Applying for a personal loan is generally quick and easy, as it is an unsecured financing solution. You can apply online in minutes. However, lenders grant the loan based on certain criteria to ensure that you do not miss repayment. Generally, a good rule to follow is to meet the lender’s eligibility criteria.
While this is sound advice, it is not enough on its own. To help you understand how to make the best application, here are the five factors that affect your eligibility for a personal loan. Using them well can help you access funds quickly and meet your financial needs easily.
Your age
Age is an important criterion, as it gives lenders insight into your financial stability and earning capacity. If you’re in your early 20s, you may not have the financial stability, but you have plenty of time to earn and repay. Similarly, after 20 to 25 years of employment, the win window is smaller, and therefore, the chances of rejection are higher. Therefore, most lenders require you to be between 23 and 55 years old to apply.
Your work experience and job stability
Lenders determine eligibility based on your work experience and current employment conditions to assess whether your income is stable or not. Job stability translates to a steady stream of income, and so lenders also look at the organization you work with. If the company you work with has a history of late payment of wages or is not financially sound, the lender may choose to deny the application. Indeed, these factors ultimately affect your ability to repay the EMIs on your personal loan.
Your monthly income
Your income is an essential part of your financial profile, as it is directly linked to your ability to repay the loan. Depending on the city you live in and the lender you have opted for, the minimum required varies, so you should check this amount beforehand. It can also be beneficial for you to showcase additional sources of income. This can range from passive sources like a rental property to more active sources like a business. This can increase your income and assure lenders of timely repayment of your dues.
Your credit score
Since a personal loan is an unsecured form of borrowing, your credit score plays a crucial role in your application. This score is the primary measure by which lenders can judge your creditworthiness. This is doubly important because lenders have no collateral to fall back on. Therefore, you must maintain a high credit score to prove that you have a good repayment history and experience in debt management. Usually, a credit score of 750 and above is considered ideal for quick personal loan approval.
Your current debt and your debt-to-income ratio
Your income segmentation is an important part of your financial profile. Lenders are less likely to lend you if you already have too many financial obligations. This is where your debt-to-equity ratio comes in. You can calculate this by simply dividing your total debt payment by your income. It is important to keep this value below 50%, as a higher percentage presents a greater risk of default.
These five elements make up your financial profile and are taken into consideration when applying for a personal loan. They also take into account your eligibility for a loan, so it is a good idea to check in advance the specific criteria for the lender you have chosen. To make the application process easier, consider looking for a lender that offers a personal loan with attractive features and relaxed eligibility criteria. The Bajaj Finserv personal loan is an example of this as it is easy to qualify and offers ample sanction at a competitive interest rate.
With this loan, you can get up to Rs.25 lakh to meet your needs comfortably. Plus, you can get approved for this loan in minutes and take advantage of the flexible loan, which helps you manage your cash flow more efficiently. To expedite financing, check your pre-approved offer online to access a loan offer tailored to you.
