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The evaluation of personal loan eligibility is a crucial step in personal loan approval process. Lenders assess the creditworthiness of the applicants by evaluating their personal loan eligibility based on several factors. Among these factors, age plays a key role in determining the eligibility of personal loan applicants.
For most lenders, the minimum age of the applicants at the time of loan application should be around 18 years whereas the maximum age of the applicant at the time of loan maturity should be 60 years. As per the eligibility criteria, borrowers are supposed to make their repayments before their retirement age. This affects the ability of individuals in their 50s to avail personal loans. Due to shorter employment term, income instability and repayment uncertainty borrowers of the older age are considered to be at a risk of loan default, and hence, find it difficult to avail personal loans at an affordable cost and longer tenure.
How does Age Influence the Personal Loan Eligibility of Applicants in their 50s
Age plays a significant role in determining the personal loan eligibility of an applicant. Let us know how it impacts the personal loan eligibility of individuals in their 50s.
Impact on Loan Tenure
The eligible age set by the lenders for personal loan applicants lies between 18 to 60 years. However, individuals in their 50s should avoid applying for personal loans. This is because older individuals planning to avail personal loans will be offered a very short repayment tenure. For instance, a 57 year old planning to avail a personal loan will be offered a tenure of only 3 years instead of 7 years due to the age bar. Shorter repayment tenure results in high EMIs and high interest cost depending on the loan amount, thereby increasing the borrowing cost.
Impact on Loan Amount
Applicants need to have a regular income in order to apply for personal loans. Lenders usually offer personal loans to individuals whose EMI is 50-55% of the net monthly income, including the existing EMIs and EMI of the proposed personal loans. Individuals approaching their retirement are at a risk of reduced income post retirement and hence are considered to be at a higher credit risk. This becomes a hurdle for them to avail personal loans at a higher loan amount. Higher loan amount results in high EMIs and high interest cost which might impact their liquidity after retirement, thereby impacting their repayment capacity. Therefore, lenders are reluctant to approve personal loans with higher loan amount for individuals approaching their retirement age.
Conclusion
Individuals in their 50s have a very short employment tenure. Due to their job instability and income uncertainty, they carry a high risk of credit default, and hence, have lower chances of personal loan approval or might avail loans for a shorter tenure.
Older applicants may however use Personal Loan EMI calculator to evaluate their eligibility and apply for a personal loan only if they feel they can afford the loan without compromising their future investments and savings.
Retired individuals who had been employed with the Central and State Government may opt for Pension Loans through banks and NBFCs. Note that, the lenders offer pension loans only to individuals drawing their pension through them.
