A Comprehensive Guide to Personal Loan Eligibility Criteria

Learn more about the eligibility criteria for applying for a personal loan and the common reasons behind rejection.

A personal loan comes in handy if you are looking for quick and easy financing to tackle any large or small expenses. One of the most beneficial aspects of a personal loan is that there is no usage restriction on the funds that you receive. You may use the funds for any requirement, such as sponsoring your child’s education, tackling any medical emergencies, or even funding your next dream vacation.

It is important to note that the lender’s personal loan eligibility criteria must be met. These eligibility criteria help the lender get an idea about your creditworthiness. Before you apply, ensure that you meet the lender’s general eligibility criteria to improve your chances of getting approved for a personal loan.

Common Personal Loan Eligibility Criteria

Every lender will have a certain eligibility criterion that you will need to meet at the time of applying for a personal loan. These criteria may be specific to the lender and could be mandatory. However, here are some of the most common ones that you must meet to clear the initial application process.

For Salaried Applicants

• You must be between the ages of 18 and 58 years
• You must have a minimum monthly income of ₹15,000
• You must have a minimum of six months of work experience with your current employer

For Self-employed Applicants

• You must be between the ages of 18 and 58 years
• You must have a regular source of income of ₹15,000 per month
• You must have a minimum work experience of 1 year

Additionally, lenders will also ask you to submit a certain set of documents at the time of applying. Ensure that you have the following documents in order to avoid rejection:

• PAN card
• Identification proof, such as an Aadhaar card or Voter ID card
• Proof of residence, such as an Aadhaar card or utility bills
• Bank statements for the past six to twelve months
• Proof of employment in the case of an employed individual

Note: These are typical eligibility terms. The criteria may vary depending on the lender.

Improving Your Eligibility Criteria

When you are applying for a personal loan, the lender will take several factors into consideration. It is important that you meet the eligibility criteria to get approved without any hassle. Here is how you can improve your eligibility criteria:

Maintain a High CIBIL Score

Your CIBIL score is the most important factor, as it allows the lender to gauge your creditworthiness. Ensure that you have a healthy CIBIL score of 750 or higher to get better lending terms.

Opt for a Shorter Tenure

If you are able to afford it, then apply for a shorter lending tenure. A shorter term would mean higher EMIs but lower interest payments.

Debt-to-Income Ratio

If you have existing debt, then consider closing those accounts. This will reduce your debt-to-income ratio and reduce the risk of defaulting on payments.

Credit Utilisation Ratio

Maintain a lower credit utilisation ratio of 30% or lower. This helps improve your credit score and lets the lender know that you are responsible with credit.

Timely Repayment

The lender will thoroughly scrutinise your repayment history. Make sure that you clear your dues on time without defaulting on payments.

Applying for a Personal Loan

Now that you have understood the lender’s eligibility criteria, you can proceed with applying for a personal loan. Ensure that you keep the required documents ready to avoid any delays. Here is how you can apply:

1. Shortlist a lender of your choice and visit either their website or mobile application
2. Navigate to the loans section of the website and click on ‘Personal Loans’
3. Upon being redirected, you will be asked to enter your personal details, such as your name and contact number
4. Once you have submitted the initial details, you may need to submit a digital copy of your documents
5. Click on ‘Submit’

After you have completed these formalities, the lender will reach out to you for further processing.

Common Reasons for Personal Loan Rejection

There may be times when your personal loan application gets rejected, and this can be due to one of many reasons. If your application is rejected, ensure that you do not immediately reapply , as it can affect your CIBIL score and even lead to another rejection. Here are some common reasons for a personal loan application rejection:

Low Credit Score

If your credit score is lower than the prescribed limit, then your application could get rejected. A low CIBIL score tells the lender that you are not creditworthy and may not be able to manage your finances. Make sure you have a CIBIL score of 750 or higher when applying.

Multiple Loan Applications

Avoid making multiple loan applications, as it will make you appear as if you are in financial distress and in need of credit. This could lead to the lender questioning your financial credibility and rejecting your loan application. Enquire about a personal loan with a lender one at a time.

Failure to Meet Eligibility Criteria

The lender will want to ensure that you are capable of repaying your loan without defaulting on payments. Make sure that you meet the lender’s minimum eligibility criteria at the time of applying for a personal loan.

Incorrect or Incomplete Documentation

A personal loan can be rejected due to the documents that you submit. If any document is missing or provides inconsistent data, then your application could get rejected. Make sure that you submit all the documents in order and ensure they are up to date.