Personal Loans are the best financing solutions for the working middle class due to their convenient features and benefits. These loans provide several advantages to the borrowers, including unrestricted usage, quick funds approval and disbursal, simple online application procedures, and the absence of a collateral requirement. Nevertheless, a lack of security raises the credit risk for the lender, leading to stricter eligibility criteria than secured loans like car and two-wheeler loans. Therefore, understanding how to check eligibility for Personal Loan is crucial to boost your chances of approval.
The following sections elucidate the Personal Loan eligibility criteria, how to check the maximum eligibility, and ways to improve the chances.
Personal Loan Eligibility Explained
When you need urgent funds, you can apply for a Personal Loan by filling out an application form on the lender’s website or loan app. However, before applying, you must meet a set eligibility criteria to qualify. The basic criteria include the following:
- Age between 21 and 58 years
- Indian citizenship
- Monthly income of at least Rs 15,000
- Work experience of 6 months in a job or 24 months in a profession
Factors Lending Institutions Consider When Approving a Loan Amount
How a lending institution determines your loan amount continues to be a matter of mystery. Here, we will demystify the concept by introducing you to a few factors that they consider when evaluating your eligibility:
Most lenders have a minimum and maximum limit to the age of applicants. Ideally, you should be above 21 years of age and have a few earning years before retirement. So, the best age to apply for a Personal Loan is between 21 and 58 years. Since you are in your prime earning years, lenders feel safer lending you a bigger amount.
As a matter of fact, the more you earn, the more you can repay. Since the loan amount will significantly affect your EMIs, a high income will easily accommodate bigger EMIs, making the lenders feel safer in lending a higher loan amount.
Existing Financial Obligations:
Your debt-to-income (DTI) ratio gives an idea of the income you spend on your existing financial obligations. The lower the DTI ratio, the more you can afford to pay towards the loan EMIs. Hence, you may qualify for a bigger loan sanction.
Loan providers give utmost importance to your credit score when evaluating your Personal Loan application form. A higher credit score not only boosts your chances of loan approval but also helps you get a higher loan amount. Check the lender’s minimum credit score requirement before applying, and check your credit score to ensure it fulfils the criteria.
Importance of a Personal Loan Eligibility Calculator
Reputable financing companies have many online tools to help you make informed borrowing decisions. One such tool is a Personal Loan eligibility calculator. It lets you calculate the attainable loan amount depending on your income, DTI ratio, and other important parameters. The primary benefits of using an eligibility calculator are as follows:
Prevents Loan Rejection:
It is a handy tool that helps you know the loan size you are eligible for based on your income, financial liabilities, loan tenure, etc. Knowing the attainable amount before applying for a loan improves your chances of approval with minimal possibilities of rejection.
Helps Plan the Repayment:
After deciding upon a loan amount, you can use an EMI calculator to evaluate your monthly EMIs and determine if you can handle their timely repayment. According to your monthly budget, you can opt for a loan tenure with easily affordable EMIs.
Defines the Interest Rate:
A Personal Loan eligibility calculator on a trusted website will also tell the interest rate you must pay for the particular loan amount. Since it varies between lenders based on your income, DTI ratio, credit history, etc., you may also contact the lender for the applicable interest rate.
Besides these advantages, an eligibility calculator saves energy and time, allowing you to compare different loan schemes and opt for one that best meets your budget without stressing your finances.
How to Use a Personal Loan Eligibility Calculator?
Need to know how to check eligibility for Personal Loan? Follow these steps to calculate eligibility using a Personal Loan eligibility calculator:
- Visit your lender’s website.
- Open the online Personal Loan eligibility calculator.
- Select whether you are a salaried employee or a self-employed professional.
- Calculate and enter your existing monthly financial obligations.
- Enter your monthly income.
- Select a loan tenure of up to 60 months.
- Your eligible loan amount, EMI amount, and maximum loan tenure will appear on your screen.
- If the loan plan is acceptable, click the ‘Apply for Personal Loan’ button to complete the application form online.
Tips to Improve Personal Loan Eligibility
Here are some handy tips to improve your Personal Loan eligibility:
- Evaluate your financial requirements while deciding upon a loan amount to borrow.
- Research and accept a loan offer that best matches your loan requirement and repayment capacity.
- Maintain a high credit score to improve your loan eligibility.
- Compare interest rates to choose the best loan plan with minimal cost.
- Check the lender’s eligibility conditions and ensure fulfilling them to get a favourable loan offer.
- Avoid applying for multiple loans within a short period, as it will project you as a credit-hungry borrower and reduce your loan eligibility.
- Double-check your credit report to identify any errors and get them rectified to boost your credit score and improve loan eligibility.
Don’t know how to calculate eligibility for a Personal Loan? A Personal Loan eligibility calculator performs the task of determining the loan amount you can borrow. Once you see the loan amount, you can make an informed borrowing decision and plan the repayment accurately. Download a reputable loan app on your smartphone and use an eligibility calculator to be a smart borrower.