Money crunch can occur anytime in life. Taking up a loan to meet the financial needs has become common for people of today. A personal loan is one of the preferred loan plans for emergency financial requirements. But to be able to avail a personal loan from a bank, one has to be eligible for it. With a number of documents establishing the authenticity of identity and address, to establishing the fact that banks can rely on you with their money is the big question here.
Almost all the banks have a set guideline to scan the loan documents and consider only the applications which meet their eligibility criteria. These eligibility criteria are measure from the banks to analyze the credibility, reliability, and authenticity of the people applying for loans. It safeguards banks against their money and makes them acknowledge that money shall be repaid. Before you make a personal loan application, here are the eligibilities you should get!
A personal loan is an unsecured loan, which means that the banks do not need any security in the form of property papers, assets, etc to get the loan approved. And the freedom of the borrower lies in using the money in the way they want. However, to be eligible for a personal loan, the security that the banks seek is the ability of the people to repay the amount. For this the income and employment conditions exist:
- Must be an employee or running a self-employed business
- Must be employed for a minimum period of 2 years before the application
- Must be working with the current employer for a year
- Regular salary
- A minimum income of INR 15000
The age eligibility
Most of the banks only take personal loan applications from people who are between 21 to 65 years of age. The age bracket represents the working age of people where they are able to work full time and derive a salary from self-employment or business. The minimum age requirement may differ from bank to bank.
A person may not always be eligible for the loan amount they are applying a personal loan for. Banks have their own set of rules when it comes to deciding the eligible loan amount for a person. And these are dependent on a variety of factors. Some of them include:
- A derivation of 10 to 20 times the monthly income of the applicant
- Up to 50 lakhs based on the income and repayment capability
- Tenure of the loan
- Interest rates
- Type of employment
CIBIL Score or credibility
CIBIL Score is a statistical measure to calculate the financial credibility of a person through their past income and expense records. These are calculated by registered organizations as part of the loan application process. Banks take into consideration a score of at least 650 for considering a personal loan. Anything below 650 is considered to be low and risky for the bank to sanction the loan.
Your existing loan plays a big loan in determining your eligibility for a new personal loan. The type of loan already taken, the purpose of it, the installments you already pay, etc are based on determining if you shall be able to pay the new loan on time. Banks take into consideration the loan amount, interest rates availed and the tenure of the previous loan to calculate the sanctioning of the loans. The bigger an existing loan, the lesser chance you have of getting a new loan considering your income. Banks also take into consideration your history of repayment when it comes to the existing loan. If you are regular at repaying the installments of the previous loans, it motivates the banks to rely on you for further loans.
Housing and expenses
Most of the loan applicants today struggle with personal loan applications because of their housing situations. If one is living in a rented apartment or house, the fixed cost to be paid as rent takes away a major part of their salary. The rent to be paid is taken into consideration for the banks to calculate your ability to repay the loan amount every month. If the income is high, the ability to pay the loan even with rent gets easier for the borrower, but if the income is low, the additional EMIs may not be something one shall be able to meet. There are other expenses into consideration too like insurance premiums, expense patterns, etc.
Before taking a loan, banks bring out a schedule of EMI based on the loan amount applied and the interest rate availed. This EMI structure provides a clear idea of the amount of loan that has to be repaid the applicant every month. The EMI structure is then matched with the income and expenses to understand if the applicant will be able to meet with the requirements. It depicts a true picture of the financials one shall go through when the loan is sanctioned. The disposable income after all the expenses determines if loan shall be a burden or can be met easily.
Documents for eligibility
Certain documents are an absolute necessity to be eligible for a loan in a country. As personal loans don’t come with structured security to be kept with the bank, the documents majorly concern the identity and residential proofs. The list of documents that are very important for the bank for personal loan eligibility include:
- Identity Proof in the form of Valid Passport, Voter ID, Driving License issued from Government Authority, Aadhar Card, etc.
- Address proof like Electricity bills, Telephone bills, Rent agreement, property papers, ration card, etc.
- Income Proof for determining employment genuineness. This includes Salary Slips from the employer, Form 16 Salary certificate, Bank Statements of the past one or two years, Passbook records, etc.
Be it public or private, the banks have certain eligibility criteria which help them evaluate the authenticity and success of a loan. If you meet the requirements as per the applications made, the loan is sanctioned!