Personal Loan Eligibility Criteria: Credit Score, Income, Documents
Whenever you apply for a personal loan, banks/NBFCs decide whether to grant you a loan or not on the basis of factors including your credit score, age, income, occupation and employer/company profile. In this article, what are the personal loan eligibility conditions prescribed by top banks/NBFCs and how you can increase your chances of getting a personal loan easily.
Factors affecting personal loan eligibility
Credit Score: Banks/NBFCs prefer personal loans to applicants with a credit score of 750 and above. Many banks/NBFCs offer personal loans at low interest rates for applicants with high credit scores. However, some banks/NBFCs also offer personal loans to applicants with low credit scores but the interest rates are higher for them. Hence, applicants should check their credit score from time to time and try to keep it close to 900.
Employment Type and Employer/Company Reputation: Banks/NBFCs offer personal loans to salaried applicants at lower interest rates as compared to non-employed applicants as their income is fixed every month. Even among salaried applicants, preference is given to government employees, followed by employees working in reputed corporate and multinational companies. In case of non-employed applicants, professionals like CAs, doctors, architects are more likely to get personal loans at lower interest rates. In case of multiple banks/lending institutions, salaried applicants must have at least 1 year of work experience to be eligible for a personal loan. On the other hand, if the applicant is non-employed, then he should have been running the current business for at least 2 years.
Age: Most of the banks/NBFCs offer personal loans to applicants in the age group of 18 years to 65 years. Many public sector banks/ NBFCs provide personal loans to pensioners based on their pension income.
Minimum Income: If you have a high income, it shows that you can repay your loan on time. This also reduces the risk for the bank/lending institution. To apply for personal loan in most of the banks, the salary of the salaried people should be minimum 15000 per month. However, those whose minimum monthly income does not exceed Rs.25,000. Banks give them priority. Whereas, the gross annual income of non-employed / self-employed applicants should be minimum Rs. 2 lakh. Should be
Work/Professional Experience: To avail personal loan from multiple banks/lending institutions, salaried applicants should have at least 2 years of experience working with the current company/employer for at least 6 months. On the other hand, if the applicant is non-employed, then he should have been running the current business for at least 2 years.
Repayment Capacity: Banks/NBFCs generally accept personal loan applications from applicants whose EMI/NMI ratio does not exceed 50% or 55%. It may vary from bank to loan institution. The percentage of your monthly income that you use to pay the current EMI and the loan EMI you are availing, higher is your EMI/NMI ratio.
How to improve your eligibility for Personal Loan
There are many factors to consider while determining your eligibility for a personal loan, but there are only a few ways to improve your chances of getting a loan application approved. Below are some ways to improve your eligibility for a personal loan:
Maintain a credit score of 750 and above: Having a credit score of 750 and above increases your chances of getting the loan approved at lower interest rates. Paying your credit card bills and loan EMIs in full by their due dates, maintaining the credit utilization ratio up to 30% and avoiding multiple loan/credit card applications within a short span of time can improve your credit score.
Apply with a co-applicant: You can improve your eligibility for a personal loan by making a close member of your family, such as your spouse, parents, etc., a co-applicant. Presently many banks/NBFCs do not allow co-applicant in case of personal loan. However, having a co-applicant if possible can certainly improve your chances of getting a personal loan as in such cases, banks/NBFCs consider both the credit score and repayment capacity of the applicants.
Do not change jobs frequently: Banks/NBFCs, while evaluating your personal loan eligibility, check where and for how long the applicant has worked. Banks/NBFCs may hesitate to offer personal loans to applicants who frequently change jobs. Frequent job change creates an image of you in front of the bank/NBFC that your career is not stable and hence many lenders avoid giving you loans. Hence, applicants should avoid quitting jobs frequently, especially if you are looking to avail a personal loan in the recent past.
Avoid multiple loan applications: Once the bank/NBFC receives your personal loan application, they obtain your credit report from the credit bureaus to assess your creditworthiness. Such request for credit report by a bank/NBFC is known as hard inquiry. Every time you have a hard-enquiry, your credit score drops by a few points. Also, doing multiple credit inquiries within a short span of time creates an image for you as an applicant who needs a loan in any case and due to which many banks / NBFCs can reject your loan application. Hence, instead of submitting loan applications directly to banks/ loan institutions, use an online financial marketplace like Paisabazaar.com. Here you will also get an opportunity to compare various loan offers and also be told which bank is most likely to approve your loan application. when online finance When the credit report for a loan is checked through L’Marketplace, it falls under the category of soft inquiry and it does not affect your credit score either.
Related Questions (FAQs)
Question. How much personal loan can I get based on my salary?
Answer: The amount of personal loan generally varies from bank/NBFC to bank and salary is one of the factors that banks/NBFCs consider. Generally, if you have a good credit score and no loan outstanding and if it is less then you can avail Rs 40 lakh as per the eligibility conditions of the bank. You can be eligible for a personal loan of up to Rs.
Question. Can I apply for a personal loan even if I have a low salary?
Answer: Yes, you can apply for a personal loan even if your salary is low. This is because not all banks set a minimum salary stipulation for personal loans. However, a lower salary may result in a lower loan amount being sanctioned to you at higher interest rates.
Question. What is Personal Loan Eligibility Calculator?
Ans: The Personal Loan Eligibility Calculator is such a handy tool that users can use to find out whether they are eligible for a personal loan or not. For this, you have to enter the desired loan amount in the calculator, your income, place of residence, number of people dependent on you, presently the total EMI paid every month.
As each / NBFC gives priority to each factor, the same applicant may get different personal loan offers from different banks / NBFCs.