For meeting your instant funding needs, a personal loan by far is one of the most prudent financial options. This is because this option does not need a lot of documents for approval, comes with no security requirement and has a quick disbursal feature. However, due to its unsecured nature, most personal loan lenders practice caution in evaluating your personal loan application. Discussed here are some personal loan eligibility criteria considered by lenders for approving your application.
- Credit profile and score
A score of 750 and above is usually considered creditworthy by most lenders. So, if you are one of those with this credit score, then your probability of getting the personal loan approval is high. A few lenders also tend to offer preferential personal loan interest rates if you hold a high credit score. On the other hand, a score of below 750 is looked upon as low and those holding this score are often considered financially undisciplined. Having a low credit score either makes the lender reject your personal loan application or charge a higher personal loan rate to make up for the credit risk.
As the requirement for a personal loan might hit at any time, assessing your credit score right before applying for the loan may be of no help. Instead, you must adopt credit-healthy habits of assessing your credit report at least twice a year. Doing so provides you with sufficient time to take appropriate steps to build your score and profile. Adopting credit-friendly practices like repaying your loan dues and credit card bills in full and on time, containing a credit utilisation ratio (CUR) of within 30 per cent, monitoring the guaranteed and co-signed loans periodically, not submitting multiple loan applications within a short time period, etc. can help in maintaining a positive score. Having a strong credit score might not only make you qualify for a standard personal loan deal but might even make you eligible for a preapproved personal loan or instant personal loan deal. Moreover, a higher credit score also allows you to enjoy a lower personal loan interest rate and processing charges at suitable terms and conditions.
- Personal loan EMI repayment capacity
Same as other loans, financial institutions consider your repayment capacity while reviewing your application for a personal loan. Usually, lenders require your debt repayment obligation monthly to be within 50 to 60 per cent of your income. In the case this limit exceeds, then you might have a lower personal loan approval chance. As higher loan repayment tenure leads to lower personal loan EMI, so for those with a higher debt-to-income ratio can consider opting for a longer loan repayment tenure to enhance their repayment capacity. Doing this would reduce your monthly personal loan repayments. For accurate computation, you may use a personal loan calculator.
- Work experience
Lenders consider your employment profile when evaluating your application for a personal loan. A few lenders also consider this factor for deciding your personal loan interest rate and loan proceeds.
As lenders’ evaluation process varies widely, your personal loan eligibility and interest rates charged even varyfrom one lender to another. Thus, make sure to enquire with multiple lenders through online lending marketplaces to get an idea about the suitable deal before you hit on the personal loan apply button. Ensure to opt for the lender offering a deal as per your need, repayment capacity and preference.