How to make your personal loan application stand out: 7 tips

An instant* personal loan can be a valuable financial tool to help you meet your goals, whether it’s consolidating debt, covering an emergency, or funding a big purchase. Lenders review applications carefully to mitigate risks, so having a strong application can increase your chances of approval with better terms. 

In this article, we’ll share 7 essential tips to help you strengthen your personal loan application.

1. Strengthen Your Financial Profile 

A solid financial profile is important for making a positive impression on lenders, as it reflects financial discipline and stability. Your credit score, credit history, and income are among the most critical factors that influence loan approval.

Start by checking your credit score and improving it if necessary. While requirements vary across lenders, a score of 750 or above is generally preferred. To maintain a healthy score, ensure timely repayment of EMIs and credit card dues, keep your credit utilisation low, and regularly review your credit report for any discrepancies that could negatively impact your score.

Lenders also value a track record of responsible credit behaviour. Keep old credit accounts open, as a longer credit history with timely repayments can positively impact your score. Avoid defaults or delayed payments, as they can stay on your credit record for several years.

Additionally, a steady and verifiable income source, such as a salaried job in a reputed organisation, assures lenders of your repayment capacity. If you have additional income sources, such as rental earnings or freelance work, include them in your application to further strengthen your financial profile.

2. Optimise Debt Management 

Along with income, lenders evaluate your existing debt obligations to assess your repayment capacity. Your debt-to-income (DTI) ratio – which measures your total debt against your income  should be kept as low as possible. A lower ratio reassures lenders that you have sufficient disposable income to manage new loan repayments comfortably.

If your DTI ratio is high, consider paying off some existing debts before applying for a personal loan.

3. Ensure Job Stability 

Lenders often prefer borrowers who have at least one year of work experience and have been in their current job for at least six months. This signals financial stability and reduces the risk of default.

If you have recently switched jobs, it may be beneficial to wait a few months before applying for a personal loan to establish job continuity.

4. Prepare and Organise Your Documents

Personal loans usually require minimal documentation, such as identity, address, and income proofs. Having these documents ready and ensuring they are error-free can streamline the application process and prevent unnecessary delays during loan processing.

5. Use Tools and Technology to Your Advantage

Take advantage of online personal loan EMI and eligibility calculators, offered free of charge by reputed lenders such as SMFG India Credit, to make informed borrowing decisions. These tools will give you a realistic picture of potential monthly payments and the maximum loan amount you may be eligible for, helping you avoid overborrowing.

6 Avoid Too Many Applications

Submitting multiple loan applications simultaneously can trigger multiple hard enquiries on your credit report, temporarily lowering your credit score and raising a red flag for lenders.

Instead, take the time to compare lenders carefully based on eligibility criteria, interest rates, repayment tenure, and associated fees and charges (such as processing fees and prepayment penalties). Apply with a lender whose terms align best with your requirements and financial profile to maximise your approval chances.

7. Maintain a Healthy Bank Balance and Spending Habits

Lenders may review your bank statements for the past 6 months to assess your financial behaviour and spending patterns. A well-maintained bank balance and controlled discretionary spending can signal financial responsibility and stability. 

Avoid frequent overdrafts, excessive spending on luxury or non-essential items, and large unexplained withdrawals before applying.

Bottom Line

Standing out in a personal loan application process requires preparation, organisation, and a strategic approach. From strengthening your credit profile and managing existing debt effectively to selecting the right lender, each step plays a vital role in ensuring a successful application. By demonstrating financial stability and responsibility, you can position yourself as a reliable borrower and increase your odds of securing a loan with favourable terms. 

*T&C apply. Loan eligibility, loan terms, and loan disbursement processes are subject to the lender’s policy at the time of loan application.