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Personal Loan Eligibility Criteria


Everyone faces a cash crunch at some point of time in his/her life when he/she must generate funds from somewhere to fulfil an immediate need. This requirement could be for anything like an emergency medical treatment, wedding, education, vacation, consumer durable goods etc. Personal loans are essentially unsecured advances offered by banks and nonbanking financial corporations in India to help eligible individuals fulfil all such needs. As they are unsecured in nature, the lenders don’t require any collateral in their case. However, the absence of collateral increases the risk for the lenders and hence they are forced to charge a comparatively higher interest rate (than unsecured loans like home loan) on these loans

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Being aware of the personal loan eligibility criteria can help you prepare well before application, and both simplify as well as quicken up the loan application and approval process. Please keep in mind that every bank and financial institution has a certain minimum criteria with regard to monthly income, credit score, employment type, job status, age, etc. for approving such loans. The lender would take all such factors into consideration before deciding the minimum and maximum personal loan you’re eligible for. You can use the personal loan eligibility calculator on our website to quickly assess the personal loan amount you can avail. You’ll have to provide your take-home income per month, existing loan commitment details, the required personal loan tenure and the applicable interest rate to arrive at that figure.

Following are the primary factors that all major banks and NBFCs take into account while approving your personal loan application:

Considered the most significant factor based on which a bank or financial institution decides the maximum personal loan amount it can offer you, monthly income is calculated differently for salaried individuals and self-employed professionals. If you are a salaried person, it’s your take-home monthly salary (income after all the deductions) that will be taken into account. Please note, the lender might deduct any performance-based allowances, tax payments and EMIs while ascertaining your eligibility. On the other hand, if you’re self-employed, your monthly income would be determined based on your yearly profit.

The lender would also take into account whether you’re working with an employer having a good reputation in the market or not. Your credibility will automatically increase and the lender might offer you a good personal loan deal if your employer is well-known and has an impressive turnover. Being a part of such an organization works as a major plus for the personal loan applicants. Your employment stability will also be factored in as an important eligibility criteria. The employment duration helps lending establishments build trust in an applicant. Your chances of personal loan approval will increase significantly if you’ve been working with the same organisation for many years. Frequent job changes indicates instability and will reduce your chances of getting a personal loan, even if you’ve been earning a steady income. The lender might not process your home loan application unless you’re salaried and have been employed with the same company for the past 2 years, or if you’re a self-employed professional, have at least 5 years’ total earnings to show.

Your credit score and credit history play a very critical role in determining your eligibility for a personal loan as well. Hence, before you apply for a personal loan, make sure that you check whether your credit score is up to the mark or not. Prospective lenders would look into your credit history and check if there have been any defaults and delays in the EMI and/or credit card payments in the past. As a personal loan is unsecured in nature, the credit score of the applicant holds even greater importance for the lenders. While a credit score of above 750 is considered good by majority of banks and NBFCs in India, having a score higher than 800 is treated as excellent. Having a good credit score would increase your chances of getting quick personal loan approvals. It will also guarantee that you’d get a personal loan offer with more flexible options.

This is another very important factor that all Indian lending establishments take into consideration while reviewing personal loan applications. While the age requirement might vary from lender to lender, there might be a difference depending upon your occupation too. While salaried individuals are normally required to be between 21 years to 60 years to avail such a loan, 25 years to 65 years is the age bracket applicable to self-employed people. Lenders normally incline more towards young borrowers as they have a higher paying capacity and have good number of working years ahead of them.

If you have any pending loans or credit card dues at the time of applying for a personal loan, those will all be factored in and will most likely reduce the maximum personal loan amount you’d be eligible for. As the eligible personal loan amount is calculated based on the applicant’s EMI repayment ability, regular contributions going towards other existing loans or debts will automatically reduce your disposable income, and hence will reduce the approved personal loan amount too.

Please keep in mind that all the claims you make with regard to your income, employer, employment stability, age and other eligibility-related factors will need to be backed by valid physical documents. You might be wondering why bother about physical documents in this digital age?! Banks and financial institutions very well know that the current era of digitisation has also led to a significant increase in cyber-crimes and forgeries. Hence they all emphasise on original physical documents like address proof, photo ID proof, income proof etc. in order to be double sure. So ensure that you have all of them available before applying for a personal loan. How good or bad personal loan deal you get in the end will depend greatly on it. Furthermore, having a longstanding banking relationship with the potential lender can be instrumental in negotiating better loan terms.