Personal Loan Eligibility Criteria: How to Check & Improve Your Loan Eligibility

Personal loan is an unsecured loan that can be flexibly used to pay for a variety of expenses. As no collateral is required to get this loan, the risk involved for lenders is greater than that applicable to a secured loan. There are thus multiple factors that a lender considers when deciding personal loan eligibility of a prospective borrower.

Personal Loan Eligibility Criteria

The following are some key factors that are taken into consideration by lenders before offering a personal loan to an individual. While the weight assigned to different factors may vary from lender to lender, the following list does provide a snapshot of key factor that a lender considers when determining a prospective borrower’s eligibility for a personal loan:

• Credit score: This is a 3 digit number that sums up how you have handled repayments of your credit cards and personal loans in the past. This score is calculated by credit bureaus and ranges from 300 to 900. The closer your score is to 900, usually the better are your chances of being approved for a new personal loan.
• Employer Reputation: Banks usually offer personal loans to both salaried professionals working in private, government or multinational companies as well as self-employed individuals and professionals like businessmen, CA (chartered accountants), doctors, architects, etc. Salaried professionals working in renowned organisations or government employees are preferred by lenders for a personal loan because of their job stability and employer reputation.
• Age: Most banks offer personal loans to individuals in the age group of 18 years to 60 years. While older individuals may also be eligible for a personal loan such as a pension loan, typically, there are certain restrictions with respect to grant of such loans.
• Minimum income: The minimum monthly income criteria set by most of the banks for salaried professionals is Rs. 15,000. Although, individuals with minimum monthly income of Rs. 25,000 are preferred more by the banks. And for self- employed individuals, a gross annual income of minimum Rs. 5 lakh is usually needed to qualify for a personal loan.
• Work/Business experience: Many banks specify that salaried individuals need to have a minimum total work experience of 2 years with minimum 6 months in the current organisation in order to qualify for a personal loan. In case of self- employed individuals and professionals they usually need to have been in the current business for minimum 2 years in order to be eligible for an unsecured personal loan.

How to Check Personal Loan Eligibility

Apart from the above mentioned criteria, another key factor impacting an applicant’s eligibility for a personal loan is the repayment capacity. There are two main ways using which banks check the maximum loan amount that they can lend based on the repayment capacity of an individual:

1. Fixed Income to Obligation Ratio (FOIR) Method – The FOIR method primarily considers the total monthly pay outs that the applicant needs to make for outstanding loans/credit card dues. Typically if the FOIR of an applicant exceeds 50% of the take home salary, the personal loan application may be rejected.
2. Net Monthly Income Method – Some lenders fix the maximum loan amount using a multiplier applied on the net monthly income (NMI) of the applicant. In such cases, the eligible personal loan amount can go up to 30 times the NMI of the applicant. In such cases, if the loan applied for exceeds this amount, the application may not be deemed eligible for a unsecured personal loan.

Documents Required

The documents required to avail a personal loan are different for a salaried professional and a self- employed individual. Here is the list of documents required:

For salaried professionals:

• Proof of Residence: Rent Agreement / Utility Bill (not more than 3 months old) / Passport (any one)
• Proof of Identity: Passport / Driving License / Voters ID (any one)
• PAN Card
• Latest 3 months Bank Statement
• Salary slips for last 3 months
• 2 passport size photographs

For self- employed individual:

• PAN Card
• KYC Documents: Proof of Identity; Address proof; DOB proof
• Proof of Residence: Leave and License Agreement / Utility Bill (not more than 3 months old) / Passport (any one).
• Income proof (audited financials for the last two years)
• Latest 6 months Bank statement
• Office address proof
• Proof of residence or office ownership
• Proof of continuity of business

Eligibility for Personal Loan with Top Banks and NBFCs

Note: The figures given in the table are indicative and are subject to periodic change at the banks /NBFCs’ discretion.

How to use Paisabazaar Personal Loan Eligibility Calculator?

Paisabazaar’s personal loan eligibility calculator is easy to use and helps you avail the right personal loan for you without any hassle. The following is a step by step guide on how you can use the Paisabazaar personal loan eligibility calculator:

Step1. Go to personal loan eligibility form on top of the page

Step2. Fill in your basic details like occupation, monthly income, loan amount, mobile number and current city. Click on proceed and you will be subsequently redirected to a second form

Step3. Fill in the form that asks for information like your company name, salary received, gender, full name, total EMI you pay currently and click on view best offers

Step4. You will be redirected to a page showing best personal loan offers you are eligible for based on the details that you have entered.

What is eligibility for top-up loan?

The following are some of the key eligibility criteria for a top-up personal loan:

• A top-up personal loan is only available to individuals who have an outstanding personal loan with the lender.
• These tend to be applicant-specific offers that may be available for only a limited time period.
• The interest rate and tenure of this type of loan is usually linked to the existing personal loan.

What is eligibility for personal loan balance transfer?

The following key criteria usually determine eligibility for a personal loan balance transfer:

• Existing personal loan with a bank other than the bank offering the balance transfer
• The existing lender must accept personal loan foreclosure
• Usually 12 EMIs need to have been paid in full before the balance transfer can be availed

What is eligibility for partial prepayment?

