How to Calculate Personal Loan Eligibility?by Sakshi Kharbanda Financial Consultant
These days almost everyone is turning towards personal loans for their financial needs. It has become the “new normal” means of funding one’s monetary purposes. With the right loan amount, a person can finance almost anything. Personal loans are known to be unsecured loans, which means it does not require any security or collateral. Though there are some eligibility criteria that you have to fulfil in order to avail the right personal loan that fits your need. And to decide the eligibility, the financial instutions have come with a personal loan eligibility calculator.
What are Personal Loans?
Personal loans are a lump sum amount that a person borrows from a lender for financing one’s personal needs. In India, there are various financial institutions like banks, NBFCs, and digital lenders who provide personal loans to customers at varying interest rates and repayment terms.
Personal loans are also called unsecure loans. It is because it does not require any security or collateral to obtain a personal loan. A person can use the loan amount to finance almost anything, such as purchasing new furniture, renovating the house, buying new vehicles, funding the holiday, etc.
With features like no collateral along with its quickness in approval, personal loans set themselves apart from all other types of consumer loans such as Home loans, Gold loans, and Education loans.
Eligibility for Personal Loans
Before applying for a personal loan, it is important to understand the eligibility criteria in detail. If you find yourself eligible you can further negotiate with the lenders to get the best interest rates and tenures. The basic eligibility parameters are almost similar for all the financial institutions offering personal loans. These factors are:
Monthly income - In the case of a personal loan, there is no trouble with collateral. Banking institutions measure one’s income to assure that he/she is eligible to fulfil the debt on time without any overdue. The minimum salary or income for approval is Rs. 25,000/month. However, the minimum salary may be different in metro cities as the cost of living is higher there.
Credit score - To calculate credit scores, lenders take into account different factors like one’s credit history and past borrowings. It is a 3-digit number ranging from 300 to 900 in order to determine a person’s credit worthiness. Usually, when a person has a credit score above 700, the lender considers that a good credit score. If the score is below 650, it is advisable to improve the score before proceeding with the loan.
Age - Normally the lenders approve applicants of age between 21 to 65. The criteria differ between a salaried and a self-employed individual as a self-employed start working at a younger age than an employed professional as well as they work beyond the standard retirement age of 58.
Work experience - Lenders mostly prefer a working professional, either self-employed or a person with a secure job (at least 3 years of working experience). It gives the financial institutions assurance that the amount they give is going to be paid back on time. However, they might consider other factors in case the applicant does not have approved working experience.
Current liabilities - An applicant’s present creditworthiness and any ongoing debt impacts the chances of availing of the personal loan. Banks like to know if the customer can repay the loan on time and check the credit history.
Calculating Personal Loan Eligibility
Each financial institution has its own personal loan eligibility calculator which one can access through their websites. It is fairly easy to use and also simple to understand. The borrower needs to input the above-mentioned factors on the website along with the tenure and interest rate for the loan amount. After giving in the data, you can check your eligibility.
In order to manually know how personal loan eligibility is calculated in India, one simply has to check the following steps:
Make sure that they fit all the eligibility factors including, a credit score above 750.
Calculate the EMI using a formula or personal loan EMI calculator and determine the monthly EMI value.
Ascertain that they are financially secure to fulfil the debt-related obligations or EMI on time.
Check with different financial institutions as per their locations to determine their eligibility, as one institution might approve and others might not.
Thus, it's easy to check your eligibility either through an online personal loan eligibility calculator. You can also check your eligibility manually. However, the online method is comparatively easier to use and can save you from unnecessary efforts. It gives you the freedom to determine your own eligibility without taking anyone’s help. Moreover, determining eligibility online is free of cost. So, if you want to calculate your eligibility for a loan, straight up visit your lender’s website.
Created on Aug 5th 2022 06:59. Viewed 89 times.