Understanding the Eligibility of Personal Loans - Ruloans

 Personal loans are a popular form of credit that can be used for a variety of purposes such as consolidating debts, funding home renovations, or covering unexpected expenses. However, before applying for a personal loan, it is important to understand the eligibility of personal loan and requirements that lenders look for.

Eligibility Criteria for Personal Loans

1. Age: Most lenders require borrowers to be at least 21 years old and not more than 60–65 years old at the time of loan maturity.
2. Income: A stable source of income is necessary to qualify for a personal loan. Lenders look for a minimum monthly income of Rs. 15,000–20,000, depending on the borrower’s location, job profile, and other factors.
3. Credit Score: A good credit score is essential to get approved for a personal loan. Lenders typically look for a credit score of 750 or above.
4. Employment Status: Lenders prefer borrowers who are salaried or self-employed with a stable income source. Salaried employees should have a minimum of 1–2 years of work experience, while self-employed individuals should have a business vintage of at least 3–5 years.
5. Documentation: To apply for a personal loan, borrowers need to submit various documents such as proof of identity, address, income, and employment.

Factors Affecting Personal Loan Eligibility

Apart from the above criteria, various other factors can affect a borrower’s personal loan eligibility, such as:

1. Existing Debts: Lenders consider a borrower’s existing debts and liabilities while evaluating their eligibility. High debt-to-income ratio can reduce the chances of loan approval.
2. Loan Amount: The loan amount and tenure can also affect the eligibility. Lenders prefer borrowers with a good credit history and repayment capacity for higher loan amounts and longer tenures.
3. Type of Employment: The nature of employment also plays a role in determining personal loan eligibility. Lenders prefer salaried employees over self-employed individuals, as salaried employees have a fixed and stable income source.
4. Credit History: A good credit history and repayment track record can improve the chances of loan approval and also help negotiate better interest rates.
5. Relationship with the Lender: Having an existing relationship with the lender, such as holding a savings or current account, can improve the chances of loan approval and also help in negotiating better loan terms.

Tips to Improve Personal Loan Eligibility

1. Maintain a good credit score by paying all bills and EMIs on time and keeping credit card balances low.
2. Avoid taking multiple loans and credit cards simultaneously, as it can negatively impact the credit score and debt-to-income ratio.
3. Improve debt-to-income ratio by reducing existing debts and increasing income.
4. Choose a loan amount and tenure that is within your repayment capacity.
5. Provide accurate and complete documentation to avoid delays and rejections.
6. Consider applying for a personal loan with a co-applicant, such as a spouse or family member, who has a good credit history and income source.

Conclusion

Personal loans can be a useful financial tool to meet various needs and expenses. However, it is important to understand the eligibility criteria and factors that affect loan approval to avoid rejections and disappointments. Borrowers should research and compare different lenders to find the best loan deals that suit their needs and financial situation. By following the tips mentioned above, borrowers can improve their personal loan eligibility and increase the chances of loan approval.