A personal loan is often resorted to in times of emergency when immediate disbursement of funds is required. Personal loans are mostly short-term or medium-term loans and are relatively expensive compared to other kinds of loan such as car loan, home loan or loan against property. However, the minimal documentation requirement and fast processing time makes personal loan easier to avail, especially if you are in a hurry. When you decide on taking a personal loan, you need to check on the eligibility criteria that you need to meet to qualify for a personal loan.
There are several factors that determine your eligibility. Mostly, the factors differ with the nature of your employment. Also, your CIBIL score is a key factor that affects your eligibility for personal loans, which are unsecured in nature.
What is CIBIL score?
A CIBIL score is a 3 digit number between 300 and 900 that is assigned to you to help identify your credit worthiness. Ideally, the CIBIL score helps determine if you are eligible for a personal loan. Simply put, information regarding your finances, your loan and credit history are gathered from your banks and credit card companies to create your profile. These data are collated and reported by 3 separate credit agencies in India – TransUnion, Experian and Equifax
Why is your CIBIL score important?
Owing to the flexible nature of personal loans, there is little security for the banks when it provides you a personal loan. Hence, the CIBIL score helps determine your credibility to repay the loan. Though there is no clear cut information regarding how high your credit score needs to be, the closer your score is to 800, the better are your chances of successfully applying for a personal loan.
What factors affect your credit score?
In order to have a favorable credit score, you must make sure that you clear your credit card dues on time as well as maintain a good record track record with regards to loan EMI repayments. This will help you build up your credit score. However, if you have too much outstanding on your credit card and only pay the minimum balance, it will adversely affect your credit score. Default and non-payment of EMIs on your loan also negatively affect your CIBIL TransUnion score.
The basic eligibility criteria
Along with the required CIBIL score, you need have a regular source of income either as a self-employed individual/professional or a salaried employee to get a personal loan. Also, you need to be employed with your current organization for a minimum number of years as specified by the lender in order to show stability of occupation alternately proof of business continuity is also required by the lender in case of self-employed individuals. The minimum age requirement also varies from lender to lender. Here we take a quick look at the different specific criteria of a few financial institutions in India that offer personal loan.
Eligibility for salaried employees
Different banks have a different set of criteria for giving out a personal loan. Let us compare the criteria of a few banks.
Table 1. Comparison of Personal Loan Offers by leading banks in India*
Income per month (Minimum)
60 years (Upon loan maturity)
Eligibility for self-employed people
Minimum Profit After Tax (Per Annum)
28 years for self-employed and 25 years for doctors
Rs 2 lakhs for self-employed and Rs 1 lakhs for non-professionals.
Rs 2 Lakh
Rs 6 lakhs (taxable income) for working professionals and Rs 10 lakhs (engineers, architects, chartered accountant etc.)
*Information provided in the above table is illustrative and liable to change periodically.
Other factors to keep in mind
After you know what the specific criteria for a personal loan are, there are certain documents you need to submit with your personal loan application. Through such documentation requirements may vary from one lender to another, the following list would serve as a ready guide:
For salaried employees:
- Make sure you have a record of your salary slips of the last few (usually last 3) months.
- Income tax returns must be up to date.
- Keep records of your bank statement of the last six months.
For self-employed individuals:
- Bank statement of the last six months
Profit and loss statements, balance sheet statements and computation of income tax over the last two years. Most recent acknowledged IT returns and copies of sales receipts for the last two years. The above requirements are correct for most lenders who provide personal loans in India, however, you might have to submit additional or fewer documents depending upon the requirement of the specific lender.