Are you thinking of applying for a personal loan? You should know if you qualify before submitting your application. Lenders usually set the eligibility criteria and expect you to meet them to accept your request. From covering a medical emergency in the family to celebrating weddings, vacations, education expenses, and buying new appliances or mobile phones, a personal loan is what to seek for when you need to cover any expense.
Just like other loan types, personal loans also need you to meet the lender’s eligibility requirements. Although these criteria can differ from one lender to another, there are some requirements every lender will require you to meet to be approved for a loan.
Your eligibility for a personal loan depends upon the following factors:
- Your Age
The age of a loan applicant is a fundamental eligibility criterion. It is an indicator of financial stability and income of the borrower, making it a paramount factor in determining whether you qualify for a loan.
If you are just beginning your career or near retirement, financial institutions will offer limited credit options. An ideal time to apply for personal loan for salaried is between the ages of 25 and 55 when earning potential, and capability are at their highest levels. However, some lenders will allow you to apply for a loan even when you are 21.
- The Monthly Income
Before a lender approves a personal loan, they will assess whether you have enough monthly income to adequately make the repayment. This way, creditors can better understand your ability to meet the repayment deadline. Your repayment capacity is linked to your income and is a powerful indicator of financial stability.
Nevertheless, the criteria for minimum income varies between lenders; they will evaluate your address and employer while assessing your income. Furthermore, if you have other sources of income like rent, it will assure the lenders that you can make timely EMI payments.
- Credit Score
Lenders often refer to a credit score when analyzing your financial profile. This number reflects your capacity to repay the loan and is used by lenders as an indicator of borrowing risk. With a high credit score, you stand a greater chance of securing a personal loan amount you wish than when your credit rating is low.
Before submitting a loan application, ensure you have an impressive credit score to be eligible. Additionally, reviewing your credit scores twice yearly is beneficial; which is termed as soft inquiry. But, when multiple lenders check your score while assessing your eligibility, it is considered a hard inquiry and could hurt your credit score.
- Work Experience
Those with many years of experience at their workplaces will likely be eligible for a personal loan for salaried as compared to someone just starting in their career. However, the required years of work experience may vary depending on the lender, occupation, and other essential details.
If you are salaried, you should have at least three years in the workplace. Business owners need at least five years of expertise within their fields, and self-employed individuals must have at least three years.
The longer the job experience, the high chances of getting a loan since it shows you have a stable income. On the other hand, a short work experience may affect the total loan amount you can qualify for and lower your chances of being approved for a personal loan.
- Credit history
With personal loans lacking any security or asset, lenders rely on credit history to assess an individual’s loan eligibility and capacity to repay. Credit history measures a person’s creditworthiness and determines if they will be approved for a loan.
Paying your EMIs on time is critical to maintaining a good credit history and simplifying the personal loan approval process. By staying committed to regular payments, you will demonstrate responsible repayment habits that lenders seek out when granting loans.
- The Repayment Period
Also, the loan span is a crucial component regarding personal loan eligibility. If you opt for a shorter repayment period, you may be eligible to receive your funds at an attractive interest rate. In addition, ensure the amount fits the budget.
Suppose you select Rs. 2 Lakh personal loan; you will use an EMI calculator to easily determine the estimated amount of your EMI payments. All you need to do is enter details like the loan sum, interest rate, and term length into this tool for it to generate results quickly.
- The Existing Liability
Any existing debt, such as credit card debts or other loans, may hamper the repayment capacity. Thus, lenders must check for your existing liabilities before approving loan applications. You won’t be eligible for a personal loan if you have other outstanding loans. The lender will see you unable to pay other obligations, which means you won’t be able to repay your loans. Therefore, paying all your existing loans is ideal for improving your eligibility for another loan.
That’s all. Remember, it is best to familiarize yourself with all the eligibility requirements before applying for online personal loan. This will help curb loan rejections. Ensure you are of age, have work experience, earn a monthly income, and have a good credit score. With all these in mind, you will surely be eligible for a personal loan.