A personal loan is one of the most accessible loans to avail if you are salaried and have maintained a good CIBIL score. It is an easy financial option to acquire without giving any asset as a security to the lender. And that is why personal loans are easy to apply for and get processed.
But! The striking feature plays in with higher interest rates as these loans do not require collateral. Still, when in need, personal loans are a great resort to fulfil untimely financial obstacles.
Having said that, many people, including you, look for an easy option that gets sanctioned with ease. But a few people understand the mechanism behind the personal loan approval and the role of your salary behind it. So, before you start the witch-hunt of the right type of personal loan, let’s study the eligibility criteria, the role of salary and CIBIL score for the application.
Your Monthly Income As A Vital Measure For The Personal Loan
As the monthly salary is the clear demarcation of regular income source, you are halfway down the edibility criteria. It helps the lender have a positive prospect against you that the loan instalments will be paid timely. Moreover, a good income level also helps you grab a larger sum as a personal loan if you earn significantly good. The thumb rule which works in the personal loan industry is – ‘higher the salary, greater the scope of getting a personal loan!’
Therefore, if you have a full-time job and a regular source of income, you are more likely to get favoured. But the real take begins here. Your eligibility depends on your monthly income but not solely. Some other vital factors that govern the approval and disbursal are explained in the section below.
- Income source
As explained earlier, a regular income source is well-applauded if you are planning to apply for a personal loan. You should earn a minimum of INR 13000 and INR 20000 in Semi-urban and Urban areas simultaneously.
- Age
You must have a legal age of 21 years for availing of the personal loan. There is also a maximum age bar for borrowing a personal loan. According to financial institutions and banks, the maximum age should not cross 57 years.
- Loan Amount
The loan amount differs from lender to lender. For example, a few lenders provide loans up to 25 lakh only. At the same time, some follow the criteria of providing the sum amount that is 10 to 27 times the net monthly income. Therefore, you will need to explore the options with multiple lenders.
- Years of experience
Some lenders also look into borrowers’ expertise in their work industry. Often the criteria for work experience vary from 6 months to 3 years. However, there are also some financial institutions that do not count your experience at all.
- CIBIL Score
This is one of the critical factors which actually work wonders for your personal loan approval. Generally, lending institutions require a CIBIL score of 650. Many NBFCs and banking institutions may reject your personal loan application if it is below 650.
- Existing EMIs
Your current EMI status also tends to affect the personal loan application. It carries the credibility to impact the approval of your personal loan if dues are stagnating high.
Eligibility Criteria For Salaried Borrowers With NBFCs
Many NBFCs offer personal loans to borrowers ranging from INR 5000 to INR 15,00,000 based on eligibility criteria including;
- Salaried employment
- Self-employment
- Must have a monthly income of INR 10,000
- Bank statement of three months
- A minimum CIBIL score of 600
- Or, Experian score of 650
- Must have age limit between 21 years and 57 years
The Calculation of Your Regular Income And Debt Ratio
Generally, NBFCs and money lending institutions provide a Personal Loan and EMI calculator for lenders. You can enter your expected amount, monthly income and tenure for a personal loan to get your monthly EMI. But some lending institutions also have a pre-made chart based on the formula of debt-income ratio.
| Salary | Expected Personal Loan Amount |
| Rs. 20,000 | Rs. 5.40 lakhs |
| Rs. 30,000 | Rs. 8.10 lakhs |
| Rs. 40,000 | Rs. 10.80 lakhs |
| Rs. 50,000 | Rs. 13.50 lakhs |
| Rs. 60,000 | Rs. 16.20 lakhs |
The debt-income ratio is a mathematical formulation of your monthly debt to monthly income. The formula is;
Debt-Income Ratio = Gross Monthly Debt : Gross Monthly Income
The gross monthly income here denotes the monthly income you get after all the tax deductions.
Cut to the short and easy way you can search for the personal loan eligibility calculator to get the crisp details. Or you can contact the money lending organization for vivid information.
The step-by-step application of personal loan
- Visit the website of money lending institution and find the personal loan option
- Fill in the required details and submit the form
Note: You may get the personal loan eligibility results within 2 minutes. Once you are eligible for the personal loan, take forward the application form by uploading documents, etc.
- Upon approval, check for the eligible personal loan plan
- Upload documents required by the website
- Get the disbursal of the loan amount in your account within hours
In case your application is rejected, the underlying causes could be anything, including your salary, bad repayment behaviour, or any existing loan. Let us learn about them in detail.
Causes behind the rejection of personal loan
Often you find your personal loan application is rejected. But the reasons aren’t made clear to you. So, let’s discuss the major causes behind personal loan rejection.
- Income
It could be a significant factor in rejection as your gross monthly income is not eligible for the personal loan at all. Therefore, it is always said to have a higher income for more chances of approval.
- Credit Score
Next could be your bad credit score. A credit score tells your creditworthiness to lenders. The highest score is the assurance of good repayment behaviour, whereas a bad score simply implies that the borrower is more likely a defaulter.
- Bad repayment behaviour
Sometimes your credit score is good, but still, your loan is denied. The underlying cause could be multiple EMI bounces of your previous loan. Thus, it is mandatory to have your EMIs paid timely.
- Age
If none of the above reasons is the potential cause behind the rejection, then you might be younger than the minimum age limit of 21 years, or you are older than 57 years. If this is the case, you can wait for a few more years if you are underage or look for lenders who allow a maximum age limit of more than 57 years.
How to improve your eligibility for a personal loan
- Pay off all your debts timely
- Have a good credit score
- Posses a regular income source
- Do not put loan queries with many lenders at a time
- Have an excellent debt-income ratio
Once you have responsible behaviour as a borrower, you will always be given priority by lending institutions. Apart from responsible behaviour, it would be best always to borrow a reasonable amount that you can afford to pay timely.
