What do Lenders Look for While Giving Personal Loans?

During financial needs, you may not have the time to complete the formalities of availing a secured home or auto loan. In such instances, instant personal loans are immensely beneficial. Such loans are approved almost instantly and do notrequire any collateral.

Although these loans are easily available, you must be eligible for the same. Here are two methods that lenders commonly adopt to determine your eligibility.

1. Multiplier The loan eligibility depends on your net take home (NTH) salary, which is multiplied by a certain number between 9 and 18. The multiplier depends on factors like your employer, salary, and profile. For example, if your NTH income is INR 50000 and the multiplier is 10, the personal loan amount will be INR 5 lakh.
2. Debt income ratio Most lenders prefer if the total Equated Monthly Installments (EMIs) do not exceed 50% to 75% of your NTH salary. Lenders consider your existing loans and credit card outstanding to determine your eligibility when you apply for a personal loan online. Assume that your NTH salary is INR 50000 and your existing EMIs are INR 10000. If the EMI is capped at 50% of your NTH income, the new loan amount cannot exceed INR 15000 (50%*50000 – 10000) as 50% of the NTH is considered for personal expenses, savings, and investments, while the other 50% is for EMIs. This method primarily calculates your repayment capabilities based on your NTH salary.
   Several factors are considered while approving your online personal loan application. These include the following.
3. Credit score In India, TransUnion CIBIL is the primary credit rating agency. It collects, analyzes, and delivers credit information of the entirepopulation. Your credit score is a number between 0 and 1300 and is based on your credit and financial history. A higher credit score may improve your eligibility while also enabling you to avail an affordable personal loan interest rate. Generally, a score of 750 and higher is considered as good and you may not have too many difficulties to avail of a loan.
4. Employment history If you have worked at a reputed company for a longer period, lenders perceive this as an advantage. However, if you have frequently changed jobs, you may find it difficult to avail of an easy personal loan. Lenders negatively perceive your application if you do not have a stable employment history.
5. Age This is an important factor considered by lenders while approving your loan application. If you are young, the lender is assured that there is sufficient time to repay the borrowed amount. Most lenders limit the maximum age at the time of applying for the loan and it is recommended you check this before you apply for a personal loan.

You will need to submit certain documents along with the application form. These include name and birth date, office and residential address, identity proof, and bank statements.

It is important you check the lender’s website to know if any additional documents are required. Additionally, you may use an online personal loan calculator to determine your eligibility.

Check your eligibility today and overcome your fund requirements.