5 factors that affect your Personal Loan eligibility
Planning to take a Personal Loan? Do you know whether or not you are eligible for one? Lenders have their eligibility requirements, and your Personal Loan application will only be approved if they find you eligible for the loan.
Be it a medical emergency in your family, wedding, vacation, child's education, or something as simple as purchasing a new appliance or even a mobile phone, a Personal Loan is an excellent way to manage a host of emergency and non-emergency expenses.
But just like all the other types of loans, a Personal Loan also requires you to meet the eligibility requirements of the lender. While the eligibility criteria can vary between lenders, there are a few requirements that every lender would require you to fulfil to get approved for the loan.
Here are 5 factors affecting Personal Loan eligibility:
1. Your monthly income
- While your monthly income is an important factor in all kinds of loan, it is often supported by security or collateral in the case of secured loans such as Home Loan, Car Loan, or Gold Loan, which is not the case with a Personal Loan. The lender would want to make sure that you have an adequate monthly income, which will allow you to repay the loan on time. The income requirements also vary based on location. It is generally higher in metro cities like Mumbai, Delhi and Bengaluru as the cost of living in these cities is high.
2. Your credit score
- A credit score is a three-digit number based on your credit history. In other words, it lets the lender understand how diligent you have been with credit like loans and Credit Cards in the past. For instance, most lenders in India rely on the CIBIL score, which ranges between 300 and 900. The higher the score is, the better are the chances of getting approved for a Personal Loan.
- Generally, lenders prefer applicants with a CIBIL score of 700 and above. If your CIBIL score is below 700, you should first try to improve your credit score before applying for the loan so that you meet the Personal Loan eligibility of the lender.
3. Your age
- Your age helps the lender ensure that you have an adequate number of working years remaining. In most cases, lenders prefer salaried applicants between the age group of 23 and 58 years.
- For self-employed professionals and non-professional, the eligible age range is between 28 years and 65 years. As people under this category are self-employed, they can continue working even after the standard retirement age of 55-58 years. Thus, the upper age limit is up to 65 years.
4. Your work experience
- Applicants with more work experience are generally considered to have a more financially secure future as compared to someone who has recently started working. The minimum experience may vary depending on the lender you choose, your occupation and other factors as well. However, a glance at the table below will help you understand what is considered favourable by most banks when applying for a loan.
|Favourable work experience
|2 years with 1-year experience in the current company
|5 years in the current business
5. Your current liabilities
- The last important factor of Personal Loan eligibility criteria is your current liabilities. If you are already repaying an existing loan, like Home Loan, Education Loan, etc. the lender would like to know about them in detail.
- With this, the lender would want to make sure that you have adequate income to repay your existing liabilities along with the new Personal Loan you are planning to take.
Getting approved for a Personal Loan
Before applying for the loan, try to understand these requirements in detail and increase your chances of availing of a loan. Moreover, as a loan applicant, you can also use these factors to negotiate on your loan terms with the bank. For instance, you can demand a favourable interest rate if your monthly income or credit score is high without much liabilities.
Check your eligibility and apply for Personal Loan, here.
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