Personal loans have emerged as a convenient way to glide over financially difficult times in the modern era by offering funds without forcing you to pledge any valuable assets as collateral.
With the introduction of numerous personal loan apps in the financing sector, one can easily apply for a personal loan and obtain the required funds through a few clicks without stepping outside.
The funds obtained through a personal loan can be used for various purposes such as paying medical bills, financing higher education, renovating a home, etc. But, the lenders pay a great deal of emphasis upon the candidate’s eligibility factors to repay the loan amount along with the accrued interest while approving the loan application.
Due to the unsecured nature of personal loans, the financial institutions tend to examine the borrower’s remaining years of service, source of income, nature of employment, and credit score with acute precision to avoid any confusion or wrongdoings in the future.
While an instant personal loan is usually offered at an affordable interest rate easily repayable through EMIs over a flexible tenure, the whole scenario is greatly affected if the borrower’s profile does not match the required eligibility conditions. Hence, you should perform comprehensive research to evaluate the eligibility before submitting the loan application and improve your chances of getting a personal loan without hassle. Scroll down to know about the top 4 eligibility criteria to focus upon to get your loan approved.
Top 4 Eligibility Criteria To Get Your Personal Loan Approved
- Credit history
One of the most significant factors in obtaining a personal loan is a solid CIBIL score. Anything around 750 or above validates the debt handling and repayment capacity of the borrower. As a result, maintaining a healthy credit history by paying credit card bills and previous/existing loan EMIs in full within the due date increases your odds at an exponential rate to secure a personal loan at a low interest rate. Additionally, it is also advisable to regularly check your credit card expenses to maintain a healthy credit utilization ratio (CUR) for a healthy CIBIL score.
While a candidate with a low credit score could also get a personal loan, they will be charged a high-interest rate to balance the increased credit risk involved in the deal. Hence, the higher the credit score, the better position you are in to negotiate with the lender about loan amount, tenure, and personal loan interest rate. Furthermore, upon proving your creditworthiness to the lender, you can also avail additional benefits associated with the loan, such as fast processing, online verification, and quick disbursement of the funds.
- Monthly income
Another key eligibility parameter that affects the chances of obtaining a personal loan is your monthly salary which determines the EMI amount you shall be liable to pay to the lender without any default. While evaluating the borrower’s repayment capacity, the lender usually confirms that the computed EMI amount is not exceeding 50% of the borrower’s net monthly income and will not affect their fixed monthly expenses.
Suppose the financial institutions come across any such issue. In that case, the candidate is more likely to face rejection unless they are willing to opt for a longer tenure which might reduce the EMI amount but will increase the overall loan cost. Hence, whether you are a salaried professional or a self-employed individual, kindly assess your EMI affordability before applying for a personal loan for a smooth process.
- Job profile and stability
The nature of your employment also plays a vital role in determining whether you are eligible for a personal loan or not. For instance, in case you are working as a government employee or are employed as a salaried professional with a multinational organization, the lenders usually consider it as a steady source of income and provide a personal loan without any delay, and at a lower rate of interest than usual.
While the lenders scrutinize your source of income in a loan application, they also tend to assess your job stability and work experience in an organization to reduce your credit risk percentage. For instance, a job-hopping candidate is more likely to face rejection for a personal loan in comparison to the one who has remained at an organization for a significant period. Therefore, it is best to make sure that you straighten out job-related eligibility factors before proceeding with the loan application.
- Association with lender
While most lenders offer instant personal loans at an affordable interest rate, many financial institutions provide pre-approved loans and special deals to their existing customers based on their trustworthy association over the years.
Hence, a person having a healthy customer relationship with a financial institution must prefer to avail personal loan from it to gain access to unique offers and additional benefits related to the loan amount, repayment tenure, and interest rate. Through an existing association with the lender and knowledge about different deals offered by various lenders, you shall be able to improve your odds for obtaining a personal loan.