A Personal Loan can be the way out of almost any financial woe, especially one where you need fast cash with no questions asked. Be it for an impromptu trip abroad or to secure a wedding venue, a Personal Loan can be used to cover these expenses and more. The best part is that you don’t have to mention the reason while taking a Personal Loan.
Factors that Affect Personal Loan Eligibility
Since this type of loan is unsecured, there is a whole list of criteria to meet before the loan is sanctioned to you. The factors mentioned below affect Personal Loan eligibility.
You will need to specify whether you are a salaried or a self-employed professional. If you have a steady job or source of income, you can avail a Personal Loan easily.
As mentioned earlier, your net income will affect the loan amount you apply for. Lenders will factor in your monthly expenses to calculate your loan eligibility.
Your age also has a part to play in your loan eligibility. If you are a young professional, you have the luxury of a long tenure to repay the loan. If you are close to retirement, you forfeit that benefit. A longer tenure would result in lower EMIs, which means you can clear the debt without straining your budget.
The city you live and apply for a loan in would bear weight during the application process. If you live in a metro, you can apply for a higher loan amount as your take-home salary will be good. On the other hand, if you reside in a town, your chances of getting a high loan amount are obscure.
Your ability to clear a Personal Loan would depend on whether you’ve been able to keep up with loan repayments in the past. If you’ve been late on your payments or have missed them all together, your potential lenders will know about it.
When in Doubt, Use a Calculator
You can use an EMI calculator to determine the loan amount you’re capable of borrowing. It’ll also give you a fair understanding of the EMI amounts you’ll be liable to pay.
Some of the details that you might need to include are your date of birth, city of residence, your employer’s name, your net salary, and loan and credit card dues. The final amount you are eligible to receive, however, would depend on the bank or NBFC you apply to.
For example, if you want Rs.1.5 lakh in loan and your monthly income is Rs.35,000, you are eligible to receive anything between Rs.3.96 lakh and Rs.5.28 lakh. This amount has been calculated assuming the loan tenure is 60 months, the rate of interest is 20%, and you don’t have any other outstanding loans. This implies that your loan eligibility will be dependent on your income and expenses.
While using an online calculator if you are live in US, you can play around with numbers to see the loan amount that would suit you. By changing details like amount required, tenure, and rate of interest, you’ll be able to zero in on the right loan amount.
Tips to Maximise your Eligibility for a Personal Loan
To make sure you don’t hit any speed bumps when applying for a Personal Loan, you can maximise your loan eligibility in the following ways.
- Ensure you have stable employment. A steady job means you will have the money for your monthly EMIs
- Get your finances in order. Pay off old debts if you can, which will wipe the slate clean for all future loans
- Make sure you don’t dent your credit score with reckless spending. If you fail to make payments on time, it wouldn’t reflect well on your credit score
What if you Don’t Meet the Criteria
You can use the pointers mentioned below to improve your Personal Loan eligibility.
Increase the Tenure
If you increase the tenure of your loan, you’ll have lower EMI amounts. If the monthly installments are small, you’d find it easier to work them into your budget. Although the tenure would be longer than you previously anticipated, you would increase your loan eligibility.
If you have a spouse or a parent who’s earning, consider clubbing your incomes together when applying for a loan. By doing so, you increase the net income significantly, thereby making yourself eligible for a higher loan amount.
Include it All
If you get annual bonuses or commissions, you can use that to hike your eligibility. Whatever monetary perks you get, factor those in when calculating your eligibility.
So, kickstart your application process by using an online calculator to figure out your Personal Loan amount. Once that is done, file your application and upload relevant documents to set the wheels in motion.