Understanding the factors impacting your personal loan eligibility

Posted on Monday, February 26th, 2024 | By IndusInd Bank

Personal loans are an easily accessible form of credit in India, offering individuals the flexibility to address various financial needs without pledging collateral. Securing a personal loan can often be the gateway to fulfilling aspirations, whether it’s renovating your home, funding education, or dealing with unexpected expenses. However, the path to loan approval isn’t always straightforward. For many of you, navigating the process to determine your personal loan eligibility can be daunting.

That’s why we’ve compiled this guide to shed light on the key factors defining personal loan interest rate and your eligibility for it.

Demystifying Personal Loan Eligibility: 5 Things That Matters

1.  Your Creditworthiness

Your credit score tells the lenders about your creditworthiness. It is not just a number but a reflection of your financial reliability. Lenders use this score to assess the risk of lending to you. For instance, a high credit score, typically above 750, indicates responsible financial management and increases your chances of loan approval. Conversely, a low credit score may raise red flags for lenders, making it harder to secure a personal loan or leading to less favourable terms.

Regularly monitoring the credit score and taking steps to improve it, such as paying loan EMIs and credit card bills on time, can significantly enhance your personal loan eligibility.

2.  Your Financial Stability

The next important thing that lenders consider when evaluating your eligibility for a personal loan is your monthly income. It represents your ability to repay the loan amount and any associated interest within the stipulated time frame.

Lenders typically prefer borrowers with a regular and sufficient income stream, as it reduces the risk of default. Besides this, your income determines the maximum loan amount you can qualify for and influences the personal loan rate of interest offered by lenders.

Recommended Read: Is Getting a Personal Loan for a Wedding Worthwhile for You?

3.  Your Professional Profile

Your work experience also holds significant weight in determining your eligibility for the loan. Lenders view a consistent employment history as a positive indicator of repayment capacity. A longer tenure in your current job or profession demonstrates commitment and reliability, making you a lower-risk borrower in their eyes.

Additionally, individuals with a consistent work history are more likely to have a steady income, which further strengthens their loan application. While frequent job changes or gaps in employment may raise concerns for lenders, highlighting your professional stability and career progression can bolster your personal loan eligibility.

4.  Your Age

Your age plays a crucial role in shaping your loan eligibility. While younger applicants may have the advantage of potential future earnings and longer loan tenures, older borrowers often possess a more established financial track record and may have accumulated assets. Lenders consider your age to assess your financial situation and hence, the ability to repay the loan within the specified timeframe. The minimum age requirement for applying for a loan online is 21 years with IndusInd Bank and requires applicants to show their income proof. On the other hand, older applicants may need to reassure lenders of their post-retirement income sources.

5.  Your Current Financial Liabilities

Your existing financial commitments, such as outstanding loans, credit card debts, and other liabilities, play a crucial role in determining your personal loan rate of interest. Lenders evaluate your current debt obligations to assess your debt-to-income ratio – a measure of your ability to manage additional debt. A high debt-to-income ratio indicates that a significant portion of your income is already allocated towards debt repayment, raising concerns about your ability to afford additional loan payments.

You can consider reducing your existing debts or consolidating them into a more manageable structure to improve your eligibility.

Conclusion

In conclusion, comprehending the factors that influence your personal loan eligibility is key to securing the financing you need and enhancing your chances of loan approval. Check your eligibility with us here and take the first step today!

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.