Personal Loan Eligibility Criteria: 5 Must See

A personal loan is an excellent option to meet short-term or pre-planned financial needs for an individual…but are you eligible? This blog touches upon the 5 criteria you must meet for availing a personal loan.  

Are you thinking of taking out a personal loan? Whether you need a personal loan to cover a medical emergency in the family, a wedding, a vacation, a child's education, or simply to purchase an appliance or a phone, it is an excellent way to manage a variety of emergency and non-emergency expenses.

So, what are your chances of qualifying for one? When applying for a Personal Loan, this is one of the first question that comes to someone’s mind. Let’s take a closer look.

Understanding personal loan eligibility

Despite the fact that lenders' requirements for personal loans vary, certain factors are always taken into consideration before approving applicants -- like age, credit score and income. Prior to applying for a loan, it is a good idea to familiarize yourself with the common loan requirements and documentation pre-requisites. Understanding how the application process works may help you streamline your application so you have a better chance of qualifying.

Such loans also require you to meet the personal loan eligibility requirements of the lender, just like all other types of loans. You will have to fulfill a few requirements regardless of the eligibility criteria that differ between lenders in order to be approved for the loan. Here are five of them:

1. Your age

A personal loan applicant must meet the lender's age requirements in order to qualify for the loan. You must consider this when applying for a home loan because it tells lenders about your ability to pay and your financial stability.

If you are just out of college and in your early twenties, you may not have the financial stability you need. Likewise, if you are approaching retirement or over 60 years of age, your earning potential decreases during this period. The financial institutions generally consider applicants whose ages range from 25 to 55. But lenders have different age requirements.

2. Your monthly income

Repayment of the loan is highly dependent on your income. You should pay attention to your income when planning your finances. Lenders have their own minimum income requirements. A lender considers the city you live in and the company you work for when assessing your income. Despite lenders considering your primary source of income, you may still be able to qualify if you have a passive income source, such as renting out your property or leasing land. It may reassure lenders that you will pay your EMIs on time if you have a secondary source of income.

3. An overview of your credit history

You must have read in certain IDFC personal loan reviews and other banks’ reviews online regarding the minimum CIBIL score you need to be eligible. Well, loans to individuals are unsecured forms of credit. There is no security or asset backing them. Lenders, therefore, determine your creditworthiness by reviewing credit metrics. EMI payment patterns are reflected in your credit history which is collated and calibrated in the form of a number called the CIBIL score. In order to avoid defaulting on your loan repayment, you should pay your EMIs on time. That will have a positive impact on the factors affecting personal loan approval. 

4. Debt-to-income ratio

Imagine you are working for one of the most prestigious organizations in the world and that too on a very high salary package, but most of your income goes to EMI payments. The eligibility of your personal loan will be affected by this factor. In this case, the lender calculates your debt-to-income ratio by dividing all your existing loans by your total income. A higher debt-to-income ratio may result in your loan application being rejected, or you may be charged a higher interest rate on your personal loan.  Debt to income ratios should be kept below 50%. High debt to income ratios increases the risk of default.

5. Stability of your job 

Your lender considers both your work experience and your current employment status when sanctioning a personal loan. You have better chances of landing a personal loan if you are a stable borrower and have a regular income through business or a regular salary as an employee of a well-known organization. A lender may reject your application if your employer has a history of late salary payments or if they are not financially solid. These factors can have an impact on your ability to repay the personal loan.

In a nutshell

It is best for you to make sure that all the above-mentioned pointers are in your checklist while applying for a personal loan. You can also check out the easy-to-use IDFC FIRST Bank’s personal loan EMI calculator to figure out your finances and how much EMI you can afford.

At IDFC FIRST Bank, the loan amount starts as low as at Rs. 20,000 and goes up to Rs. 1 Crore. Catering to both salaried and self-employed individuals here’s a summary of the personal loan eligibility criteria:

For salaried individuals:
 

• Minimum Age: 23 years
• Maximum Age: at the time of loan maturity - 60 years OR the age retirement whichever comes first

For self-employed individuals:
 

• Minimum Age: 25 years
• Maximum Age: 65 years at the time of loan maturity

IDFC FIRST Bank offers competitive interest rates starting at 10.75%, repayment tenure of up to 84 months and a completely digital personal loan application process

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.