A personal loan is a loan taken out by an individual to fulfill short-term objectives. Personal loans are unsecured loans that can be repaid through a period of equated monthly installments (EMI). A personal loan can be used for different reasons, including a wedding, a medical emergency, education.
Banks and other companies may offer personal loans with various interest rates and qualifying restrictions. These loans are granted based on a variety of variables, including repayment ability, source of income, occupation, credit/CIBIL score, and employment records. Below, go through the below factors that can influence your personal loan eligibility.
Factors That Affect Personal Loan Eligibility
When you have an emergency, whether it’s a medical emergency, a residential renovation, or an accident, a personal loan can help. Personal loans have higher interest rates, but they will be approved quickly if the borrower qualifies the requirements. In the lack of the lender’s qualifying conditions, a personal loan may be delayed or even refused. Here are some factors that may affect your personal loan eligibility,
1. Maintaining a Credit/CIBIL score
One of the most important qualifying factors for lenders to accept your personal loan is your credit score. A credit score provides an overview of your credit history. If a person’s credit score is 750 or above, it indicates that, he or she is a responsible borrower. When a person pays back their debts on schedule, their credit score improves.
A person’s chances of getting a personal loan are better if they have a decent credit score. A credit score of less than 700 shows that the individual has a bad payment history; as a result, the applicant may be considered a high-risk candidate, and interest rates may be increased or the application may be rejected.
2. Monthly income
Monthly income plays a significant role in getting the approval of a personal loan. If you have a steady income, you have better chances of getting approval for the personal loan. Although the place where the borrower lives does come under consideration, as the cost of living will be different from one place to another.
The lender would want to see proof of a sufficient monthly income to ensure that you can return the loan on time. This may act as collateral or security. You can use a personal loan EMI calculator to compute your monthly payments.
Your age matters while you are applying for a personal loan. It gives an idea to the lender that you have sufficient number of working years. Generally, lenders prefer salaried individuals between 21-58 years of age.
4. Employment History
When compared to someone who has just started working, applicants with higher job experience are typically thought to have a more financially secure future. Depending on the lender you pick, the required experience may vary.
Make sure you have settled all your debts before applying. If you have an existing loan, such as a home loan or an education loan, the lender will want to make sure you have enough money to pay off your current debts as well as the new personal loan you intend to avail.
The above points can affect your personal loan eligibility. If you have a bad credit score or unsteady income, rectify them before applying for a personal loan. It can improve the chances of your loan getting approved.