April 24, 2024

How to Become Eligible for a Personal Loan?

Getting a personal loan has become easier and simpler but it is not guaranteed that you will certainly get it. Like all other forms of lending, personal loans also need to be repaid and the lenders do want to be sure that they will get back their funds. And this is done by putting in place certain eligibility conditions that an applicant has to fulfil before his loan application can be approved. Although it is easy to apply online for a personal loan, the applications for the same are processed and verified to check their adherence to the various eligibility criteria.

Eligibility Conditions and How to Meet Them

Good Credit Score

The first and the most important eligibility for a personal loan is your credit score. The score is a numerical estimate of your past track record in repayment of your earlier loans, credit card bills or any other dues. A good score is an indicator that you have been regular in the payment of your dues and have no arrears. But any kind of unpaid dues will result in the lowering of your credit score and affect your eligibility.

A low credit score also affects the personal loan interest rates making these loans costlier. You can also use the personal loan eligibility calculators to check your eligibility for getting a loan. A score of 700 and above is considered good and can be ensured by paying the EMIs of your current loans on time and avoiding excessive borrowing.

Your Total Income

Your income is a key factor determining your eligibility for getting the best personal loan. Not only your total income but how much of that is used to service your existing loans is important for the lenders. A lender would like to ensure that you can repay your loan.

While the credit score is an indicator that you have a good track record of repaying, your income and the current level of loans indicate whether you will have spare funds to repay the new borrowings. Limiting your debt-to-income ratio (your monthly debt payments divided by your monthly income) or using only a small percentage of your income for servicing your debt is important for ensuring that your loan application gets approved.

Meet the Criteria Specified by a Specific Lender

Apart from the conditions related to credit score and the debt-to-income ratio of an application, lenders may set additional conditions related to age or profession/job profile or a minimum level of income. So, once you have decided about which lender to approach, do check the conditions put forth by them. This is important to ensure that your application does not get rejected.

You can even check your eligibility for a loan by using the personal loan eligibility calculators available online or offered by the various lenders. These calculators are simple to use and tell you about the amount you are eligible once you have fed in the details of your age, income, and credit score. Once you are sure about your eligibility for your loan application, you can apply for a personal loan online or in person. Do remember, however, that the calculator simply provides you ready information and the final approval of the loan will be determined after you have completed the application process.