Personal loans are unbarred loans to help you in an emergent financial situation, such as urgent medical emergencies, weddings, debt consolidation, etc. A personal loan comes with a set of great benefits for an applicant’s advantage. However, the lender has specific eligibility criteria to qualify for a personal loan. One of the essential eligibility factors is your income, which determines your repayment capacity.
Your chosen lender will offer you an urgent personal loan if they’re convinced you to have a sound and regular income inflow to take care of the loan EMIs. Your combined income from all sources is one of the most critical determinants of your personal loan eligibility. The proof of income to be submitted along with a personal loan application varies for a salaried and self-employed professional. However, the minimum income criteria are equal for both.
Personal Loan Eligibility Criteria
The minimum salary for personal loan eligibility varies from lender to lender. The lenders will consider your loan application only if you can meet their income and repayment ability requirements. All lenders have their specific personal loan eligibility criteria concerning income, age, and other factors; however, certain factors are common to all.
Here are the personal loan eligibility criteria for a personal loan for salaried or a self-employed individual:
- The applicant’s age shall be between 21 years and 60 years.
- Salaried individuals with a minimum income of 18000 INR (in metro cities) and 15000 INR (for non-metro cities) can apply for a personal loan.
- The individual shall be employed in a private or government company or a public sector firm.
- The applicant shall have at least two years of work experience.
- The applicant shall be working for their current employer for at least a year.
Tips on Availing a Personal Loan with Low Income
There are certain things to keep in mind if an urgent personal loan is required. Before applying for a loan, make sure you consider the following factors:
- Requirements- If you are drawing a comparatively low income, you must check and compare the eligibility criteria of several lenders before you finalize one. This will decrease the chances of your loan application getting rejected by the lender.
- Interest Rate- The overall cost of your loan depends largely on the interest rate that your lender charges. If you are levied a higher interest rate, your loan cost would be higher. It is, therefore, highly suggested that you compare interest rates offered by all lenders before deciding which lender to go for. If an urgent personal loan is required, installing the leading lender’s mobile apps for an easy and quick comparative study is best.
- Other Charges- When calculating the loan’s total amount, it is also crucial to consider the other charges levied by the lender as loan processing charges or foreclosure fees.
- Credit Score- Before applying for a personal loan for salaried individuals, check your credit score to know your credit profile. It is suggested to maintain a credit score of over 700 if you want to borrow a loan at a low-interest rate.
Also Read – Decoding FOIR: Impact on Personal Loan Approval
How to Improve Your Chances of a Personal Loan Approval
There are a few ways to improve your chances of getting approved for a personal loan:
- Paying your dues on time- Make sure to pay all your credit card dues and loan EMIs within the due date and in full. Making regular total payments consistently for a few months helps improve your credit score. A higher credit score improves your chances of being approved for a new personal loan.
- Existing Debt- if you have prior loan commitments, the outstanding debt will decrease your chances of getting a personal loan. Reducing debt will also reduce your burden of repaying loans. In addition, it will free up a large portion of your income for new loan EMIs.
- Minimizing credit utilization- You have to keep your credit utilization ratio at less than 30% to improve your credit score. An increase in credit score will reflect responsible credit behavior to potential lenders.
Documents Required for Getting a Personal Loan
You need to submit certain documents to apply for a personal loan–
- Duly filled loan application form
- Passport copy, driving license, Aadhaar card, or voter ID as identification and address proof.
- Past three months’ bank statements
- Latest salary slips – for salaried individuals
- Evidence of income – for self-employed individuals
- Age proof
- Passport size photographs
Conclusion
Financial institutions have their methods to determine whether a person is eligible for a personal loan. Factors considered for a personal loan for salaried applicants are different from those for self-employed individuals. However, the criteria of salary and repayment ability of a person are some of the biggest and common factors that individuals have to meet to get a personal loan.
