Personal Loan: Easy ways to improve your Eligibility

Many lenders and financial institutions offer personal loans with an easy online application process, flexible repayment options, and typically disburse funds within 24 hours of loan approval. However, you have to meet certain eligibility criteria to get a personal loan with favourable terms. This mini-guide will take you through the critical eligibility requirements and actionable ways to improve your standing.

Eligibility for Personal Loans

While different lenders have different eligibility for their personal loans, we will generally talk about the eligibility criteria of one of India’s leading financial institutions, SMFG India Credit.

1. Nationality

The first and most important eligibility criteria for applying for personal loan is being a Resident Indian.

2. Age Limit

The age limit for getting a personal loan starts at 22 and extends to 65. So, if you’re a salaried employee, you are eligible for a personal loan from the age of 22 until you are 65 at the time of maturity. However, if you are a self-employed individual, your eligibility for a personal loan will start when you are the age of 25.

3. Income

Your personal loan application depends on your ability to repay the loan, so your income level is also an eligibility criterion.

For a salaried employee:

If you live in cities like Delhi or Mumbai, your monthly income must be at least INR 25,000. If you live in any other part of India, your monthly income should be at least INR 20,000 to be eligible for a personal loan.

For a self-employed individual:

For self-employed individuals, your eligibility income will be as per the minimum annual turnover, which varies according to the nature of your industry or profession.

4. Work Experience

For salaried individuals, a minimum work experience of at least one year is a common eligibility requirement for personal loans. For self-employed individuals, a minimum of three years of business existence is typically required.

5. Credit Score

Personal loan applicants are often expected to have a good credit history along with a credit score of 750 or higher to meet the necessary criteria.

Now that you know the eligibility criteria for personal loans, let's talk about some tips that can help you improve your eligibility for personal loans.

Please note that these are basic eligibility criteria. Actual eligibility will be determined based on several factors including SMFG India Credit’s policy at the time of loan application.

5 Ways to Improve Your Eligibility for Personal Loans

Here are 5 easy ways to improve your eligibility for personal loans:

1. Maintain a Good Credit Score

Your credit score reflects your creditworthiness and repayment history. A CIBIL score of 750 or more puts you in a good position to get a personal loan approved with beneficial terms such as low interest rates. To get there, make sure to pay your credit card bills and loan installments on time.

2. Use a Personal Loan Eligibility Calculator

This cannot be stressed enough. Before applying, you should use a personal loan eligibility calculator to estimate your chances of getting the loan approved. This calculator can be accessed online, without making any phone calls or getting in touch with any customer executive. SMFG India Credit provides you with one such personal loan eligibility calculator that accurately tells you the amount of loan you are eligible for.

3. Try to Lower Your Debt-to-Income Ratio

Your debt-to-income ratio is very important because the more debt or loans you have, the more it seems that you can’t repay additional loans. Lenders look at your Debt-to-Income ratio to judge whether you should be eligible for a personal loan. If you have existing debts, paying them off or increasing your income can help you get into this range. A 30% or less DTI ratio is an ideal range that you should aim for. This will not only improve your eligibility for a personal loan but also help you maintain better financial health in the long term.

4. Show Your Additional Income

When presenting your financial profile to the lender, go beyond just your monthly salary. Highlighting additional income sources, such as rent, investments, hobbies, or part-time jobs, paints a comprehensive picture of your financial stability. This transparency reassures lenders of your ability to repay the personal loan on time and increases your eligibility for larger loan amounts at better interest rates.

5. Choose a Longer Repayment Tenure

If you want to increase your chances of getting approved for a personal loan, choosing a longer repayment period could be a smart move. This option will not only reduce your monthly payments, making it easier to budget, but it will also subtly improve your eligibility for the loan. However, do note that longer repayment tenure will result in higher interest costs. Choose the option that best suits your needs.

Conclusion

To easily obtain a personal loan, it's important to understand the eligibility criteria and take strategic measures. To improve your chances of personal loan approval, maintain a strong credit score, use personal loan eligibility calculators, manage your debt-to-income ratio, show any additional income, and consider selecting a longer repayment period. These measures not only improve chances of personal loan approval but also favorable terms that can improve your overall financial situation.

(No Hans India Journalist was involved in creation of this content)