How to Check Personal Loan Eligibility Criteria Before Applying

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A personal loan is an unsecured loan that can be used to cater to different financial needs. Since it does not require collateral, lenders assess your eligibility based on factors like income, credit score, and employment stability. The funds you receive do not have any usage restrictions and can be used for purposes such as medical emergencies, home renovations, travel, or debt consolidation. 

However, before applying, it is important to check the personal loan eligibility criteria set by banks and Non-Banking Financial Companies (NBFCs). Understanding the personal loan eligibility criteria before applying can help avoid rejection of your loan application and improve approval chances.

Factors That Determine Personal Loan Eligibility

A lender will evaluate different factors before approving a personal loan. Here are some of them:

Age of the Applicant

Most banks and NBFCs will have specific age requirements for personal loan applicants, but this can differ from one lender to another. Salaried individuals must be between 21 and 60 years, while self-employed individuals can apply up to the age of 65.

Employment Type and Stability

A lender will prefer an applicant with a stable and regular source of income. Salaried employees working in either public or private sector companies are generally eligible.

Self-employed individuals, professionals, and business owners can also apply if they meet the lender’s income and business vintage requirements. A steady employment history with 1-3 years of experience in the current role can help improve the chances of approval.

Monthly Income

Every bank or NBFC will have different minimum income requirements to ensure that an applicant is capable of managing their loan repayment. The required monthly income generally ranges from ₹15,000 to ₹25,000, depending on the lender and the city of residence.

Credit Score

A credit score is an important factor because it reflects your credit repayment history and financial discipline. Lenders will typically prefer a score of 750 or higher, as it is an indicator of responsible financial behaviour.

A lower credit score may result in rejection of your loan application or higher interest rates, as the lender may consider the profile high-risk. Regularly repaying existing loans and credit card bills can help maintain a healthy credit score.

Existing Debt and Financial Obligations

Lenders will assess your outstanding loans and monthly debt obligations, if any, before approving a personal loan. A high debt-to-income (DTI) ratio may impact your loan eligibility, while a lower DTI can improve the chances of approval.
It is important that you maintain a healthy DTI ratio, since it’s an indicator of your financial habits to the lender.

How to Check Personal Loan Eligibility

Before you apply for a personal loan, it is important to check whether you meet the lender’s required eligibility criteria or not. This can help avoid any chances of rejection and ensure a smooth loan application process. Here are different methods for checking a lender’s eligibility criteria:

Visit the Lender’s Website

A bank or NBFC will most likely provide information regarding their personal loan eligibility criteria on their official website. This typically includes details about the age limit, income requirements, and employment conditions.

Check these details thoroughly and ensure that you meet them before applying to improve your chances of approval.

Use an Online Eligibility Calculator

An online eligibility calculator is a free-to-use tool that helps you get an estimate of the loan amount you can receive. This figure is based on your monthly income, monthly expenses, and existing loan obligations.

You can enter basic details such as your monthly salary, existing EMIs, if any, and the preferred loan amount. The calculator will display the loan amount you are eligible for, along with the respective lending terms that are suitable for your details.

Improving Your Personal Loan Eligibility

If you do not meet the lender’s eligibility criteria, then here are some steps you can follow to improve your personal loan eligibility before applying:

Maintain a Good Credit Score

Paying bills and EMIs on time, reducing your credit utilisation ratio, and avoiding multiple loan applications within a short period can help improve your credit score.

Reduce Existing Debt

Lowering your debt-to-income ratio by repaying your existing loans or clearing your credit card dues can help you meet the eligibility criteria for a personal loan.

Increase Income Stability

For salaried individuals, staying employed with the same organisation for a longer period demonstrates stable employment and a regular source of income. This can help improve your personal loan approval chances.
Self-employed applicants can provide income proof such as Income Tax Returns and audited financial statements to help strengthen their loan application.

Choose a Lower Loan Amount

Applying for a lower loan amount can help increase the chances of approval if your income is on the lower side. A lender will assess your loan repayment capacity before approving any loan. Apply for a loan that is within your budget to improve your chances of approval.

Apply with a Co-Applicant

You can consider applying with a co-applicant who has a stable source of income and a higher credit score to improve your chances of approval. This can even help you secure a loan with better lending terms.

Conclusion

Checking the personal loan eligibility criteria before applying can help avoid rejection and improve your chances of approval. Applicants can take proactive steps to ensure that they meet the eligibility criteria before applying to prevent rejection and its negative impact on their credit score. A well-prepared application can help increase the chances of getting approved for a personal loan with favourable terms.