While you’re at it, be prepared to make a few stops on your way to receive the loan- deciding the loan amount and checking out the interest rates. With this, you will get a clear idea about your requirements. The next important task for you to consider would be checking your loan eligibility to make sure your needs are matching with your acceptability.
Why Do You Need To Check Your Personal Loan Eligibility?
Applying for a personal loan while knowing the eligibility criteria and applying without that makes a huge difference. The latter can hamper the process and lead your application towards rejection, but being aware of it helps you avoid such consequences.
Personal loan eligibility is calculated considering certain aspects of your financial situation, such as income, current EMIs, employment type, working experience, and creditworthiness.
Each bank and NBFC will have different personal loan eligibility Criteria. They offer various ranges of personal loans based on the applicant’s eligibility. You can easily end your brainstorming sessions without having to calculate the personal eligibility yourself; The personal loan eligibility checker will do the needful. These calculators are available on the websites of lenders and personal loan apps and are extremely user-friendly.
How to Calculate Personal Loan Eligibility?
You’ve already come across the benefits of checking personal loan eligibility in, up above. As mentioned earlier, you can use a Personal Loan Eligibility Checker or calculator available on lenders’ official websites. All you have to do is fill in the details per the instructions. In the next click, the calculator will display the maximum loan amount, interest rate, and repayment tenure that suits you the best.
The information you will have to fill includes:
- Name
- Monthly Net Income
- Total years of work experience
- Age
- Existing EMIs
- Required repayment tenure
- The answer given at the end by the calculator will provide a clear picture of your expenses and, further, help you set a budget keeping that in mind.
Personal Loan Eligibility Check
Personal loans are collateral-free, which pushes the lenders to the higher end of the risk. Thus, most lenders check the following parameters to filter the applicants. The basic requirements per Buddy Loans’ personal loan eligibility here’s how can come across as a eligible person for a personal loan–.
- You should be a citizen of India.
- Your age must fall in the range of 21-65 years. This differs with few lenders setting their criteria as 23 years.
- You are expected to have a work experience of 1 year. A few lenders might ask for more.
- Your credit score should be in a good range, the one that exceeds 750 is most preferable to avail of a loan.
- In case of a bad credit score, you can add a co-applicant to increase the chances of loan approval.
On meeting all these personal loan eligibility criteria, you can apply for a loan online without confusion, submit the required documents for verification, get your loan approved and have the amount disbursed to your bank account directly.
How Do Lenders Evaluate the Personal Loan Amount For You?
Your ability to repay the loan plays an important role here. You may find this in Buddy Loan App too, that there are two methods where lenders take into consideration while evaluating the maximum amount of personal loan they can grant you:.
- Fixed Income to Obligation Ratio (FOIR) Method– The lenders will focus on the cumulative monthly payments required to repay current debt. If your FOUR reaches 50% of your take-home pay, the personal loan application will either get rejected, or the loan amount sanctioned may be less than what you require.
- Net Monthly Income Method– Lenders use a multiplier based on the applicant’s net monthly income (NMI) to evaluate the maximum loan amount. The loan amount that is up to 30 times your Net Monthly Income (NMI) is considerable. If your requested loan amount
Factors Affecting Personal Loan Eligibility.
Your loan application will not be considered eligible for a personal loan, till you fulfil these eligibilities:
- Credit score: Borrowers with a credit score of 750 or above usually have an impressive history with financial institutions. Thus, they are considered more financially responsible and less likely to be rejected. This makes banks and NBFCs bias those applicants for personal loans and offer them low interest rates.
- Employment: Personal loan eligibility for a salaried person to consider him eligible for a personal loan is one year of work experience at the least. In the case of self-employed individuals, their business should be in existence for at least two years.
- Age: Large number of banks and NBFCs offer personal loans to individuals falling in the age group of 18 years to 65 years. This is one of the happening benefits through Buddy Loan’s lenders.
- Minimum income: High income indicates that you’re more capable of repaying your loan on time, automatically implying that you are a low-risk borrower.
- Repayment Capacity: The EMI/NMI ratio of less than 50% to 55% is ideal for banks and NBFCs to approve your personal loan applications.
