What Factors Determine Personal Loan Eligibility Criteria of a Person?

1. What Factors Determine Personal Loan Eligibility Criteria of a Person?

2. As you may know, personal loans are unsecured loans, meaning the bank doesn’t ask you to pledge any securities in order to avail it. What is mind boggling is that how can the bank trust you with such big loan amounts without asking any collateral against it. Well, banks are smart that way. They have various criteria checks in place before they disburse the loan to you. Any default in even of one of the factors can lead to loan rejection. Thus, it is important to understand the factors on which the eligibility criteria are based. Below mentioned are the factors that determine the personal loan eligibility criteria for all lending institutions:

3. Credit Score: This is one of the dominant factors that banks and non-banking financial companies (NBFCs) make it a point to check. Credit scores is a reflection of your credit service, so far; it is basically like your financial report card. There are many credit information companies, like CIBIL, Experian and more, who give these scores out to individuals. But CIBIL holds the most prominent position as most of the lending institutions in India accept CIBIL scores. A credit score is a three digit number ranging from 300 to 900, where 300 is the worst score and 900 being the best. An ideal score of 750 and above is considered to be a good score to bag a personal loan.

4. Regular Income: Personal loans are only given to people who are either salaried or self employed. What the lending institutions look in an individual is whether they have a regular net flowing income in their account. They check this to confirm whether the individual has the repayment ability to service the loan or not. To assess this, lenders ask for your payslips and bank statements to see if the salary is credited into your account or not. Self-employed people are asked to produce their current account statement in order to get the personal loan.

5. Citizenship: Most of the banks consider citizenship as a mandatory personal loan eligibility criteria. Only individuals who hold Indian citizenship are extended personal loans. Some banks and NBFCs even provide personal loans to Non Resident Indians (NRIs). Age: Age is also a crucial factor. Personal loan is not extended to people who are very young or who are extremely old. Normally, lenders approve loans to people who are above the age of 21 years. The upper limit for personal loans is 60 years at the time of maturity.

6. Employer Details: Lenders ask for employer details before giving loans. If you are working for some renowned company (like MNCs or PSUs), it is easier for you to get loans. Banks categorize each and every company as Cat A, Cat B, Cat C, etc. People working in Cat A companies will have not only easy access to personal loans but will also be given lower interest rates. Lower the category of your company, lower are the chances of you procuring the loan from lenders.

7. What are the Documents Needed to Support the Personal Loan Eligibility? Obviously, you’ll will have to produce some documents to prove that you fulfill all the eligibility criteria in regards to personal loan. Most of the lending institutions, more or less, follow a similar documentation policy. Following are the documents that you need to have while applying for a personal loan:

8. Proof of Identification: PAN Card/ Driving Licence/ Passport / Aadhar Card/ Voter ID Card • Proof of Address: Driving Licence/ Passport / Aadhar Card/ Voter ID Card • Employer Details: Company Name and Company ID Card for salaried people, GST Registration Form for Self-employed Income Details: Pay Slips and Bank Statement for the last 3 months (salaried). Self-employed people should submit current account statement for the last 3 months.