Personal Loan
Personal loans are a good choice for meeting emergency expenses, such as finance for home improvement, weddings, medical bills, and more. They usually have quicker disbursal times, and the interest may also be low, depending on your credit score and relationship with the bank. In fact, many institutions offer pre-approved personal loans based on your credit history, income, etc.
If you are considering getting a personal loan, then you should be aware of its eligibility criteria. In this blog, we will discuss all the factors responsible for determining who qualifies for a personal loan. This will help you evaluate your situation. Furthermore, we'll also get into the details of how you can improve your chances of getting a personal loan. So, let's dive in.
Below is a list of factors that affect the eligibility criteria for personal loans directly:
Credit score:
For any loan, this is the most essential measure that determines your ability to repay. The higher the score, the better your chances of getting your loan approved. So, check this beforehand and work towards improving it. To increase your score, you can repay your existing debts, pay bills on time and not max out your credit card limit.
Income:
If you have a regular source of income, then your profile is likely to be considered good. This holds true in the case of a salaried individual. There is a maximum loan amount for different salaries. For instance, a person with â¹15,000 salary can avail up to â¹2.25 lakhs. This amount varies from lender to lender. On the other hand, self-employed individuals need to show a profitable business. Here, the amount of personal loan you can get depends on the turnover.
Age:
Lenders usually prefer borrowers of a certain age group, such as those with a stable income and better repayment capacity. For instance, a salaried employee may have higher chances than a student fresh out of college or a person approaching retirement. Financial institutions like Unity Bank allow applicants from the age of 23 to 55 to apply for a personal loan. However, each lender may have different age requirements. So, it is better to check this beforehand.
Loan amount and tenure:
These are some other factors that affect eligibility for a personal loan. The tenure usually varies from lender to lender; however, the standard range is between 6 months and 5 years. The shorter tenures are ideal for those with a higher monthly income. They have low interest rates, saving you money overall. Also, if you require a higher loan, you may also be required to show a higher income and credit score.
1. Relationship with the bank: It is an added benefit if you have a good relationship with the lender, be it a commercial or small finance bank. When you have an existing relationship with a bank, you are likely to get better loan terms.
2. Existing debt: If you already have taken a loan or have credit balances, it may affect your credit score and hamper your eligibility. Therefore, it is vital to clear other dues before you avail another personal loan.
3. Debt to income ratio: This ratio refers to your monthly debt payments to your monthly income. A higher debt-to-income ratio indicates a heavy financial burden, which could impact your eligibility criteria for a new personal loan.
Here is a list of general documentation you would need to apply for a personal loan:
Choosing the right personal loan amount is also a critical aspect that you should keep in mind. There are personal loan calculators that help you derive the amount of eligibility you are eligible for based on your income, debt, and age. So, make the most of these tips to get hassle-free approval for your personal loan.
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