Partial prepayment refers to payment of an amount exceeding the EMI amount that is normally outstanding on the loan. Some of the key partial payment eligibility criteria are:

• The lender must allow partial prepayment of loans
• Minimum partial prepayment amount (usually equal to 2 EMI) is specified by the lender
• Typically a pre-payment penalty of up to 3% of the principal prepaid is applicable
• Usually partial prepayment is allowed only after a pre-determined number of EMIs (usually 6 or 12 EMIs) have been paid.

What is eligibility for foreclosure?  

Foreclosure usually refers to full payment of an outstanding personal loan prior to completion of the loan tenure as mentioned in the loan agreement. The following are some key eligibility criteria associated with this:

• The lender must allow foreclosure of personal loan
• Often allowed only after a specified number of EMIs (usually 6 to 12 EMIs) have already been paid
• A foreclosure charge of up to 5% of the principal amount outstanding has to be paid

Why use Paisabazaar Personal Loan Eligibility Calculator?

Following are some of the key benefits of using personal loan eligibility calculator provided by Paisabazaar:

• Feasible Loan Amount Identification: With Paisabazaar’s calculator for loan eligibility, applicants can easily calculate the exact amount they are eligible to get as a personal loan from numerous banks. The eligibility to get the loan is based on various factors, including your employment status, net salary, loan tenure, and many more.
• Quick and Easy: Within a couple of minutes you can get your loan eligibility status. To get the results, you just need to furnish details regarding net monthly income, existing EMIs, rate of interest, and loan tenure.
• Reliable Results: The loan eligibility calculator is specially designed by the experts in order to calculate eligibility for a personal loan and it provides accurate information that helps an individual to opt a loan that is appropriate in terms of loan amount, tenure and interest rate.
• Easy Comparison: If you are perplexed between the loan offerings of two different lenders, you can easily compare between the two on the basis of key criteria, such as maximum loan amount, applicable interest rate, tenure, as well as processing fees and additional benefits, if any.
• Time Saving: With speedy results and the easy procedure of determining eligibility, Paisabazaar’s eligibility calculator simply eliminates the time taking process of contacting a particular bank in order to check loan eligibility.

Therefore, before applying for personal loan from any lender, it is always recommended to check related details from Paisabazaar’s personal loan eligibility calculator. This way, you will gain a good insight and have better understanding of your loan requirements and will be able to choose the appropriate one after making a comparison.

How to Improve Your Personal Loan Eligibility?

• You can follow the below steps to improve your chances of personal loan approval: Pay your existing loans: When you wish to avail a personal loan, make sure that you pay your existing loans or at least decrease the number so that your debt to income ratio remains below 50%. If your debt to income ratio is above 50%, the lenders might doubt your repayment ability and might not consider you eligible for another loan.
• Maintain your credit score: As mentioned above, an individual with a credit score of 750 or above is preferred by the lenders. If you maintain your credit score, you would be considered creditworthy by the lenders.
• Variable pay: Ensure to keep a record of perks you earn at work or variable pay that you get. This record might be considered by the lenders while calculating your eligibility.
• Go for longer tenure: When you choose a longer tenure to repay the personal loan, it increases your eligibility as implicates that you have the ability to repay the loan for a longer period of time in the future. You can calculate your monthly EMI using Paisabazaar’s personal loan EMI calculator.
• Pay the credit card bills timely: If you pay your credit card bills timely, it reflects that you are disciplined with your payments hence it boosts your eligibility.
• Rental income: If you own a commercial or a residential income that you have given for rent then that rental income can be an add-on and can enhance your loan value.

FAQs

Q1. How much personal loan can I get on my salary?

The personal loan amount that can be disbursed typically varies from one lender to another and salary is only one of the factors that lenders consider. Typically, if you have a good credit score and low or no outstanding debt, you may be eligible for unsecured personal loans of up to Rs. 25 lakh based on the bank’s eligibility criteria.

Q2. Can I apply for personal loan online with low salary?

Yes, even if you have a low salary you may be able to apply for a personal loan. This is because not all lender specify a minimum salary to be eligible for a personal loan. However, the loan amount sanctioned will typically be low and you may also be charged a high rate of interest.

Q3. What is the personal loan eligibility calculator?

Personal loan eligibility calculator is a handy tool that can help users figure out if they are eligible for a personal loan based on the inputs provided. The inputs that need to be provided may include desired loan amount, income level, city/town of residence, number of dependants, current total EMI payments each month and more.

Q4. How is personal loan eligibility calculated?

Lenders typically determine eligible personal loan amount and interest rate based on a few criteria such as:

• Credit score of applicant
• Income level of applicant
• Current outstanding debt/EMI paid per month
• Employer reputation/track record,
• Existing relationship between applicant and lender, etc.

As the weightage provided to each factor varies from one bank to another, the same applicant may receive different personal loan offers from different lenders.

Q5. What is the maximum personal loan amount that I can get?

The maximum personal loan amount that can be sanctioned varies from lender to lender. The maximum unsecured loan amount mentioned by most banks is in the Rs. 20 lakh to Rs. 25 lakh, but some lenders offer unsecured loans of up to Rs. 50 lakh subject to various terms and conditions.

Q6. What is the minimum salary to be eligible for a SBI personal loan?

Currently the minimum salary to be eligible for a SBI personal loan is Rs. 15,000. However, meeting the minimum salary criteria does not guarantee that your loan application will be approved.

Q7. Are self-employed individuals eligible for a personal loan?

Yes. Many lenders offer unsecured personal loans to self-employed individuals however, the eligibility criteria tend to differ from one lender to another.