Personal Loan Eligibility

When a borrower raises personal loan from a loan provider, which could be a bank or a financial institution, s/he is expected to adhere to all the prerequisites such as a stable job, right age bracket, good credit score, ability to repay, among other factors.
All these prerequisites are broadly referred to as the eligibility criteria for procuring a personal loan.

Let us understand more on this here:

What is a Personal Loan Eligibility?

In order to become eligible to apply for personal loan, the borrower needs to fall in the right age bracket, possess an impressive credit score, draw a good salary and have an ability to repay. Broadly speaking, these are the key factors which make an applicant eligible for personal loan:

Right age:

Typically, banks lend loans to applicants within their working life (21-65) and not to the ones who are either too young or too old to repay the loan. For example, a personal loan which has a loan repayment tenure of 5 years would be given to someone who has a minimum of five years of employment remaining.

Income:

Borrowers should have a minimum threshold of income to be able to borrow personal loan. Salaried borrowers should have a minimum income of ₹15,000 to be able to apply for personal loan.

Credit score:

The credit score (also known as CIBIL score) is measured on a scale of 300 to 900. In order to apply for a loan, one should have a minimum credit score of 650 or 700 depending on the lender.

Necessary documents:

The borrower should also be able to produce all the necessary documents in order to apply for personal loan which include PAN, bank statement and salary slips (if applicable).

Bank account:

Sometimes lenders require permission to auto debit your bank account in order to deduct the EMI. So, the borrower needs to submit the bank details as well.

How to get the lowest interest rate on a Personal Loan?

One thing to keep in mind is to maintain a good credit score. The rationale is simple. The higher the credit score, the lower the interest rate. And alternatively, lower the credit score, higher would be the credit score.

What is a credit score?

The credit score, also known as CIBIL score, is a three-digit number that determines your creditworthiness. It is based on your credit history, which includes such information as the number of accounts, total debt, repayment history, among other factors.
A healthy credit score is vital to be able to raise personal loan. A good credit score is generally above 700. And when it is below 700, either the loan application is declined, or the bank charges a higher rate of interest.

What are the documents required?

When you apply for a personal loan, loan providers would ask you to submit additional documents.

1. Identity documents (passport copy, voter ID or Aadhaar)
2. Address proof (voter ID, passport, driver's license, Aadhaar)
3. A bank statement for the past three months
4. Three months' latest salary slips or the latest Form 16

Rate of interest

Once you are eligible to apply for personal loan, you can apply for personal loan at a rate of interest which could be fixed or floating.
The higher the rate of interest, higher the EMI and conversely, lower the rate of interest, smaller the EMI.
You can ascertain your EMI (principal amount and interest) by using a personal loan calculator.

What is a Personal Loan EMI Calculator?

A personal loan EMI calculator helps borrowers compute their monthly loan repayments. It factors in the amount of loan, interest rate, and loan tenure to compute the EMI.
The personal loan EMI calculator gives a fair picture of how much a borrower needs to pay every month.
The EMI calculator enables a borrower to calculate the amount s/he needs to pay every month in order to service the loan.
You can click the following link of Personal loan EMI calculator to compute the monthly EMI. All you need to do is to enter the loan amount, rate of interest and loan duration to find out the monthly EMI.

Factors determining the EMI

These are the three key factors which determine your loan EMI:

1. Amount of loan: The amount you borrow directly impacts the amount of EMI that you are meant to pay. This means higher the loan amount, higher the EMI. On the other hand, lower the loan amount, smaller the EMI. So, borrowers should first evaluate their financial needs and then borrow what they can easily repay.
   
2. Interest Rate: Another factor which decides the size of your EMI is the rate of interest. When the interest rate is low, the personal loan EMI is small, thus making the loan more affordable. Borrowers tend to compare interest rates charged by different loan providers before choosing the best deal.
   
3. Tenure of loan: The tenure of loan also affects the EMI. A longer tenure reduces the EMI but increases the total interest payable. Conversely, a shorter tenure pushes the EMI higher, but brings down the total interest. Borrowers should choose a tenure that balances their monthly budget and total interest costs.

How to apply for a personal loan?

You need to take following steps to apply for personal loan:

1. Online application: First of all, you need to sign in and create an application on the website of the bank where you want to apply for a personal loan.
2. After you have created the application, you need to fill the form for your personal loan application.
3. Upload documents: Once the form is filled, it is mandatory to upload the necessary documents such as salary slips or form 16, PAN card, identity proof such as aadhaar or voter ID, and bank statement.
4. Enter vital information: Now you need to enter the KYC and income information and select the loan amount that you want to borrow.
5. Submit the application: At this stage, you can submit the application for personal loan.