Applying for a personal loan? Before you submit your application, it’s important to know what lenders evaluate. Personal loans are unsecured, so banks and NBFCs carefully assess eligibility to minimize risk. Here are the 5 crucial factors that determine whether you get approved.
1. Credit Score
One of the most important factors in personal loan approval.
A higher credit score (750+) increases approval chances and lowers interest rates.
Late payments, defaults, or high credit utilization can negatively impact your score.
2. Income & Employment
Lenders assess your repayment capacity based on monthly income and employment stability.
Salaried individuals with steady jobs or self-employed professionals with consistent income have better chances.
Banks usually require minimum monthly income (varies by lender and city).
3. Age & Employment Tenure
Minimum and maximum age limits apply; typically 21–60 years for salaried applicants.
Stable employment history or long-term business track record is a positive factor for eligibility.
4. Existing Debts & Liabilities
Lenders consider your debt-to-income ratio.
If you already have multiple loans or high EMIs, approval chances may reduce.
Ensure total EMIs do not exceed 40–50% of monthly income to maintain eligibility.
5. Loan Amount & Tenure
Requested loan amount should be reasonable relative to your income.
Longer tenures may reduce EMIs but could increase interest liability.
Banks prefer applicants who can repay comfortably within 1–5 years.
Tips to Improve Personal Loan Eligibility
Check Credit Score – Aim for a score above 750.
Reduce Existing Debts – Pay off high-interest loans or credit card dues.
Maintain Stable Employment – Avoid frequent job changes before applying.
Apply for the Right Loan Amount – Don’t overreach your repayment capacity.
Provide Accurate Documentation – Income proofs, bank statements, and identity documents must be complete.
Conclusion
Understanding these 5 eligibility factors helps you strengthen your personal loan application, increase approval chances, and potentially secure a lower interest rate. Being prepared with documentation and financial clarity can make the process smooth and stress-free.
FAQs
Q1. What is the minimum credit score required for a personal loan?
Usually 650–700, but higher scores improve approval chances and lower interest rates.
Q2. Can self-employed individuals get a personal loan?
Yes, with proof of income stability and business continuity.
Q3. How much can I borrow based on my income?
Lenders typically offer up to 20–40 times your monthly income, depending on your debt obligations.
Q4. Does existing EMI affect eligibility?
Yes, high EMIs may reduce repayment capacity and affect approval.
Q5. Can I improve eligibility before applying?
Pay off debts, increase income sources, and maintain a good credit score before applying.
Published on : 25th September
Published by : SMITA
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