Ways To Improve Personal Loan Eligibility Parameters.
- Satisfying all the required eligibility criteria: It is crucial to ensure a smooth process when availing of a personal loan. A few tips to enhance your eligibility for a personal loan are mentioned here:.
Credit Score.
With reference to it being a major factor in deciding eligibility, the credit score plays a key role in approving your loan application. The score is based on your prior loan history, transaction details, and other credit factors. A good score ensures quick approval, while a poor score can lead your application toward rejection.
Sometimes, you might have a perfect credit history, but there could be errors in your credit report. So, check your credit report thoroughly before applying because a single error can reject your application. On finding the wrong information, fix it at the earliest.
- Make Sure You Have a Proper Source of Income.
A steady income helps you avail a personal loan with ease. The repaying capacity is directly proportional to the income. For that matter, it also gives you the right to negotiate the interest rate and repayment tenure.
- Do Not Choose Multiple Loans/Lenders.
Applying for only one personal loan at a time is straightforward advice from finance experts. When you apply for too many loans or choose more than one lender, each inquiry is mentioned in the credit report, affecting your credit score negatively. Selecting a lender who will conveniently cater to all your financial requirements is a crucial skill, so do your research and compare loan offers, interest, tenure, etc, before approaching the lenders.
Instead of submitting loan applications to multiple lenders directly, try your luck with online loan aggregators like Buddy Loan to get personal loans from multiple loan options. The inquiries from online financial marketplaces are considered soft and will not hamper your credit score.
- Keep All Your Documents Ready.
Make sure all your documents are ready and in place. Cross-check your application form and credit score, and make sure all the criteria match lenders’ requirements. You can also add a co-applicant to enhance the approval chance with Buddy Loan App.
Get a co-applicant: A co-applicant certainly helps in improving personal loan eligibility. They can be your family members, such as spouses, parents, children, etc. It gets easier from here, when you apply for a personal loan with a co-applicant, the lenders will check applicants’ credit scores and repayment capacity and decide on the approval. Thereby, the risk of repayment is distributed over 2 heads equally. Not so long ago, Buddy Loan helped a couple get through their financial journey with ease.
- Avoid frequent job changes: This might not sound relevant, but lenders also look for employment history and stability when evaluating your personal loan eligibility. They may hesitate to offer you personal loans if you change your jobs frequently as it depicts an instability of income. However, there are options open for the non-salaried as well, apply through Buddy Loan and choose the vendor so you can conclude on that financial blockage too.
Documentation Needed For Personal Loan.
The documents salaried and self-employed individuals need to submit for online personal loan approval:.
The loan applicant should keep their documents handy while applying for personal loans. Requirements may vary from Salaried employee to Self-employed.
For Salaried Employee:
| Sl. No. | Particulars | Documents Required |
| 1 | Proof of Identity | Aadhar Card, PAN Card, Driving License, Passport |
| 2 | Proof of Address | Electricity Bill, Water Bill, Passport |
| 3 | Proof of Income | Salaried: Bank statement for the past six months |
| 4 | Work experience | Employment Certificate for a minimum of 1-year experience |
For Self-Employed:
With standard documents such as ID proof and address proof, Self-employed need to produce their recent bank statements, tax returns, or a lease agreement of their business as income proof.
| Sl. No. | Particulars | Documents Required |
| 1 | Proof of Identity | Aadhar Card, PAN Card, Driving License, Passport |
| 2 | Proof of Address | Aadhar Card, Electricity Bill, Water Bill, Passport |
| 3 | Proof of Income | Bank statement for the past three monthsSalary Slips of three monthsIncome Tax Returns for the last three yearsBalance Sheet and Profit & Loss Statements for the last three years audited by a CA. |
Final Take Away.
Get more insights on Personal Loan Eligibility & resolve all your queries regarding it. You could always reach out to Buddy Loan Support!
Also, the recommendations set here are for the best of intentions of the borrower, as the lending partners of Buddy Loan practice industry-best-service.
More so, get a financial standpoint & instantly spike your chances of getting a personal loan by 90%.
Apply for a personal loan online using the best loan aggregator apps like Buddy Loan and have the results on your palm in a few hours.
