Struggling to secure a loan in India can be a frustrating experience, especially when you need financial assistance for essential expenses or investments. However, being denied a loan doesn’t mean you’re out of options.
By taking proactive steps to improve your financial profile and demonstrate creditworthiness, you can increase your chances of becoming eligible for a loan. Here’s a guide to help you enhance your loan eligibility and access the funds you need:
Understanding Your Credit Score
Before applying for a loan, it’s essential to understand the role of your credit score and how lenders evaluate your creditworthiness. Your credit score, typically ranging from 300 to 900, reflects your credit history and repayment behaviour. Lenders use this score to assess the risk of lending to you. Check your credit score regularly through credit bureaus and review your credit report for any errors or discrepancies.
Adhil Shetty, CEO, Bankbazaar.com, says, “A higher credit score indicates lower credit risk and increases your chances of loan approval. If your credit score is low, focus on improving it by paying bills on time, reducing credit card balances, and avoiding new credit inquiries.”
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Managing Your Debt-to-Income Ratio
Lenders also consider your debt-to-income (DTI) ratio when evaluating loan applications. DTI ratio measures your monthly debt payments relative to your gross monthly income. A lower DTI ratio signals to lenders that you have sufficient income to manage additional debt responsibly. To improve your DTI ratio, focus on paying down existing debts, such as credit card balances or personal loans. Avoid taking on new debt before applying for a loan, as it can increase your DTI ratio and raise concerns for lenders. Additionally, consider increasing your income through side gigs or part-time work to lower your DTI ratio and strengthen…
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