There are numerous reasons why an individual might feel the need to apply for a personal loan. One of the best parts of availing a personal loan is that you can use the proceeds of the loan in any way that you see fit. The funds that you receive can be used to renovate your home, or to pay for your child’s education, or even for a car repair.
One of the terms that are commonly used with personal loans is the rate of interest. When it comes to the rate of interest, it is important that you avail the lowest possible rates as the Equated Monthly Installments (EMIs) that you’ll pay will be included as a huge part of your monthly expense. If you avail a personal loan with low-interest rates, it will help you save a lot. But availing a loan isn’t as easy as it is said; there are a lot of factors considered by the banks before they approve your loan application.
There are a lot of things that can affect your personal loan application approval. Here is how you can check personal loan eligibility.
- Credit Score:
One of the most important things on your application is your credit score. That is the first thing that is checked by the bank when you apply for a loan. Your credit score is important to the financial institutions and lenders because it helps them decide your creditworthiness and repayment capability.
The Credit Information Bureau of India Limited (CIBIL) keeps a track of your credit history. All the financial institutions and lenders acquire your credit history from CIBIL. Your credit score is affected by a lot of factors. If you have defaulted on repayment of your previous debt then your credit score will be affected negatively, whereas, if you have paid all your dues on time them your credit score will be affected positively.
The CIBIL score ranges from 300 to 900 and financial institutions and banks are more inclined to approve your loan if you have a good score, i.e. above 750.
- Age Factor:
Age is another factor that is taken into consideration when approving your personal loan. If you are nearing your retirement, not a lot of financial institutions or lender will be forthcoming to give you a personal loan. This is because since you will retire soon, your only source of income will be your pension unless you decide to become a consultant. Your pension will be comparatively lesser as compared to what your monthly salary was.
Taking a personal loan 10-15 years before your retirement is a wise option since you will be able to repay all the debt by the time you retire. Your personal loan will be approved faster if you hold a stable job and have been earning for quite some time now.
- The Tenure of the Loan:
The loan tenure also affects your personal loan approval. If you avail a loan for a shorter period of time, your personal loan will be approved much faster and the EMI that you’ll have to pay is high. If you apply for a longer tenure of your personal loan, the EMI that you will have to pay is less.
The process of availing a personal loan has undergone a lot of changes since there is an increase of competition in the market. You can avail a personal loan anywhere between 5 lakhs and 1 crore. Different banks offer a different rate of interest and hence it is necessary that you do a proper research and only then avail a loan that has a low-interest rate.