Personal Loan Eligibility: What It Is, How It Is Calculated, and How It Can Be Improved

A personal loan is a type of loan taken by an individual to finance personal expenses such as home improvement, medical emergency, travel, wedding, debt consolidation, etc. It is an unsecured loan, meaning the borrower must provide no collateral or security deposit.

Since it is unsecured, the lender takes a higher risk; hence, the interest rates are usually higher than those attached to a secured loan. The loan eligibility for a personal loan is based on a few factors, such as the borrower’s credit score, income, employment status, personal loan interest rates in India, etc. In this article, we will discuss personal loan eligibility, how it is calculated, and how it can be improved.

What is Personal Loan Eligibility?

Lenders set personal loan eligibility check criteria to determine if a borrower is eligible for a loan. It is based on a few factors, such as the borrower’s credit score, employment status, income, repayment capacity, etc. The eligibility criteria may vary between lenders, and it is essential to read all the terms and conditions before taking a loan.

How Is Personal Loan Eligibility Calculated?

The eligibility criteria for a personal loan vary from lender to lender. Generally, lenders look at the following factors to determine a borrower’s eligibility for a personal loan. Generally, lenders prefer borrowers with a good credit score (750 or above) as it indicates their creditworthiness.

Income: Lenders also look at the borrower’s income to determine repayment capacity. Generally, lenders prefer applicants with a steady income and a higher income.

Repayment Capacity: The lender also looks at the borrower’s repayment capacity, i.e., the amount of money they can comfortably pay back every month.

Apart from these factors, lenders may also consider other factors such as the borrower’s age, residential address, etc.

Get Complete Knowledge of Personal Loan Eligibility Criteria

How Can Personal Loan Eligibility Be Improved?

A borrower can take a few steps to improve their personal loan eligibility:

Maintain a Good Credit Score: Maintaining a good credit score is essential for a borrower to be eligible for a loan. A good credit score indicates the borrower’s creditworthiness, and lenders prefer applicants with a good credit score.

Increase Income: Increasing income is another way to improve personal loan eligibility. Increasing income helps the borrower repay the loan on time, and it also increases the lender’s confidence in the borrower’s ability to repay the loan.

Personal loan eligibility is based on a few factors, such as the borrower’s credit score, income, employment status, etc. A borrower can take a few steps to improve their personal loan eligibility, such as maintaining a good credit score, increasing income, maintaining employment status, and reducing debt. It is essential to read all the terms and conditions before taking a quick personal loan.