A Personal Loan an unsecured loan that allows you to use the loan in every manner that you want, enabling you to fulfil all your financial obligations. Because this loan does not require any collateral, the risk for lenders is higher than that for a secured loan. Thus, a lender considers several factors when determining if a prospective borrower should be eligible for a personal loan.

• At any time, unplanned emergency costs can occur. It is a great choice to meet your immediate financial requirements instead withdrawing your savings early (with penalties) or taking informal loans.
• It’s a big boon for everyone to get a little extra credit. Suppose it’s your idea for a much-needed holiday with your family, contemplating to gift a mobile that your beloved has requested, a dream wedding or medical emergencies. In that case, a Personal Loan provides all advantages.
• It offers immediate, zero collateral access to funds. Personal credits have been the most preferred loan product for handling your monthly paycheque’s cash requirements.

Go on to learn what are the minimum eligibility and factors affecting your eligibility for your loan.

What is the eligibility criteria?

As the Personal Loan is unsecured (no collateral is required), the conditions for personal loan eligibility vary from other secured loans, such as home and gold loans. While the exact eligibility criteria differ from one person to person and your relationship with your bank, here are the general specifications and limits:

• 23 years of minimum age.
• Max age: Salaried – 58 years and for self-employed people – 65 years.
• Job-status – Employed for at least 2 years/in business
• Minimum pay – Typically, a decision takes several considerations into account, including the individual’s credit record, relationship with the bank, etc.

As personal loans are not assured, the lender may determine your eligibility concerning your take-home pay.

What are the Factors Affecting the Eligibility?

Although the weight of various factors may vary from lender to lender, the following list offers an overview of the main factors considered by the lender in assessing the eligibility of a prospective borrower for a personal loan:

• History of Credit and Credit score: In assessing your eligibility for a loan, your credit history plays a critical role. It indicates your repayment potential, which relaxes your eligibility criteria if you have a stellar credit history. It could also lead to rejection of your loan application if your credit record is low or negative.
  • This is a 3-digit number which summarises how your credit card and personal loans have been repaid in the past. The score is measured from 300 to 900 by credit bureaus. The higher your credit score is to 900, the more likely you’re to get a new personal loan accepted.
• Your record of employment and Employer Reputation: For several years working for a respectable organisation ensures that you have a stable job. The lender will lower the minimum salary requirements if you have steady employment. Now, replying to the question, “What amount will I get on my salary? “State the exact amounts for your particular case with an online personal loan eligibility calculator. To calculate the maximum amount of personal loan, you must give details such as your current salary, desired loan amount, place of residence and so on.
  • Banks typically provide personal loans to both salaried skilled employees as well as to self-employed people and professionals such as businessmen, CA (chartered accountants), physicians, architects, etc. The lenders prefer personal loans to salaried workers in renowned companies or public employees, because of their work security and prestige of employer.
• Age: Most banks offer personal loans to people between 21 to 60-year age. Though older people may also be eligible for a personal loan, for example, a pension loan, however, there are certain limitations on the granting of such loans.
• Minimum income: The minimum salary required for Personal Loans is not predefined but decided on a case to case basis. The Loan Officer considers multiple factors in determining whether your income qualifies for eligibility when applying for a Personal Loan. For most banks, the minimum monthly income requirements are ₹ 15,000. However, the banks prefer individuals with a minimum monthly income of ₹ 25,000. And a gross annual revenue of at least ₹ 5 lakh is typically required for self-employed persons to qualify for a personal loan.
• Work/Business experience: Banks specify that salaried professionals need to have a minimum overall work experience of 2 years, and at least 6 months in the current organisation in order to apply for a personal loan. For self-employed persons and professionals, they typically have to be in the existing business for at least 2 years to apply for an unsecured personal loan.
• Borrower’s location: The area where you live has a vital role to play in deciding the minimum eligible salary. Generally, in metro cities such as Delhi, Mumbai, Chennai, Bengaluru, Hyderabad and others, minimum requirements are higher compared to minimum wage requirements in the Tier II cities and towns. The lender expects that you have a high salary to be able to pay the loan comfortably since the costs of living in these cities are higher than the towns.
• The situation of housing: It plays a crucial role in deciding your minimum wage requirement whether you live in your own house or at rent. This is because your disposable income limits your repayment potential when you stay in a rental home.
• Other loans: If you have some other credits now, such as house loans, car loans or credit card debts, then you can raise your minimum wage requirements.

It is the lender’s choice to set your eligibility for borrowing. However, most banks and NBFCs limit ₹ 25 lakhs to one person. In most cases, people are eligible up to 30 times their income for a personal loan.

Also, lenders hold loan EMIs at approximately 45 to 60% of your monthly income to reduce default risks. For example, if your monthly income is between ₹ 20,000 – Rs.25,000, including all deductions, your EMI is likely to be no more than ₹ 12,500, which is around 50% of your monthly income.

Conclusion:

Although these are generally acceptable guiding principles, make sure your credit score and history are strong. If there are previous defaults, the chances of having the desired loan amount or a better tenor and interest rate will become more difficult. Before approaching a lender, understanding your eligibility makes it easier for you to discuss the loan terms and conditions with the lender’s representative better.