What are the Eligibility Criteria for a Personal Loan?

Personal loans are without a doubt one of the most popular financial instruments available to consumers in today’s market. Their versatility and unsecured nature make them the go-to solutions for a plethora of requirements – purchasing a vehicle, financing a foreign trip, starting a small business, or any other personal reason. According to the Reserve Bank of India, personal loans and credit card debts amounted to a total of whopping Rs. 570,00 crore at the end of FY 2018.

The best part - you can avail a personal loan at attractive interest rates and get up to 60 months to repay the loan. It actually gets better when you realize that anyone can apply for a personal loan, as long as they have a stable monthly income. With this, there are also a few eligibility criteria that you must meet to get a personal loan. Let’s take a look.

Eligibility Criteria for a Personal Loan

Broadly speaking, banks and financial institutions have their own conditions and parameters based on which they sanction a personal loan to the applicant. It is more than possible that no two banks/lenders may have the same set of requirements. For this reason, it is strongly recommended that you look at various banks and research the options available to you before applying for a personal loan.

With that in mind, the eligibility criteria can be broken down into the following factors:

• Age of the Applicant: 

  Many lenders have the age bracket set between 21 and 60 years of age. Then, there are certain lenders who will take into account whether the applicant is self-employed or salaried, and set the age bracket accordingly.

• Work Experience for Salaried Professionals:

  Must have been working professionally for at least 1-2 years, with at least 6 months to 1 year with the current employer.

• Salary Requirements:

  For salaried individuals, the minimum monthly net income varies from bank to bank. Most private-sector banks have the cut off mark set at Rs. 15,000 although, with a few banks, this benchmark may be higher. On the contrary, public banks may have a lower salary limit for the applicants.
  For self-employed individuals, banks look at factors like minimum turnover, minimum profit after tax, and business stability.

• Place of Residence:

  The minimum salary requirement may be higher for big cities like Mumbai and Delhi, in comparison to other places like Bangalore, Pune, Chennai, et cetera.
• The personal loan can be availed by employees of private sector companies and public sector undertakings, along with self-employed professionals like doctors, architects, businessmen, Chartered Accountants, et cetera.

In addition to the aforementioned factors, many financial institutions will also look at the credit history and credit score of the applicant. While this is not mandatory – it is possible to get a personal loan with zero credit history, having one will definitely boost your chances of getting the loan.

As a rule of thumb, the higher your credit score, the better rates you stand to get for your loan. It proves to the lender that you are adept at dealing with credit and can handle it responsibly. That’s why you should always strive to maintain an excellent credit score.

How to Check the Eligibility for a Personal Loan?

Thanks to the booming personal loan market in India, almost all major banks have an eligibility calculator on their websites. All you have to do is enter your details like name, place of residence, date of birth, and employment details like work experience, take home salary, turnover and profits in case of self-employed, among other relevant details.

Upon furnishing these details, the bank/financial institution will get in touch with you and inform you whether you are eligible for a personal loan. Keep in mind that your loan quantum and the interest rate will depend on the details you provide here - make sure that they are correct as the bank may ask for further documentation.

While personal loans are excellent to meet your short-term financial requirements, they also come with certain added responsibilities. You need to have a solid repayment plan set and must pay the monthly instalment well before the due date to avoid penalties. Moreover, be sure to look at hidden fees and charges, along with prepayment options so that you avoid any surprises down the road. Be a diligent financial customer and research thoroughly before applying for a personal loan.

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