Personal loans are unsecured forms of credit offered by NBFCs and financial institutions on various conditional factors, including income level, repayment capability, occupation, and credit history. This loan enables borrowers to meet their financial needs. However, there are specific strict personal loan eligibility criteria of lenders through which they determine your eligibility for the credit.
Factors Impacting Your Eligibility for a Personal Loan
Following are the five factors that affect your personal loan eligibility. They are as follows:
Before availing of a personal loan, you have to consider the foremost criterion that affects personal loan eligibility
, which is your age. Age is an important factor since it shows your financial steadiness and earnings to the lender.
If you are in your early twenties, your earning potential will be lower. In the same way, if your age exceeds 60 years, your earning capability can reduce again. Optimally, financial institutions offer personal credits to individuals of age between 25 and 55 years.
● Monthly income
Before issuing the loan, your lender will determine whether you have sufficient monthly income or not. In this way, they will get an idea if you can repay the loan within the mentioned time. Your repaying capability has a direct relation with your income and it denotes an important part of your financial profile.
However, the conditions regarding minimum income criteria differ from one lender to another. While assessing your income, the lender will figure out your residence and your organisation. In addition, if you have a secondary income source like rents or leasing land, it will reassure the lenders about your punctuality in paying EMIs on time.
● Credit history
Personal loans are unsecured loans, meaning they are free of any security or asset backing. As a result, lenders take the help of credit scores to know your creditworthiness. These scores also affect personal loan eligibility. Your credit score will show the patterns of your previous EMI payments. Hence, you must focus on paying the EMI amounts on time without any default. This will make your personal loan approval process easier.
● Work experience
Borrowers having more work experience will possess a financially secure future in comparison with someone who has just entered the working field. However, the minimum required experience differs based on the lender, your occupation, and other necessary factors.
For instance, salaried persons usually require 3 to 5 years of working experience. Business entrepreneurs require a minimum of five years of experience in the business field and self-employed persons need at least 3 years of working experience.
Remember that the repayment period is also another important factor that affects the eligibility for the personal loan. If you select a shorter tenure for your personal loan, you are likely to get the loan approval at a lower rate of interest. Moreover, you have to select the loan amount as per your affordability.
For example, if you choose Rs. 2 Lakh personal loan
, you can take the help of a personal loan EMI calculator to determine the EMI amount. All you have to enter is the loan amount, interest rate and tenure.
Documents Required for a Personal Loan
Following is the list of documents you will require while applying for a personal loan:
- Identity proof (includes PAN card, passport, Aadhaar card, voter ID card, and driving license)
- Address proof (includes voter ID card, Aadhaar, driving license)
- Bank statement for the last three months
- Employment ID
- Salary slip of last three months
Advantages of a Personal Loan
The benefits of a personal loan are as follows:
● Fast approval
The processing of a personal loan is much quicker than that of a home loan. If someone has a healthy credit score, he/she will get loan approval within a day or two.
Personal loans are unsecured loans hence it does not require any collateral. All it needs is proper documents and a healthy credit score of the applicant.
The personal loan amount is applicable to be used for various activities such as a tour, purchasing a machine, medical treatment, house renovation, wedding, children's education, and more.
● Builds credit score
It is a great option to increase your credit score. As soon as you start paying the EMIs within the mentioned time, your credit score will enhance.
● Easy to avail
Anyone with a decent credit history and having a credit score of 750 or above is considered perfect for lending a personal loan.
● Minimal documentation
The documentation involved in a personal loan is minimal. However, the type of documents required here must be genuine.
A personal loan helps you to meet your financial needs without taking any security. Before opting for a personal loan, you must check the personal loan eligibility criteria apart from its necessary terms and conditions.