Don’t Know the Eligibility Criteria and Documents Required to Secure a Personal Loan? Know Here
Personal loan eligibility differs from one lender to another. However, there are certain considerations like your income and credit score that all lenders look at when assessing your application. Before you begin your search for a suitable loan, ensure to familiarize yourself with the required personal loan eligibility criteria and the documents that you will need to provide. With this knowledge, you can streamline your application process and ameliorate your personal loan eligibility chances.
Listed here are important personal loan eligibility criteria that lenders consider when assessing your application –
- Credit score and your repayment history
A credit score is an important parameter that lenders consider for evaluating your personal loan eligibility. Credit score ranges anywhere between 300 and 900 and is determined based on your repayment history, outstanding debt, and credit history length. Most lenders require you to have a score of at least 750 to qualify for a personal loan. If your score is below 750, lenders may either turn down your personal loan application or approve your application at a higher personal loan interest rate to compensate for the involvement of higher credit risk.
As the need for a personal loan may be instant, you must ensure to adopt healthy credit habits to build a good credit score because forming a score takes ample time. Having a good score also makes you eligible for a preapproved loan, a kind of instant personal loan that may be disbursed on the same day of placing the loan application.
Lenders impose a predetermined income requirement on personal loan seekers to ensure they can make the EMI repayments on time. The minimum income requirement generally differs from one lender to another. If you hold a higher income, lenders usually consider you to be safer bets and hence may offer a lower personal loan interest rate. However, if you hold a lower income, you may be considered riskier bets owing to your higher default risks. Higher credit risk often may propel lenders to charge a higher personal loan interest rate.
- Employer’s profile
Your income source is even reviewed by lenders when setting your personal loan interest rate. Generally, a lower interest rate on a personal loan is levied if you are salaried than self-employed. Under the salaried category, PSUs and government employees are given the highest preference due to their job security and income certainty. They are followed by private-sector employees. Under the self-employed category, chartered accountants and doctors receive the highest preference to secure a lower interest rate on a personal loan.
- Relation with lenders
Preferential interest rates on personal loans are offered if you hold an existing banking relationship. Such banking relationships may be in the form of fixed deposits, current accounts, credit card accounts, recurring deposits etc. Thus, if you are looking to avail a personal loan, begin your search by first contacting the bank/NBFC with whom you share a long-term relationship. The personal loan interest rate offered by them must be considered as a benchmark for comparing numerous personal loan deals offered by other lenders.
- Relevant documents
As proper documentation is one of the major parameters considered by lenders for processing your loan application, ensure to attach the right documents when applying for a personal loan. These documents include identity proof, address proof, residence ownership proof, income proof, IT returns, employment proof, investment proof, existing debts, and passport size photos.
As the process for examining your credit risk may differ from one lender to another, the personal loan interest rates also may widely vary amongst lenders. Thus, ensure to compare distinct loan deals by lenders before you apply for personal loan. One of the best ways is to approach an online financial marketplace to find the best deal. Once you choose the preferred lender, use the EMI calculator to compute a suitable EMI and repayment tenure as per your repayment potential and cash flow.