Sometimes unannounced expenses can disturb our flow of money, and we find ourselves in a financial deficit to carry out the essential works of ours. Such situations create panic in our minds, and we look to loan some money to get out of these situations.
You may have made some investments that have not reached to their maturity, or you might think of going to some local vendor to get quick cash. But do not exhaust your investment or approach the local vendor for a small amount of money. So, what other option do you have? You have the option of a personal loan.
Personal loans should be taken out only for the emergencies. They carry high interest rates or if it is a secured personal loan you may lose your mortgage. If you are self-employed or earning a living, there may be times when you need quick cash for various types of emergencies, at which point you may need a personal loan.
Unlike a business or a commercial loan, a personal loan is provided in advance for personal use. This type of loan is less than a mortgage and is usually used to buy a car or renovate a home. Here you get to know more about personal loans. In addition, personal loans are scheduled to be repaid in the short term. Instead of paying for more than ten to thirty years, your regular scheduled payment will range from one to five years.
A personal loan can benefit you to arrange money on time to meet your needs. But there’s a minimum personal loan eligibility criterion for a personal loan. This article will inform you about the minimum eligibility to get a personal loan and how it will impact the loan amount.
The minimum salary that you should have to get an instant personal loan varies from lender to lender. Still, it also depends on your CIBIL score, repayment capacity, goodwill with the lending institution, etc. Moneylenders check your credit regularly or get a FICO test to find out how you have dealt with the loan before. Your credit reports contain details of past transactions , any late instalments, and freely available bank statements to consider.
Banks need to make sure you have enough money to repay the loan. They can ask you for details about your work and pay. They can also check your current credit to make sure that installing a credit instalment won’t add much to your monthly payments. But since a collateral guarantee is not required for personal loans, it is your salary that lenders consider the most.
Also, the minimum salary is not always fixed by the lenders to provide personal loans. It depends on how much money you’re seeking and how much risk you are willing to take. For an example a home credit personal loan, your minimum salary should be more than Rs. 10,000.
Geographical location is one of a primary factor in evaluating the loan amount by the lender. People working in metropolitan cities, such as Delhi, Mumbai, Kolkata, Chennai, Bengaluru, etc., earn more than the people working in tier 2 cities with lower slab rates than metro cities so they have better chances of getting the loan approved than those who are living in rural or in outskirts. Necessary expenses are also higher in the metro cities than they are in smaller cities and towns.
Owned or rented home
Your house can significantly impacts your loan affordability. Many lenders in India, as a part of their process of assessing the personal loans, inquire into borrowers for ownership of their homes. If you have a home of your own, your chances of getting a loan approved are much higher than those of a rented home and you will undoubtedly have a higher ability to pay high EMIs for loan repayment, increasing your loan affordability. But if you live in a rented place where a big part of your salary is running through rent, then the lender will undoubtedly lower your loan affordability.
If there are other loans active in your name and you are paying regular EMIs from your salary, it will also reduce your salary and loan affordability.
Past credit history
Lenders also consider your credit history before approving a loan to you. Any outstanding debts can continue for up to 7 years; therefore, it affects your credit score and the appropriateness of your loan.
If you have paid your bills on time and have made loan repayment on time, the bank will put more confidence in you and offer you a higher loan based on your repaying capacity. If you have a bad credit history or have unpaid debts the banks may be reluctant to approve your loan application. Bad credit history will make the lenders avoid giving you a loan because they will feel that they will insecurities about losing their money if you don’t repay it.
Our Profession also plays an important role in the approval of personal loan. There are jobs that banks may like, such as state-owned banks, government employees, and PSU employees. After that, banks prefer people who work with blue-chip companies, as well as other established professionals such as doctors, engineers, lawyers.
Self-employed or private company applicants are at the bottom of the hierarchy. If a person works for a company that has a bad record of paying salaries to its employees, then a loan application is considered weak. Similarly, an applicant who is known for changing jobs frequently and creates a negative impression. However, banks treat all applications equally, whether they are working in the public or private sector.
Past employment record
Suppose you have a history of regular employment without any break and you have received your salary each month in the total amount. In that case, it will enhance your eligibility for a personal loan. It will also add to your benefit if you are working in a reputed organization.
In addition to the above, banks take into account your age at the time of applying for a loan. Banks prefer to give money to people aged 30-50 as they are considered financially stable. People over the age of 60 may find it difficult to get a personal loan and may be required to provide collateral before banks can approve their loan application
Reason for applying for a loan
Another important factor that lenders consider before offering an instant personal loan is why the borrower requires the loan. You’ll be much less eligible for getting an instant personal loan if the lender feels that the reason you need money is irrelevant. There are chances that the lender will approve your loan, and there are also chances that they will offer you more than your requirement.
In the case of a high-risk loan (such as starting a new business without your knowledge) banks may reject your application, charge high interest rates or claim collateral. In the event that a loan amount is made for a minor risk, such as repairs and renovations to your home or house building, then you may find it easily approved. But it would help if you were responsible enough to choose the money wisely for the right cause because, after all, you have to pay it back with interest.