Technology improvements have made it possible to apply for a personal loan online in less than ten minutes.
A personal loan is a quick alternative to fund projects or emergencies without using credit cards. The interest rate charged on a personal loan varies depending on several factors, such as the type of loan, lender, usage, term, and borrower’s credit history.
Borrowers must assess their present financial condition and pinpoint areas where they may make improvements to be approved for a personal loan. They also need to consider whether borrowing is a viable solution for them.
In addition, you must be qualified for a loan to obtain one. One must adhere to the requirements set forth by the lender. Your most recent credit score is one of several factors your lender will consider before approving your loan.
What personal loan eligibility criteria do lenders have for a personal loan?
The top 5 parameters to qualify for a personal loan are:
1. Credit score
Being eligible for a personal loan depends on several criteria. The prime factor for personal loan eligibility is your credit score. Lenders look at your credit score to determine if you qualify for a loan. The better your credit score, the more likely you will get approval for a personal loan. A credit score shows the borrower’s creditworthiness and can help lenders determine how much money they can lend and how much interest they charge.
2. Income and employment history
Your ability to obtain a personal loan may also depend on your income and work history. If you have worked steadily for several years and have consistently made payments on time, then lenders may consider you more stable than someone unemployed for six months or longer.
Before considering an application for a personal loan, a lender will demand to see evidence of income. For both your present and previous work, this can include pay stubs or account statements.
3. Collateral
Though personal loans are unsecured (no collateral required), if borrowers provide collateral, their chances of approval might increase with a more significant amount of loan.
This is because the lenders can sell off the security provided if you do not repay the loan.
4. Debt-income ratio
Your debt-to-income ratio determines how much debt you have compared to your monthly income. This is essential when considering a personal loan because if the ratio is high, the person is at more risk of not paying the debt on time.
The lower the ratio, the better it is. Lenders can use this number to determine if you can repay the loan fully and on time.
If you do not pay off your debts, they will continue to affect your credit score and make it harder for you to get approvals for future loans, leading to more expensive interest rates.
5. Age
Lenders also consider the applicant’s age when evaluating a loan application. They favour lending money to those between the ages of 30 and 50 as people in this age bracket have been employed for several years and yet have time to repay their loans comfortably.
Points to examine before choosing a personal loan
When requesting a personal loan, the following considerations must be made:
 1. Lender
Before opting for a personal loan, it is necessary to compare the lenders and choose a reliable one. You can check the reviews online and compare interest rates before finalizing. With a reputed lender, you can get an instant personal loan in just 24 hours, which will fund your immediate financial needs.
2. Interest rates and other fees
Before obtaining a loan, interest rates and other fees are the next essential factor.
You will have to decide whether you can afford to pay interest on your loan and what type of fees you will have to pay. Some lenders charge processing fees for approving your loan application or for processing the papers of your loan.
Other lenders charge fees for closing the loan before time. So, before choosing a loan, you must get information on these expenses.
3. Repayment terms
The repayment term of your personal loan also matters. A more extended repayment period means you will have to pay more each month than someone who only needs an amount for a few months or weeks.
Many lenders provide different repayment tenures to borrowers to help them meet the repayment deadline.
Generally, top lenders offer a flexible repayment tenure ranging from 24 to 60 months.
What are the eligibility requirements to get a personal loan?
Different lenders have different personal loan eligibility requirements for the borrower.
Let us look at the eligibility requirements to avail of a personal loan.
- To avail of a loan, the minimum age needs to be 25 and 58 years at the end of the loan tenure.
- To get a personal loan, the applicant should be an Indian and a salaried employee.
- The minimum income of the applicant should be Rs. 25,000 per month.
- The applicant’s total work experience should be 12 months, and the job in the current organisation must be six months.
- The applicant’s credit score should be 725 or above.
Conclusion
Personal loans can be quite beneficial when appropriately utilised. However, you must evaluate your needs and financial status before applying for a loan.
Additionally, people can use a personal loan EMI calculator to calculate their expenses. This will help in assessing the monthly budget and managing the finances efficiently.
Failure to make timely loan payments might hinder your credit score and limit your ability to obtain loans in the future.
