During these tough coronavirus times, a personal loan can be a great help to counter your financial difficulties. However, getting a personal loan isn’t an easy task considering the current economic condition worldwide. Let’s have a look at a few factors that can affect your chances of getting a loan.
Though the eligibility criteria to avail a loan remain more or less the same, the economy has completely transformed within the last three to four months. The lockdown has affected the income pattern of people in significant ways. As a result, most borrowers are likely to default their loan amount, making it difficult for lenders to lend capital to new prospects. This is a primary reason why one needs to be extra careful now when it comes to personal loan documents if they wish to avail a loan without much trouble. Here, in this article, you will know the potential factors that might impact your personal loan eligibility during the lockdown period.
To avail a personal loan, you need to have a decent monthly income. However, during the lockdown period, most people have suffered a fall in their income which lowers their chances of getting a loan significantly. Hence, in such cases, you will be required to present other sources of income, such as income from rented properties, agricultural income, and so on. Such additional income proofs help showcase your creditworthiness and increase the chances of getting a loan.
As the global economy is suffering from a recession at the moment, many people have lost their jobs. Self-employed professionals are also suffering from financial losses. And due to such a decline in income level, consumer purchasing power has reduced drastically as well. This has further led to a steep fall in demand for goods/services and a decrease in profit margins for businesses. Hence, more people are expected to apply for a personal loan in such a critical scenario. However, the rapid surge in credit seekers will result in more competition. As a result, lenders will be forced to follow strict regulations and so, having a sound debt-to-income ratio will only increase the chances of getting a loan.
Though there is no fixed number, a debt-to-income ratio of less than 50% is generally considered good to avail a loan—the chances of default increase with a higher debt-to-income ratio.
If you have ever applied for a personal loan online before, you would already know the importance of employment stability. A stable job acts as an assurity when it comes to repayment of the loan amount and enhances the chance of getting a loan. Considering the present scenario, the risk of losing your job has increased severely, which could cause a hindrance when you apply for a loan. However, if you are working in some government sector or any reputed multi-national company, getting a loan will be a lot easier.
What measures can you take to avail a personal loan?
By now, you must have realized the effect of the lockdown on the finance sector. However, there are some measures that you can consider to improve the chances of getting a loan. Some of them are:
- If you don’t have a secure job or have an extremely high debt-to-income ratio, it is advised to go with a loan which is secure in nature. Such a loan will help you gain the lender’s confidence as the collateral will act as a protection of payment for the lender. Besides, the interest rate for the secure loan lies on the lower side as well.
- These days, almost all reputed lenders have their own personal loan mobile applications. It is advised that you check your eligibility on the personal loan eligibility calculator feature on these apps before applying. Once you are done comparing, go with the lender that charges least interest rates and offers a flexible tenure to repay the amount.
- As mentioned earlier, you are expected to showcase all your source of income to the lender to improve the chances of getting a loan.
Wrapping it up
A personal loan is a popular borrowing option for the majority of the population. The recent reduction in the interest rate and repo-rate will likely help stabilize the market in the days to come.