Personal Loan Eligibility 

Being an unsecured loan, a personal loan requires no collateral. Lenders determine the eligibility of the applicants based on their age, credibility, income and other such factors. The lender may approve or reject a loan application based on these factors. To make it easier for the borrowers, most lenders usually have an online personal loan calculator to help them identify if they are eligible for a home loan or not. Just fill in the basic fields and find out the loan amount you are eligible for within seconds without visiting the lender’s branch.

Personal Loan Eligibility Criteria

Different lenders have different eligibility criteria, but some of these remain standard across banks and financial institutions:

Age - 23-60 years

Work Experience: Minimum 2 years of work experience with 1 year in the same company.

Loan Tenure - 1 year - 7 years

Profession: Salaried professions or business owners withdrawing a fixed income from their own company.

Features of Personal Loan Eligibility

It Can Help You Plan Your Budget

Creating a monthly budget can become easy with the help of this calculator, as it provides you with the estimated EMI amount.

It Can Help in Avoiding Loan Rejection

A personal loan eligibility calculator helps you know the loan amount you’re eligible for. Based on your income and liabilities, this calculator will provide you with the result.Thus, if you’re not eligible for a loan amount that you require, then it will suggest you not to apply for the loan as it can get rejected. A loan rejection can have a significant impact on your credit report. Hence, a personal loan eligibility calculator can help you safeguard your credit report.

It Can Help Compare Different Lenders

With the help of a personal loan eligibility calculator, you can check your eligibility with multiple lenders. Hence, you’ll know which lender will offer you a loan and its interest rate. After that, you can compare the lenders and select the one that is most affordable.

Documents Required for a Personal Loan

Below are some important documents that you need to submit to avail a personal loan-

PAN card

Identity proof (Passport, Aadhaar card, driving license, etc.)

Address proof (Passport, Aadhaar card, driving license, etc.)

Bank statements

In case you’re self-employed, you’ll need to submit a few additional documents-

Business proof (GST number, registration certificate, etc.)

ITR

Balance sheet and profit and loss account

TDS certificate (Form 16A) or income tax challans or Form 26AS for income declared in ITR

IT assessment or clearance certificate

If you’re a salaried person, then you must submit the below documents-

Salary slips

ITR or Form 16

How To Apply For Personal Loan

In order to apply for a personal loan, you must follow a few important steps-

Check the Eligibility Requirements

You must check the eligibility requirements of the lender to find out if you’re eligible. You can use a personal loan eligibility calculator to check your eligibility.

Find Out the Interest Rate and Other Fees

Based on your income, loan amount, loan tenure, credit history, etc., the lender will levy an interest rate on your loan. Furthermore, you’ll have to pay other fees, such as processing fee, to avail the loan.

Gather the Necessary Documents

Documentation is an important step. You must submit all the documents that the lender requires to get the loan approved.

Fill Out the Application Form

You must visit the lender’s website to fill out the loan application form. You’ll have to enter a few important details, like your name, email ID, contact number, loan amount, etc., to fill out the loan application form.

Factors that Affect Personal Loan Eligibility

As a personal loan requires no collateral, banks have to rely solely on the borrowers’ credibility to determine their loan eligibility. Following are some of the factors that play an important role in determining a lender’s credibility.

Your Monthly Income

Your Monthly Income

: The net monthly income (NMI) you draw is one of the most important factors that most lenders consider when approving or rejecting your loan application. While the minimum monthly income for loan eligibility is Rs 15,000 per month, an income above this level does not guarantee a loan. It depends majorly on your debt to income ratio. You can also club the income of your spouse or a relative and apply as a co-applicant to increase your chances of getting a loan. When using a personal loan EMI calculator, you can put in your income to find out the amount of loan you are eligible for.

What are the Interest Rates and Tenure?

The interest rates on the personal loan depend on the applicable rates at the time of applying for the loan, along with applicants credit score, debt-income ratio, and other factors. You can choose from two types of interest rates.

• Fixed Interest Rate

  : In this, the interest rate remains unchanged throughout the loan tenure. Thus, the EMI remains the same throughout the tenure.

• Floating Interest Rate

  : The interest rate may increase or decrease depending on the market conditions. Since the interest rates can change during the tenure, the EMI may also subsequently increase or decrease.

Another important point to consider when looking at the interest rate is how it’s calculated. There are two ways in which the interest rate might be calculated.

• Flat Rate Method

  : The interest is calculated on the total loan amount for the entire duration and added to the principal amount. The cumulative amount is then divided by the number of months of the loan tenure.

• Reducing Balance Method

  : In this, the interest is calculated on the remaining balance each month. With every EMI, a portion of it goes towards paying the interest and the rest towards the principal. As the principal reduces, so does the interest outgo.

Most lenders usually use the reducing balance method for interest calculation. It is essential to determine the total interest outgo before applying for a loan. Using the lender’s personal loan interest calculator will give you a clear idea of the total interest outgo on the loan amount based on the interest rate and the tenure.

How is Personal Loan eligibility calculated?

Lenders use their own method to calculate personal loan eligibility. Thus, it is best to use the lender’s PL calculator when applying for a loan. Assuming all the eligibility criteria mentioned above are met, lenders may use two methods to determine the total loan amount that borrowers may be eligible for. These are:

• Debt to Income Ratio

  : This ratio is your total EMI payments in a month divided by the total monthly income. A debt to income ratio of more than 50% may not work in your favour when applying for a loan.

• Monthly Income Method

  : Sometimes, the lenders may also just determine an applicant’s eligibility based on their net income in a month. Typically, lenders grant loans of up to 30 times the monthly income of an individual. For example, if you have an income of 25,000 per month, you can be eligible for a personal loan of up to Rs 7Lakh approximately.

Know Your EMIs and Available Repayment Options

To know your EMI, it is best to use a personal loan EMI calculator. It will quickly give you the monthly EMI, total interest outgo and the total repayment amount once you fill in the loan amount, the tenure and the applicable interest rate. You can also opt for part pre-payment or full pre-payment of the loan once it completes a minimum duration set by the lender. Do note that you’ll have to pay pre-payment penalty if you wish to pre-pay before the tenure.