A personal loan is one of the best financing tools for emergency funds. With the unrestricted end-use feature of a personal loan, you can use a personal loan for meeting several financial needs. Be it making expensive purchases, home renovations, wedding expenses, medical bills or travel experiences, a personal loan offers you a stress-free stream of funds. Over the past decade, the use of personal loans has witnessed a drastic rise, thanks to the ease of application and simplified documentation. However, it is with the introduction of a personal loan app, that applying for a personal loan has become simpler than ever!
Before you apply for a personal loan, you should know that there are some qualifying requirements that you need to satisfy. You can determine the eligibility parameters by visiting your lender’s office or by choosing the best loan app and checking the eligibility criteria section there. The requirements for qualifying for a personal loan differ from lender to lender and are often based on the borrower’s age, yearly income, city of residence, credit history, and credit score. This information is easily accessible online. To help you out, we have listed the personal loan eligibility criteria along with how you can calculate them and the crucial factors that affect your eligibility.
What Is Personal Loan Eligibility?
Personal loan eligibility involves a certain set of standards that every person must check before applying for a personal loan. Eligibility criteria are an important factor in a personal loan. If you fail to comply with these criteria, then your loan application may be rejected immediately.
- Age: 21 to 58 years
- Employment Status: Both salaried and self-employed individuals can apply for this loan
- Residential Status: The applicant must be a citizen of India
- Minimum Income: You need to have a minimum income of ₹15,000 per month
- Income Proof: Salaried employee must provide 6 months of salary account bank statements and self-employed individual has to provide 6 months of bank account statements with most transactions
- Credit Score: It is suggested to have a credit score of above 700 to be eligible for a loan.
Can I Calculate My Loan Eligibility? If So, Then How?
It is straightforward to determine your eligibility for a personal loan. You can go directly to the office of your preferred lender and enquire about the qualifying requirements for personal loans. You can also visit the lender’s website or loan app and verify the personal loan qualifying requirements yourself.
Apart from that, you can also use an online Personal Loan eligibility calculator to see whether you are eligible for a Personal Loan from a lender. The eligibility criteria will show you whether you are eligible for a loan or not and if yes then what is the maximum amount you are eligible to apply for.
Following Are the Factors to Keep In Mind Before Applying for a Personal Loan
As you already know that different lenders have different eligibility requirements for a personal loan. The following are some typical elements that each lending institution considers before approving applications for personal loans:
1. Credit Score
Credit score plays a very vital role in determining your eligibility for a personal loan. A credit score is a three-digit figure that shows your creditworthiness. Your chances of receiving a favorable loan offer decrease as your score drops. A person’s credit score is determined after taking into consideration several variables, such as yearly income, open loan accounts, past loan payback history, and credit usage ratio. Before you apply for a personal loan, it is advised that you check your credit score to increase your chances of approval. If your credit score is poor, you may start working to raise it.
2. Age
Your age is another key factor in determining your loan eligibility criteria. Typically, the age criteria for personal loan eligibility are between 21 to 58 years. To guarantee that the borrower has adequate working time to repay the loan, lenders verify the borrower’s age. People below the minimum age range do not have the experience for a stable income and those who are nearing retirement may lose their steady income source. This makes it challenging for them to repay debts.
3. Monthly Income
As personal loans are unsecured loans they are not backed by collateral. Thus, your monthly income and ability to repay the loan become crucial factors. The required income varies depending on where you reside, including in metro areas, tier-1 and tier-2 cities, and villages. To qualify for a personal loan, lenders typically require a monthly income of at least ₹15,000. The higher the income, the easier it is for you to secure a loan. In addition to your income, your income-to-debt ratio also plays an important role in loan approvals.
4. Work Experience
Lenders also check your work experience when they are checking whether you are eligible to apply for a loan or not. Since lenders believe that applicants with sufficient job experience have reasonably stable financial plans and savings, they are more likely to have their applications granted. The preferable work experience for salaried individuals is for 6 months with the present employer and for self-employed individuals, the required work is at least two years in your current business.
5. Employment Status
Your employment status is another factor that determines your eligibility criteria for a personal loan. For instance, your chances of being approved for a personal Loan are higher if you work for a renowned and well-established firm than if you are employed by a start-up. For people working in MNCs or government sector jobs, it is quite easy to get a personal loan. The lender might also offer them loans at lower interest rates, as compared to those working as self-employed or with start-ups.
6. Your Debts/Debt-to-Income Ratio
The lender will consider your debt-to-income ratio and may decide not to approve the application if you have filed for a personal loan or if you are already paying large credit card bills or any other type of loan like a home loan, two-wheeler loan etc. This is because a significant proportion of your monthly paycheck may be used to pay off debt, leaving you with inadequate funds to meet your household commitments. This way your creditworthiness decreases as the lender may think that you will not be able to pay off your loan EMIs on time.
Conclusion
So, these were the list of parameters to avail of a personal loan. Your credit score may suffer if your loan application is rejected. Whether you are applying using a loan app or visiting your lender’s office you must check these eligibility criteria before initiating the application process.
We recommend you explore different lenders and find the best loan app with the lowest interest rate and minimal documentation once you find that you are eligible for the loan. This way you can save a significant amount of money by paying less EMI on your loan. Also, before applying for a minimal Personal Loan amount, you should wait and take action to increase your eligibility if you believe you are not currently qualified.
