Personal loans are an excellent option for someone who needs funds quickly. A Personal Loan can be used for any purpose including medical emergencies, weddings, or even renovating your house. Personal loans also have lower interest rates than credit cards, so it is better to use a Personal Loan to fund more expensive expenditures.
However, not everyone can get a Personal Loan. There are certain eligibility criteria which need to be met before a reputed lender will consider forwarding a loan. Usually, you can check your Personal Loan eligibility by going to the lender’s website. The lender will have different criteria for different types of loans. You can visit their Personal Loan webpage to check their Personal Loan eligibility criteria. You can also use a Personal Loan eligibility calculator if it is available on the lender’s website. Remember that the Personal Loan limit will depend on your eligibility.
In this article, we’ll provide an indicative list of Personal Loan eligibility, and factors that affect your eligibility, and discuss how to improve your eligibility.
Often, most lenders have similar criteria when they decide whether a borrower is eligible for a Personal Loan or not. These criteria can differ slightly but will largely be the same across the board.
Hence, we’ve curated a list of top criteria for you, so that you can self-check whether you are eligible or not.
The eligibility criteria for Personal Loans are usually kept as relaxed as possible so that lenders can target as many borrowers as possible. However, they still need to have certain criteria in place to ensure that they have a high chance of recuperating their loan. The criteria for eligibility may be different for salaried individuals and self-employed individuals.
These are some of the common factors that a loan professional will consider before approving your Personal Loan.
Ideally, the credit score of the borrower should be more than 750. A credit score is a score calculated by CIBIL which tells the lender how likely it is that the borrower will be able to pay back the loan. The higher the score, the more credit-worthy the borrower.
There are a lot of factors based on which a credit score is calculated. It takes into account your income, your wealth, your credit history, how many times you’ve missed credit payment, and so on.
The higher your credit score, the higher will be your Personal Loan limit.
It may seem unlikely, but your employer plays a big part in determining whether you will receive the Personal Loan or not. The reputation of your employer helps the loan professional to judge how safe your job is and how reliable your source of income is. If your employer is highly reputable, then you may receive a loan at a lower interest rate as well, from certain lenders.
If you’re self-employed, then the loan professional will judge the size of your operation, its revenue, how long it has been operating, and so on.
Age is a common criterion across all lenders. Only adults can take out a loan since minors are not allowed to enter into a contract, legally speaking. However, it may not be enough to be an adult. A lot of lenders require that the person is of at least 21 or 22 years of age so that they have sufficient maturity to understand the gravity of a loan and their responsibility to repay it.
Further, on the other side of the spectrum, the borrower must not be too old at the time the loan matures. This is because as a person ages, they may retire and their source of income may cease. Hence, their ability to repay the loan is directly affected by their age.
A Personal Loan eligibility calculator will help you figure out if you’re the right age.
Not every lender will allow you to add a co-applicant, but some lenders do. A co-applicant is someone who will be borrowing with you. This can be your spouse, your parents, your business partner, and so on. The lender will consider the repayment capacity and credit score of your co-applicant as well when they are processing the loan. Hence, Applying for a personal loan with co-applicant can increase your chances of having the loan approved.
If you’re a salaried individual, then the lender will check your employment history. If you have had frequent job changes, then this indicates that you’re not stable when it comes to employment. Hence, if a borrower’s employment is unstable then their source of income and their ability to repay the loan is also unstable.
As mentioned earlier, having a credit score which is above 750 is good for your loan application. If a borrower’s credit score is less than 750, then it will be significantly tougher for them to receive the loan. Hence, if such is the case, then improving the credit score should be the first target. Credit score can be improved in a variety of ways such as:
• Repaying all your EMI’s on time.
• Repaying your credit card bills on time every month.
• Maintaining your credit utilization ratio below 30%.
Personal loans are often the preferred financial instrument to finance people who need funding, either to achieve their personal goals or to take care of an emergency.
There would be times in your life when you may need additional funds for any personal or professional requirements.
Life is uncertain and, people have responsibilities. Whether you are planning a wedding for a loved one, paying for the education of your child, engaged in home renovation, or dreaming of expand your business, you need readily available funds.
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