Personal loans have become a go to solution for people who want funds immediately. Whether it's for marriage, home renovation or higher studies, personal loans are ideal for those who need quick funds without the need for collateral. Getting an approval for personal loan depends on multiple factors and the eligibility criteria may differ as per the policies of the banks and the non-banking financial companies (NBFCs).
Personal loan eligibility: Why it matters
Lenders evaluate several parameters from credit score to the income of the borrower before approving a personal loan application. It’s important to know about your personal loan eligibility before applying for a loan to avoid rejections.
If you are looking forward to applying for a personal loan, Moneycontrol could be a suitable option. Through the Moneycontrol app and website you can apply for personal loans up to Rs 50 lakhs from eight lenders. The loans start at an interest rate as low as 10.5% per annum. The 100% paperless process ensures a quick evaluation of eligibility and easy approval.
Personal Loan Eligibility Check: Key factors to keep in mind
Here's a look at the Personal Loan Eligibility Check and other important factors:
1. Good credit score
To get a personal loan, having a good credit score is key. A CIBIL score above 750 shows lenders that you are a reliable borrower. A low score can make you seem risky and lead to higher interest rates. You can improve your score by paying bills and EMIs on time and keeping your credit usage below 30%.
2. Stable income
Lenders often provide personal loans to those who have a steady income. So, you need to maintain a consistent income over the last 6-12 months to show your authenticity and credibility. Lenders provide loans after going through a proper documentation process like salary slips, income tax returns and bank statements.
If you don't have a consistent income, then your chances of approval decline. To show your income stability, make sure to avoid frequent job changes just before applying for the loan. If you are self-employed, keep proper financial records to show a stable income.
3. Manage debt efficiently
If you are applying for a loan, ensure your debts, including previous loans or large credit bills, are already cleared. This improves your debt-to-income ratio, a crucial indicator that lenders use to determine your capacity for repayment. Your total EMIs should ideally not be more than 40 percent of your monthly income.
For example, if your monthly income is Rs 50,000, you should limit your EMI commitments below Rs 20,000.
4. Choose the right loan amount
When applying for a personal loan, it's important to request an amount that matches your income and ability to repay. Asking for a loan that's too large compared to your salary can lead to rejection.
Lenders assess your monthly income and existing expenses, like bills or EMIs, to determine if you can manage an additional loan. So, it’s essential to ask for a loan amount that suits your financial situation.
5. Avoid multiple loan applications
While it might seem like a good idea to apply for loans from multiple banks or lenders to increase your chances, doing so can actually hurt your chances of approval and damage your credit score.
When you apply for multiple loans in a short time, it results in too many hard inquiries, which signals to lenders that you may be in urgent need of credit. Even if you are financially stable, this could create the impression that you are struggling financially.
6. Proper documentation
Submitting complete and accurate paperwork is crucial when applying for a personal loan. Incomplete or incorrect documentation is often the reason for loan rejections. Errors, inconsistencies, or missing files can delay the process or lead to your application being rejected.
Conclusion
To conclude, there are times when you need quick funds, but poor personal loan eligibility can lower your chances of approval. Meeting the basic requirements is just one part of improving your eligibility. Maintaining a high credit score, showing a steady income, managing existing debt, and providing accurate documentation are all key to improving your approval chances.
Moneycontrol has partnered with eight lenders to offer fast, fully digital loans up to Rs 50 lakhs. The application process is simple: enter your details, complete the KYC verification and select an EMI plan. Interest rates start as low as 10.5% per annum.
Disclaimer
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