According to an RBI report, the outstanding credit volume in the personal loan category has surged to 16.4% in March 2021 (1). Individuals prefer this loan type over the other alternatives because they can leverage the capital without any end-usage restriction. Further, the documentation process is also simple.
Nevertheless, while applying for credit facility, borrowers need to ensure that they meet the personal loan eligibility of the lending institution. If they fail to meet those parameters, they may encounter a rejection of their credit requests.
Aspects that determine the personal loan eligibility
Following are the eligibility factors that borrowers need to properly meet to get a personal loan quickly without any chance of rejection:
- Monthly income
Lending institutions ensure that the applicants have sufficient monthly income so that they can repay conveniently. Individuals must meet the income requirements properly to get quick approval on their loan applications. Nevertheless, the minimum monthly income differs according to location. For example, lenders determine a higher earning requirement for residents of metro cities than small towns or other locations.
- Job security
Apart from the monthly income, lenders also assess the job security of their applicants. This is why they prefer a borrower to have a job in an MNC or a PSU. Besides job security, such borrowers have a stable income throughout the year.
Nevertheless, self-employed individuals can also secure this collateral-free credit facility. They just need to prove that they get sufficient and stable earnings from their ventures. In this regard, individuals also need to know how they can get a loan without a job.
- Work experience
Lending institutions also come with personal loan eligibility criteria regarding work experience. Professionals with sufficient experience (over 3-5 years) in a particular field are considered more financially secure than individuals who have just started their careers.
- Credit score
Individuals need a CIBIL score of at least 750 to get the credit facility without hassle. Such a credit score assures the individual’s credibility as a borrower. It ensures that the applicants have a positive record of paying all their EMIs on time. As a result, lending institutions get confidence that those individuals will not default on their repayment. They approve their loan applications without hesitation. Besides, individuals also may need to know how they can get a personal loan with a poor credit score.
- Borrower’s age
Young professionals have sufficient working years remaining in their careers. They can pay debt obligations more conveniently than the applicants nearing retirement. For this reason, lending institutions prefer to sanction this collateral-free loan to youths. They can easily get approval on a large or small personal loan request.
Generally, individuals need to be in the age group of 21 to 67 years to get a personal loan easily. Nevertheless, here 67 years refers to the maximum age of borrowers when they must pay their last EMI.
Individuals who need personal loans must meet these above-mentioned eligibility requirements to get the credit quickly.
In this regard, applicants must also be aware of some probable mistakes they must avoid while applying for a personal loan. It will help them reduce the risk of rejection on loan requests.
Besides, by meeting the eligibility criteria properly, they can easily negotiate with their lending institutions to get a reduced interest rate. They also need to be aware of other ways that can help them decrease the borrowing rate.
Tips to reduce the interest rate on personal loan
Individuals need to follow the strategies mentioned below to secure a lower interest rate:
- Comparing lenders
The interest rate is not the same for all lending institutions. Before accepting a loan offer, individuals need to compare this rate across lenders. This way, they will be able to find a financial organisation charging a lower rate on personal loans.
- Opting for a balance transfer
The balance transfer facility lets existing borrowers move their loan accounts to another financial institution. They need to find a lender offering the lowest interest rate on personal loan and transfer their existing obligation to that lender. It will help them enjoy the new interest rate on their outstanding debt.
- Maintaining a healthy FOIR
Lending institutions check the FOIR (Fixed Obligations to Income Ratio) of the applicants while approving the personal loan applications. When individuals have fewer monthly obligations (debts, credit card bills, etc.), they can repay their loans easily. Such individuals can negotiate with their lenders to reduce their interest rates.
Furthermore, several lenders in India also help their customers to meet their credit shortages instantly with pre-approved offers. These are special loan offers tailored for customers on their financial products, including personal loan, business loan, and credit card. They can expedite their loan application processes by accepting these special deals. They only need to mention their credentials, including their names and contact details to check their pre-approved offers.
In conclusion, being an unsecured credit facility, financial institutions put significant stress on the personal loan eligibility factors to reduce their risk of repayment failure. Individuals must meet these criteria properly to ensure a quick and hassle-free loan application process. It also helps them get this credit assistance quickly.
