A personal loan is an instant and most viable option for dealing with a financial crisis. It has become the preferred financial tool of most borrowers to meet unforeseen needs, such as medical emergencies, unscheduled travel, education costs, marriage, accidental accidents, etc. must keep any collateral with the lender to get this loan.
Personal loan eligibility criteria
AT take out an instant loan, you must meet the eligibility criteria provided by each lender, otherwise the loan may be rejected. Here are some crucial factors that a lender takes into account when assessing an applicant’s eligibility for a personal loan.
- Credit score – The credit score of the borrower plays an important role in determining the eligibility for the personal loan. It usually ranges from 300 to 900. A credit score above 750 is considered healthy and may make you eligible for the best deals in terms of loan amount as well as interest rate.
- Age – Credit institutions provide personal loans to borrowers aged 21 to 60.
- Returned – Your monthly income is a critical part of your financial profile and helps assess your ability to repay the loan on time. Minimum income requirements differ from lender to lender, depending on the city you live in and the lender you have selected. Income stability also plays an important role, which is why lenders insist on payslips (or income proofs for self-employed / business owners) and latest bank statements as part of the documentation.
- Employer reputation – Employees and independent professionals can benefit from a personal loan. However, to be assured of timely payments, lenders prefer employees working with reputable personal loan organizations due to their stable income and job stability.
- Existing monthly obligations: It will determine eligibility as well as the maximum loan amount that can be granted. The lender will calculate your ability to repay the loan taking into account the income you earn against your monthly obligations. These would include credit card payments and EMI payments from other loans.
How to check eligibility for a personal loan?
Are you considering a personal loan, but not sure if you qualify? A personal loan eligibility calculator is a useful financial tool that can help you determine your eligibility for a personal loan. It calculates the loan amount as well as the monthly EMI of your personal loan and is extremely flexible to use. This calculator gives reliable results based on relevant information like income, age, existing monthly obligations, location, etc.
Checking your eligibility using a personal loan eligibility calculator is extremely simple. All you need to do is provide relevant details, such as your city, age, monthly expenses, and income. After that, the calculator will tell you the personal loan amount that you can acquire. However, this should only be used as a reference – actual eligibility is often decided based on many other parameters which vary from lender to lender.
How To Improve Your Personal Loan Eligibility?
If your lender offers you a lower loan amount or a higher interest rate, here are some ways to improve your eligibility.
1. Build a Strong Credit Score: A low credit score can result in your application being rejected outright. Lenders can accept applications from borrowers with low to medium credit scores, but may charge higher interest rates. It is therefore advisable to wait and improve it before applying for the loan from the concerned lender, so that you can prove your creditworthiness.
2. Pay off existing debts: A debt-to-income ratio of 50% is considered ideal if you have only one loan. And, in case you have taken out multiple loans, the combined IMEs should not exceed 50% of your income. If the debt-to-income ratio is greater than 50%, the lender may be reluctant to disburse the loan to you. Thus, before applying for a personal loan, you must repay your previous debts or reduce the number of debts so that your debt ratio is below 50%.
3. Avoid applying for several loans at the same time: sending many applications may indicate several refusals. Every rejection can hurt your credit score. So, to improve your personal loan eligibility, it is best to carefully assess your eligibility against the lender’s criteria before applying. Moreover, you have to apply with only one lender at a time and wait for their decision.
At the end of the line
The tips above can be helpful in improving your personal loan eligibility. Once you meet the eligibility criteria, submit all necessary documents to complete the application process.