How is your personal loan eligibility determined?

Personal loans come in handy when you are facing any kind of financial emergency or financial crunch. There is no need to run to your family or friends anymore for a loan when you can get it easily from reliable lenders such as banks, non-bank financial institutions (NBFI), or even peer-to-peer lending platforms. Personal loans are available at varying rates of interest, depending on the lender, but at rates which can be affordable for different categories of people. If you are thinking of applying for a personal loan but are not sure if you meet the eligibility criteria, what you can do to increase the possibilities of getting your loan approved, what the repayment tenures are, etc., then read on. All the information you need is right here.

How do lenders determine your personal loan eligibility? 

There are specific criteria for determining your personal loan eligibility. While this can differ from lender to lender. There are agregator sites like BankBazaar where one can compare all lenders and get pre-aprroved for personal loan as per their eligibility.

here are some of the common parameters that all lenders look for: 

  1. Age: For salaried employees, the age criteria is between the age of 21 to 60 years for a personal loan. However, for self-employed, it could be between 25 to 65 years of age. The younger you are, that much easier it is to get approval for a personal loan because lenders take into consideration the number of years you have, to pay back the loan. 

  1. Stability of income: You could be self-employed or salaried, it really doesn’t matter, as long as you are able to show consistent income over a certain period of time. If salaried, then the criterion is at least one to two years of employment with your current company with a total work experience of 3 years sometimes, according to the lender’s criteria. If you are a self- employed individual, then the criterion is anywhere from two to five years of steady income in your current business. Some lenders give extra points for having a job in a reputed company. 

  1. Credit rating: A minimum CIBIL score of 650 to 750 is ideal for getting a personal loan approved. The better your credit rating, the more the chances of your getting a loan with better interest rates, flexible tenure, higher loan amount, etc. If your credit rating is on the lower side, however, you could be charged a higher interest rate or the application could be rejected too. 

  1. Minimum income: The minimum income criterion is in the range of Rs.20,000 to Rs.25,000 whether you’re a salaried or self-employed individual. The higher your income, the higher the loan amount that you would be eligible for. 

  1. Existing credit: Some lenders will take into account your existing credit situation, such as if you already have taken out loans or have outstanding credit card payments. This will determine the rate of interest that you will be charged. 

  1. Location: The minimum amount of salary for being eligible for a personal loan can be dependent on where you live or work. In metropolitan cities or other major cities, the minimum salary required will be higher than in smaller towns. Some examples of larger cities where a higher salary is required are Bangalore, Chennai, Kochi, Delhi, Kolkata, Mumbai, etc. 

  1. Residential status: This could also have a bearing on the quantum of loan that you get approval for. If you are living in a rented accommodation, you would have lesser disposable income, which could be a factor in determining your repayment capacity and the quantum of loan that you are eligible for. 

Documents required for personal loan 

This could vary from lender to lender. However, some common factors in the documents required for getting personal loan are the following: 

  • Identity proof (driving license, Voter ID, passport, etc.) 

  • Address proof (rental agreement, passport, electricity bill, telephone bill, etc.) 

  • Recent salary slips 

  • Bank statements of the last 3 months or more 

  • Form 16 

  • For self-employed individuals, business proof and bank statements of the last 6 months will be required. 

  • Passport size photographs are also required for all applicants. 

How to increase your personal loan eligibility 

You can improve your chances of getting approved for a personal loan with a few simple tips. For example, apply for a personal loan with the bank with which you already have a customer relationship. This could be having a savings account with the bank, or a fixed deposit, or even a credit card. This will also save you time in documentation and will facilitate instant loan disbursal directly to your account in just a few minutes. Also ensure that your credit card payments and any existing loan EMIs are paid off in time without any defaults or late payments. Having sufficient balance in your credit card is by itself a good sign of financial management.  

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