. Understand the reason for the rejection
The first step is to find out why your application was denied. Common reasons include low credit scores, insufficient funds, high existing debt, or incomplete documentation.
Action: Contact the lender for an answer. Knowing the exact reason for the rejection allows you to better manage your problem.
Tip: Review your credit report for errors and correct any inaccuracies that could affect your eligibility.
2. Improve your credit score
Your credit score plays an important role in loan approval. A lower score may indicate a higher risk for the lender.
How to improve:
- Pay off existing debt faster.
- Limit your credit card usage to 30 per cent of the limit.
- Avoid applying for too many loans at once, as this can negatively affect your score.
Timeline: Improving your credit score can take months, so it’s important to start as soon as possible.
3. Consider low-cost loans
If your income or credit score can’t support the amount of loan you originally applied for, consider applying for a smaller loan.
Action: Recalculate your financial needs and take only as much as you need. A lower loan rate can reduce a lender’s risk and increase the chances of approval.
4. Apply with a Co-Applicant or Guarantor
Including an accompanying applicant or delinquent with severe credit issues can improve your eligibility. Their income and credit scores can make up for any shortcomings in your application.
How it works: In the event of default, the co-applicant or lender ensures payment, reducing the risk to the lender.
Tip: Choose someone you can trust with a steady income and a good credit history.
5. Find other lenders
If your application has been rejected by banks, consider other financial institutions:
- NBFCs (Non-Banking Financial Companies): These institutions tend to have more lenient eligibility requirements.
- Fintech lenders: Digital lending programs are likely to offer loans to individuals with low credit scores or income disparities.
- Credit unions: Credit unions can offer small loans with flexible terms.
6. Select a secured loan
Secured loans require collateral such as fixed deposits, gold, property, or an insurance policy. These loans typically come with more lenient standards because the borrower has assets to fall back on.
Example: A gold loan or a fixed deposit loan can provide fast cash with low interest rates.
Warning: Make sure you can repay the loan on time to avoid losing your credit score.
7. Increase your income or reduce your Debts
If your income is below the lender’s requirements, consider increasing your income or reducing your existing debt.
Ways to increase income: Take on a freelance, side job, or part-time job.
Reduce EMIs: Pay smaller loans or consolidate them into one with lower interest rates to improve your credit and income.
8. Strengthen your loan profile over time
If you aren’t approved right away, focus on becoming a stronger candidate for future loan applications:
- Build a steady income stream and maintain job stability.
- Regularly monitor and improve your credit score.
- Avoid unnecessary borrowing to maintain a healthy financial profile.
Not meeting the eligibility criteria for a personal loan is not the end of the road. By understanding the reasons for rejection and taking proactive steps—such as improving your credit score, applying with a co-applicant, or exploring alternative lenders—you can increase your chances of loan approval. In the meantime, consider secured loans or adjust the loan amount to better align with your financial situation. With time and effort, you’ll be a more competitive candidate for personal loans in the future.
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