One of the first things that an individual in need of financial assistance thinks of is to apply for a personal loan. This is because a personal loan can help in arranging for the required finances to take care of the immediate expenses at hand. Now, before applying for this loan, one has to be aware of their eligibility for a personal loan. Any financial institution sets certain personal loan eligibility criteria based on which it decides whether to approve or reject a loan application.
To make sure that their application gets approved without any problems, an applicant should be aware of how their personal loan eligibility is determined. So, take a look at the following factors that lenders take into consideration while evaluating an application for a personal loan:
- Applicant’s credit record
An applicant’s credit record is something that every borrower focuses on while deciding whether to give them a loan. This is because a credit record can show how responsible the applicant has been when it comes to paying off their previous dues. This is why it is very important for the borrower to maintain a good credit score before applying for a personal loan.
- Personal loan repayment tenure
A lot of borrowers are unaware of the fact that even the repayment tenure that they choose to clear a loan can influence their eligibility. There are some borrowers who prefer to choose short tenures in order to clear the loan faster. However, since this means that the EMI payments are higher, this increases the lender’s risk. If a borrower is looking to give a boost to their eligibility for a personal loan, they should aim to choose a longer tenure and keep the EMI payments smaller, which lowers the lender’ risk.
- Multiple loan EMIs
It is also quite common for financial institutions to take into account the applicant’s existing credit. If the applicant is already taking care of multiple EMI payments, this leaves less room for another personal loan, reducing their chances of getting one. This is why it is advisable to first clear any existing dues before applying for a personal loan.
The younger an applicant is, the higher the chances of their personal loan approval. This is because if the applicant is nearing the age of retirement, they might face difficulties in paying off the monthly instalments of a personal loan once they stop earning a regular income. This is why one should aim to apply for such loans when they have a long working career ahead of them. Also, it is better to check with the lender about their exact age criterion when it comes to getting a personal loan.
After going through these factors, one can improve their personal loan eligibility. Lenders also provide a personal loan eligibility calculator that anyone can use for free. This tool is available on most financial institutions’ websites, so a borrower should use it to check the loan amount that they can qualify for.