An instant loanis a very useful debt tool that can help you in meetingall your financial obligations. Whether you need financing for a vehicle, a long-planned vacation, renovating your home or paying off your medical bills, you can do it all with a personal loan. All you have to do is download the cashloan, check eligibility and fill out the application form.
Today availing a personal loan is very easy. You can apply for a loan at the tap of a few fingers and the amount gets disbursed into your account within hours. However, the only thing to note before applying a personal loan is the eligibility criteria. Since, a personal loan is an unsecured loan; the lender sets certain eligibility criteria to ensure timely repayment of their money. If you do not meet the lender’s eligibility criteria, then they may reject your instant loan application or offer you the loan at a higher interest rate.
Read on to understand the factors that influences your personal loan eligibility.
What Are the Factors Affecting the Personal Loan Eligibility?
Have a detailed look at all the important factors that affect your personal loan eligibility.
1. Your Age
When applying for aninstant loan, you must evaluate the most important characteristic affecting personal loan eligibility is your age. Age is a significant criterion since it demonstrates your financial stability and earnings to the lender. You must fall into the bank’s required age bracket at the time of application.
Banks usually keep the age eligibility criteria between 21 to 58. The reason behind it is that this age group is financially active and they have good earning potential. So, their chances of making timely payments on the loan are high.
2. Work Experience
Individuals with lengthier work histories are often seen to have a more secure financial future than those who have just started their careers. The minimum required experience, however, varies depending on the lender, your employment, and other relevant circumstances.
The work experience for salaried individuals usually ranges from 3 to 5 years, while self-employed individuals need at least 3 years of work experience to get qualified for a personal loan. In addition to this, lenders prefer employees with stable employment.
3. Monthly Income
Your lender will check if you have a sufficient monthly income before approving the cash loan. Your ability to pay off debt is strongly correlated to your income. It will give them an indication of whether you will be able to repay the loan within the specified time frame. Your repayment capacity is directly related to your income and is an important aspect of your financial profile.
When determining your income, your lending institution considers both the location in which you reside and the firm you work for. While most lending institutes consider your primary source of income, it works in your favor if you provide any additional source of income to make your profile stronger.
4. Credit Score
Your credit score is based on your credit history, which includes payments made on loans and credit card bills. Since instant loans don’t need collateral, your credit score has the most impact on your eligibility. Your credit score is a three-digit number that ranges from 300 to 900.
Lenders prefer candidates with a high credit score. So, if your credit score suffered in the past due to negligence, then it is wise to work on improving your credit score. Because based on the credit score, the lender may reject your application or approve the loan at high interest rates.
5. Employment Status
Your lender takes into account both your current employment situation and your entire relevant experience when approving a personal loan. If you have worked for a reputable company for a lengthy period of time, your chances of getting an instant loanare significantly higher.
Lenders prefer candidates who have been with the same company for two or more years and are making a stable income. If you change your jobs frequently, then lenders may view this as an unstable behavior and they may rejectyour loan application.
6. Debt-To-Income Ratio
Your debt-to-income ratio is the last critical element of the qualifying requirements for a personal loan. Let’s say you work for a respected company and have a good salary, but most of your money is going toward EMI repayments. Your eligibility for a personal loan is impacted by this issue.
Any loans you are currently repaying such as a home loan, two-wheeler loan, and so forth, must be fully disclosed to the lender. The debt-to-income ratio should ideally be kept at or below 50%. Your lending institution may decline your loan application or charge you a higher interest rate on your personal loan if your debt-to-income ratio is higher than 50%.
In order to qualify for a personal loan, you must consider these factors that represent your creditworthiness. Most lenders consider these factors when they receive a loan application for a cash loan. Try to comprehend these conditions before submitting your loan application to improve your loan eligibility. In addition to the personal loan eligibility requirements, you should also consider having a look at the terms and conditions of an instant loan.