Complete Details About Personal Loan Eligibility Criteria
Complete Details About Personal Loan Eligibility Criteria.Personal loans have become a source of credit for everyone who is in need of cash for anything whether it is for wedding, medical bills or any other need that you may have. It is, however, crucial to know the most important requirement in the application process of the loan which is the eligibility requirements of banks and other financial institutions. That is knowing this not only increases the probability of approval but also it would make the decision making process a well informed one. In this article, we’ll go over the core of personal loan requirements and give detailed descriptions of what is expected of borrowers in terms of prerequisites for a personal loan, as well as, how to increase the probability of receiving a positive response from the lending company.
1. Age
Originally, the age of the applicant is among the most significant factors that are considered by owners of potential credit. There is an issue of at least age requirement in most of the banks and NBFCs (Non-Banking Financial Companies).
Minimum Age: In general the applicant should be above the age of twenty one years in addition to being a literate person.
Maximum Age: The applicant should not be older than 60 years but the age can sometimes go up to 65 years.
2. Income Level
The next criterion by which you are eligible is your earnings; Banks have to decide if you have a sustainable flow of income to enable them repay the loan as agreed. The minimum income requirement can be credited to the fact that it differs depending on the city and the lender.
For Salaried Employees: Some of the lenders demand minimum monthly income of ₹15000. But then, this limit could be higher in metro cities including Mumbai, Delhi, and Bangalore and the other because the cost of living in such region is slightly higher.
For Self-Employed Individuals: Commonly, to get a loan, the lender may demand some evidence of receipt of steady money for the last two or three years. Your eligibility over here depends much on the Income tax returns (ITRs).
3. Employment Stability
Employment stability is also considered by the lenders while evaluating the personnel for extending personal loan applications. Another recent job letter also suggests that the candidate has stable source of income hence turning off risks for the lenders.
For Salaried Individuals: Ideally any candidate who applies should have 1-2 years of prior working experience. Lenders have also specified that candidates within their current employment for not less than six months are more favorable.
For Self-Employed Individuals: Self-employed persons should demonstrate that the business has been in existence and profitable for 2-3 years.
4. Credit Score
It is therefore important to note that credit score is one of the most likely criteria for personal loans. Mortgage rate is a bit difficult to determine because it depends on the credit rating, individuals with credit scores above 700 are most likely to get a good mortgage deal. Employers use your credit score to measure one’s behavior when it comes to handling other loans and credit cards.
Good Credit Score (Above 750): This greatly increases your chances of receiving approval on your loans and you could get better rates on interests.
Moderate Credit Score (Between 650-750): You could still be approved a loan but at a higher interest rate than you would be charged on an unsecured loan.
Low Credit Score (Below 650): A score at this or below decreases your likelihood of a loan being approved, or if approved, you get high interest rates and few selections.
Tip: They also maintain that one should check credit score frequently or pay your bills on time in order to increase it or simply keep it stable.
5. Existing Debt Obligations
When you go seeking a loan, your financial situation is evaluated before the loan is approved. Personal loans can also be dependent on the credit score and history of the borrower and if the borrower has multiple loans, or high credit card balances, then access to more personal loans may be limited.
Debt-to-Income Ratio: There is another calculation where your lenders determine you by the debt-to-income (DTI) ratio which shows how much of your monthly salary goes to the outstanding debts. Rates of return below 40% DTI are generally favorable according to the majority of the lenders.
Tip: In case you get a high DTI, then they recommend the payment of some existing debts to increase the likelihood of being granted a loan.
Complete Details About Personal Loan Eligibility Criteria
6. Employment Type and Company
Even though the default options are quite similar to the one presented above, the nature of your employment as well as the company that you work for also define your eligibility for a personal loan.
For Salaried Employees: Employers want those applicants, who are placed in reputed concern, government jobs or multinationals because of job secured. Depending on the job you’re seeking, you may encounter more stringent requirements to meet the eligibility criteria especially if you are employed by a new company or a company that is not yet popular in your country.
For Self-Employed Individuals: Before approving a loan your performance, operation, or business line, financial institutions are very likely to analyze your industry and position in the market.
7. Nationality and Residency
It takes an Indian borrower or an NRI borrower with valid proof of Indian origin and proof of Identity and residential proof.
For Indian Citizens: In the present time Aadhar card, PAN card and the voter ID card are accepted almost everywhere as the valid proof of identity and nationality.
For NRIs: While personal loans are provided for NRIs in some banks and other financial institutions, they invariably have some stiffer conditions as regards income and employment.
8. Loan Amount
The amount that you can borrow can be different dependent on your income, credit score, along with the conditions Collaborate with this lender. Possessing a higher income and a better borrowing credit rating means more loan amount that one can borrow. It is common knowledge that all lenders can have fixed upper limit on loan amount, which ranges between ₹ 50000/- to ₹ 500000/-.
Tip: Make an application for the loan amount with reference to your income source and your repayment ability. Taking debt above the amount of money one can afford to repay has a certain level of pressure towards the borrower.
9. Purpose of Loan
Personal loans are mainly provided without security and they can be taken for virtually any need but the lenders may sometime ask for the purpose of the loan. This is especially the case where the loan amount is large. Common reasons include:
Medical emergencies
Wedding expenses
Home renovation
Education fees
Travel
10. Consumer Credit: Banking & Financial Relationship
It is recommendable to apply from the same bank you usually do your business with them for example by having a saving account, fixed deposit or any previous loans since you will be transacting with them they will favor you by granting you a personal loan easily. In fact, some banks provide their customers with simple personal loans based on certain parameters that you meet, which are already pre-approved.
Documents Needed for Personal Loans
As for the requirements, writing documentation for personal loans is quite easy; however, to provide all required documents, which are accurate, help in improving your turn around time.
Identity Proof: Aadhar card, passport, PAN card and voter ID.
Address Proof: Light bill, lease agreement, passport.
Income Proof: Pay stubs and bank statements and form 16 or income tax returns if the candidate has income from other sources on his own account.
Employment Proof: Documents that can be provided for self-employed people include; offer letter, company identification, or any proof of the business.
Credit Report: A few lenders may request for a copy of your credit report with attention to the recent one.
Conclusion
It is therefore important to find out the eligibility criteria required in personal loan for better course of application. They are your age, income, employment history, credit rating, and current liabilities. There should also ensure all the relevant documents are availed in readiness for the approval process. If you are solvent and have good credit worthiness, chances are high that your personal loan will be approved.
Bonus Tip: Use the internet tools to always compare different lenders before you apply. This is so because interest rates, charges and qualification requirements differ from one institution to another.