A personal loan is one of the easiest and most convenient financing options that have transformed the world of finance. Today, availing an online loan is as easy as downloading an app on your phone and clicking a few buttons. Also, a personal loan is also more affordable than your credit card or other such debt instruments. As such, it makes sense to know the eligibility criteria for a personal loan, the factors that influence your eligibility criteria and tips to improve your eligibility.
The eligibility criteria for a personal online loan are very simple especially if you opt for finance through a money loan app. The basic criteria include your age, income, occupation, existing debt and your financial capability to repay the loan.
Read on to know more about eligibility criteria for personal loans.
What Are the Personal Loan Eligibility Criteria?
Personal loan eligibility criteria consist of a list of requirements that a person has to qualify for before applying for a personal loan. If you don’t meet the eligibility criteria, then your loan application can get rejected.
The eligibility criteria for salaried individuals and self-employed individuals are a bit different. We have provided eligibility criteria for both of these categories below:
Eligibility criteria for salaried individuals
- You must be an Indian citizen.
- You must be between the ages of 21 and 58.
- You must work for six months before applying.
- A ₹15000 monthly salary is required.
Eligibility criteria for self-employed individuals
- You must be a citizen of India.
- You should fall within the age range of 21 and 58.
- You must have at least two years of experience in your current line of work.
- A ₹15000 rupee monthly salary is required.
Things That Affect Your Personal Loan Eligibility
- Monthly Income
Your lender will assess if you have enough monthly income before approving the loan. The lender would want to confirm that you get a sufficient income to accommodate the monthly loan repayments. To be qualified for a personal loan, the majority of lenders normally check that the borrower has a minimum monthly income of ₹15,000. The higher the salary the better will be the loan eligibility and the higher will be the loan amount. You might also get better deals on loan interest rates, if the lender sees you as a low risk borrower.
Your age aids the lender in determining how many working years you have left. Your earning potential will be lesser if you are in your early twenties. Similarly, if you are older than 60 years old, your earning potential may decline once again. This is why lenders favor candidates between the ages of 23 and 58 for a personal loan. However, if you do not fall within this age bracket then you can consider adding a co-applicant to your loan application. The co-applicant shall fulfill all the loan eligibility requirements mentioned by the lender.
- Your Credit Score
Personal loans are unsecured loans which mean they don’t need any assets or security to secure them. In such cases, lenders rely on your credit score to determine your creditworthiness. Your credit history, which includes your loan repayments and credit card bill payments, is reflected in your credit score. If you have been paying off your bills on schedule and have a high credit score then you can easily qualify for a personal loan. Also, having a high credit score will bring you better offers in terms of interest rates and fees associated with the loan.
- Employment Status
When evaluating your loan application, the lenders may also take into account your current job situation and the status of your company. Lenders often favor candidates who have been working with a reputed firm, at a steady salary and a higher position. Remember that if you often change employment, lenders can view this behavior as a red signal and reject your loan application or offer you a loan at higher interest rate. You must also mention all your income sources while applying for a personal loan, this will help you get a great deal on your loan.
- Work Experience
Candidates with higher job experience are typically thought to have a more stable financial future than those who have recently started working. However, the minimal experience required differs depending on the lender, your occupation, and other important considerations. If you are a salaried individual you need to have a work experience of at least six months and if you are a self-employed individual you need to have a work experience of at least two years in your current business.
- Relationship With Lenders
Your eligibility for a personal loan is also impacted by your relationship with the lenders. If you have an excellent relationship with your lender, even if you don’t always have the necessary credit score or employment experience, you may still be qualified for a loan. You can check out with the financial institution where you have your salary account, or your savings account. You might also check for corporate loan offers that you might be eligible for, you can get great interest rates on these offers.
Tips to Improve Your Personal Loan Eligibility
Now that you know most of the things about personal loan eligibility, here are a few tips that you can follow to improve your personal loan eligibility.
- Always pay off your previous debts before applying for a new loan. The chances of your loan application getting rejected increase when you already have too much debt.
- Make sure that you maintain a good credit score by keeping a good debt payment track record.
- Ensure that your credit score is high.
- To increase your eligibility, demonstrate any other sources of income, such as variable compensation, bonuses, passive income from hobbies, freelance work, etc.
- Lastly, a credit card makes a significant rise in your credit score so make sure that you pay off your credit card dues on time for good credit history.
You can satisfy your financial demands with the aid of an online loan like a personal loan without providing any collateral. While applying for a personal loan, in addition to the required terms and conditions, you should review the personal loan eligibility requirements before choosing one. Personal loan eligibility plays a very important role when it comes to the approval of your loan.
Most lenders have the same eligibility criteria, but it’s prudent to check the eligibility requirements of every lender. You can find the eligibility requirements on the website or in the money loan app provided by the lenders. So whenever you are planning to apply for a personal loan, first check the eligibility criteria of that lender. Apply only if you fulfill the lender’s eligibility criteria and work towards improving your eligibility using the tips mentioned above.