A personal loan is a great way to purchase a new home appliance, your desired mobile phone, meet a medical emergency, etc. Here, you need to know that a personal loan is an unsecured loan wherein lenders sanction the loan amount without any collateral.
However, similar to all other forms of credit, financial institutions need you to fulfil certain personal loan eligibility criteria before approving this loan. There are several factors that affect your eligibility for personal loan. To know more about these factors, keep reading.
Factors Influencing Personal Loan Eligibility
Following are the factors that affect your personal loan eligibility:
- Credit Score
A personal loan is a collateral-free or unsecured loan. Due to this, your three-digit credit score found on your credit report is among the most vital factors that can affect your personal eligibility. Precisely, your credit score is the foremost criterion that lenders notice to understand your credit behaviour.
This indicates how diligently you have repaid your earlier EMIs against other loans and dues of credit cards. Lenders prefer loan applicants to possess a credit score of 750 or higher as it ensures their creditworthiness. Therefore, the higher your credit score is, greater will be the possibility of getting approval for a personal loan.
- Age
Age is the next personal loan eligibility factor, and these are inversely related. This means a younger applicant with sufficient years of employment remaining is more likely to get approval for a personal loan compared to people of higher age.
For example, if you are aged more than 50 years, a lender is less likely to entertain you with a personal loan for a long term. However, borrowers in their 30s have more chances to get a personal loan with a longer duration.
- Monthly Income
Before approval of the loan, the lenders will analyse your monthly income to ensure that it is adequate for repaying the EMIs timely. Therefore, having an additional source of income, such as rental income, will be encouraging to your lender, considering your reliability of repaying on time.
This is how your lender will have a clear impression whether you can repay the EMIs of the loan within the schedule tenure. To compute the EMIs, borrowers can use the personal loan calculator to get correct and prompt results.
- Working Experience
Borrowers with more working experience potentially possess a considerably more secure future than individuals who just stepped into their occupation. However, depending on the lender you opt for, your occupation and various other factors, the minimum required experience varies.
For example, salaried employees must have 3 to 5 years of work experience, while self-employed people should possess at least 5 years of experience in their field. Similarly, self-employed professionals should be involved for a minimum of 3 years in their specialisation area.
- Income Vs Debt Liability
Another important factor that lenders check is your current debt level to ensure that the ratio of your debt to income is low. A lower ratio ensures your monthly income remains after paying all your debts and your personal expenses. So, paying your personal loan EMI will not be burdensome for you.
Now, after having gone through the factors affecting personal loan eligibility, take a look at the eligibility criteria to apply for a personal loan.
Eligibility Criteria for Personal Loan
Eligibility criteria for a personal loan are as follows:
- The applicant should be an Indian citizen
- Age limit should be between 21 years and 67 years
- The borrower must be associated with a private or public enterprise or an MNC
- Must have a working experience of minimum of 3 years
- Applicant should retain a credit score of 750 or higher
After checking the eligibility criteria, take a look at the documents required to apply for this credit facility.
Documents Required to Apply for a Personal Loan
Documents required to apply for a personal loan are as follows:
- KYC documents (includes PAN card, passport, Aadhaar card)
- Income proof (salary slips for last 3 months and bank account statement for last 3 months)
- Employee ID card
So, these are the eligibility criteria and documents required to apply for a personal loan. Now, take a look at the steps by which you can apply for this loan online.
Steps to Apply for a Personal Loan Online
The steps to apply for a personal loan are as follows:
Step 1: Navigate to the official website of a financial institution
Step 2: Click on ‘Personal Loan’ below the loan section.
Step 3: Select on ‘Apply Now’ option.
Step 4: Input the details in the personal loan application form and click on ‘Submit’
Step 5: After this, submit the necessary KYC documents and income proof documents.
After this, your documents will undergo verification, and if found genuine, your lender will transfer the loan amount to your bank account.
These are the factors that affect your personal loan eligibility. Now, before applying for a personal loan, make sure to go through its eligibility criteria, documents required, and application process as stated above with diligence.
