Personal Loan Eligibility

Personal loan eligibility criteria for Salaried & Self-employed Applicants:

Note: The above-mentioned personal loan eligibility criteria are indicative in nature. Lenders can at their discretion relax or make the eligibility criteria for a personal loan more stringent from one applicant to another.

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Personal Loan Eligibility Criteria of Top Banks/NBFCs

Note: The values given in the table are indicative and are subject to periodic change at the sole discretion of banks and NBFCs. Updated as on April 2022.

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Also Read: Which banks & NBFCs offer personal loans at low interest rates?

Factors Affecting Personal Loan Eligibility

• Credit score: Applicants with credit scores of 750 and above are considered to be more financially disciplined and hence, are less likely to default. Hence, banks and NBFCs prefer to lend personal loans to such applicants. Many lenders also set lower interest rates for personal loan applicants having higher credit scores. However, some lenders also offer personal loans to applicants having lower credit scores but at higher interest rates. Therefore, applicants should check their credit scores at regular intervals and take necessary steps to keep it as close to 900 as possible.
• Employment Type and Employer Reputation: Among salaried and self-employed applicants, lenders offer personal loans at lower interest rates to salaried applicants due to their higher income certainty. Among the salaried applicants, government employees are the most preferred followed by the reputed corporates and MNCs. In case of self-employed applicants, professionals like CAs, doctors, architects, etc. are more likely to get personal loan at lower interest rates. For many lenders, salaried applicants should have at least 1 year of total working experience to be eligible for a personal loan. In case of self-employed individuals, their business should run for at least 2 years.
• Age: Most banks and NBFCs offer personal loans to applicants in the age group of 18 years to 65 years. Various public sector banks also offer personal loans to pensioners on the basis of their pension income.
• Minimum income: Higher income indicates higher capacity to repay your loan on time, which further implies lower risk for lenders. The minimum net monthly income criteria set by most lenders for salaried professionals is Rs. 15,000. Although, individuals with a minimum monthly income of Rs 25,000 are preferred more by the banks. And for self-employed individuals, a gross annual income of at least Rs. 2 lakh is required.
• Work/Business experience: Many banks specify that salaried individuals need to have a minimum total work experience of 2 years with a minimum of 6 months in the current organisation in order to qualify for a personal loan. In the case of self-employed individuals and professionals, they usually need to have been in the current business for a minimum of 2 years in order to be eligible for an unsecured personal loan.
• Repayment Capacity: Banks and NBFCs usually sanction personal loans to applicants whose EMI/NMI ratio is not more than 50% to 55%, which may vary across lenders. This implies that their total credit card and existing loan EMI obligations, including that of the proposed loan, should not exceed 50% of their total income.

How to Improve your Eligibility for Personal Loan?

While there are multiple factors that you need to consider when determining your eligibility for a personal loan, there are only a few ways to improve your chances of being approved for a loan. The following are some tips to enhance your eligibility for a personal loan:

• Maintain a high credit score of 750 and above: Having a credit score of 750 and above increases your chances of getting loan approval that too at lower interest rates. Repaying your credit card bills and loan EMIs in full by their due dates, maintaining credit utilisation ratio within 30%, making multiple loan/credit card applications within a short span, etc. can help you steadily improve your credit score.
• Add a co-applicant: Adding a close family member, such as spouse, parents, children, etc., to your personal loan application can also help in improving your eligibility for a personal loan. At present, not all banks and NBFCs allow co-borrowers in case of personal loans. However, having a co-borrower, if possible, can definitely improve your chances of availing personal loan as in such cases, lenders consider credit scores and repayment capacity of both the applicants.
• Avoid frequent job changes: Lenders also consider an applicant’s employment history and stability when evaluating their personal loan eligibility. Lenders may hesitate giving out personal loans to applicants who as a practice change their jobs frequently. Such practice reflects career instability and therefore is frowned upon by many lenders. Therefore, applicants must try to avoid job hopping, especially when they are planning to take a personal loan in the near future.
• Avoid multiple loan applications: On receiving your personal loan application, lenders fetch your credit report from credit bureaus to evaluate your creditworthiness. Such lender initiated credit report requests are known as hard enquiries. These hard enquiries reflect in your credit report, thereby reducing your credit score by a few points. Moreover, making multiple credit enquiries within a short span of time can show you as a ‘credit hungry’ borrower, which may lead to loan rejections by some lenders. Therefore, instead of directly submitting loan applications to multiple lenders, visit online financial marketplaces like Paisabazaar.com to choose the optimum personal loan offer from multiple loan options. Credit report requests generated through online financial marketplaces are considered as soft enquiries and they do not affect your credit score.

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FAQs

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

The personal loan amount you can get on your salary depends on several factors like your income, existing loan repayment obligations, co-applicant’s income (if any), etc. Banks and NBFCs may also consider EMI/NMI ratio and income stability while evaluating your personal loan amount eligibility. Typically, if you have a high credit score, preferably 750 and above, with high paying job and low debt-to-income ratio, you may be eligible for unsecured personal loans of up to Rs. 40 lakh based on the bank’s eligibility criteria, subject to the fulfillment of other eligibility parameters.

Q. Can I apply for a personal loan online with a 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 specifies a minimum salary to be eligible for a personal loan. However, the loan amount sanctioned will typically be below and you may also be charged a high rate of interest.

Q. 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 dependents, current total EMI payments each month and more.

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.

Q. What is the minimum salary to be eligible for an SBI personal loan?

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