As we know how digitalization is spreading all over the world, we are no longer required to stand in endless queues. The same goes with Applying for a personal loan, all you need to know is the personal loan eligibility criteria. With the complete information regarding eligibility, applicants can easily get a personal loan in the palm of their hand.
The great thing about personal loans everyone should consider is the flexibility that they offer. It helps with emergency expenses, dream vacations, and investing in home renovation.
However, ahead of embarking on the journey of Applying for a personal loan, it is unavoidable to have even a basic understanding of the personal loan eligibility criteria that lenders ask for.
What is a Personal Loan
Personal Loan is a proven way to secure your immediate financial needs with short-term credit. Financial institutions tend to offer this unsecured credit considering the designed criteria. Personal Loan is the easiest loan among all other types of loans.
To ease your task of applying for a personal loan, we have narrowed down a few of the important points to help you with checking personal loan eligibility criteria:
1. Importance of CIBIL Score
CIBIL stands for Credit Information Bureau India Limited. It is a credit information corporation that keeps track of every action taken by people or businesses that has to do with credit. It holds much to say about if you are eligible to apply for a personal loan. And, if your credit score fulfils the criteria, you will know what interest rate you would be charged with.
Your credit score matters a lot as it shows your financial history which tells how punctual you are about repayments if borrowed in the past. Remember, those with high credit scores can have a smoother and more efficient process of availing easy personal loans online. A considerable credit score witnesses that you have borrowed multiple secured and unsecured loans that were timely repaid.
2. Source of Income
People with stable incomes can easily opt for a personal loan even at lower interest rates. Those having regular income with stability are liable for timely repayments. Plus, your income plays a vital role in determining your loan eligibility. For example, a salaried person must have at least three lakhs per annum for a smoother process. And, applicants running businesses or are self-employed must be secured more than three lakhs per annum.
It is clear to know that once you get the loan, you need to repay it in EMIs every month. Therefore, you are required to earn enough income so you would have sufficient funds left for necessities such as house rent, groceries, and more.
3. Age Matters
Your age matters when it comes to a personal loan eligibility check. The possibility becomes higher if you apply for a personal loan at a younger age. It is thought by many bankers and other financial institutions that a young man is always more capable of repaying a loan than a mature one. On the other hand, many public-sector banks are likely to offer personal loans on the basis of their pension income.
4. Applicant’s Employer
The best person or organisation to determine your credibility is your employer. Having a job at a company with a high turnover rate might help you when applying for a loan. Salaried staff members of prestigious multinational corporations are thought to have safe and stable jobs in the future.
On the other hand, workers in proprietorships, small and medium-sized businesses, and start-ups are not seen to have a stable future because there is a chance that they will close at any time, endangering the financial security of their staff. An employee of an MNC is often preferred by any lender over an employee of a smaller business. Additionally, top-tier company employees receive perks like reduced interest rates on whatever loans they take out.
Things You Require for Personal Loan Eligibility Check:
It completely depends on the borrower’s ability to repay the loan to decide how much the borrower is eligible for. Most lenders consider using two key methods to determine the maximum amount of personal loan to give. Here is an explanation about them:
- FOIR Method: The Fixed Income to Obligation Ratio, or FOIR, takes into account the applicant’s total monthly payments that are needed to pay off existing debt. An applicant’s personal loan application will be rejected or the approved loan amount may not meet your needs if their FOIR exceeds 50% of their take-home salary.
- Net Monthly Income Method: Some lenders or financial institutions consider determining the maximum loan amount by multiplying NMI i.e. net monthly income. This way, a personal loan should be up to 30 times the Net Monthly Income of the applicant. Here, the notable thing is if the requested loan amount exceeds this limit, the unsecured personal loans will not be eligible to pass.
In a Nutshell
Hence, these are the factors that define your eligibility for getting a loan. This blog has discussed the crucial points one needs to understand regarding Personal loan eligibility criteria. People having deep information about such loans are likely to increase their chances of a successful loan application. So, take a step ahead with your check personal loan eligibility criteria to embark on your journey with financial security.
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