Why is your personal loan eligibility important?
Gone are the times when people could easily attain financial wellness on their own; after all, the inflation rates have greatly increased in the last few years. Although, several factors are responsible for the same; however, the Covid-19 pandemic is unarguably the biggest reason for this scenario.
Thus, at such times, people are left with no other choice but to borrow capital from either friends or family or via traditional financiers. However, you now have another option in the form of new-age banks and NBFCs (Non-Banking Financial Companies), from whom you can borrow personal loans at way lower interest rates as compared to traditional financiers.
Further, there are a plethora of benefits of opting for an instant loan such as access to online tools, flexible repayment tenure, etc.
However, to reduce the risks of loan defaults, new-age financial institutions have set personal loan eligibility criteria that every borrower must meet to be able to borrow instant loans.
The various factors that determine your personal loan eligibility criteria are:
1. Your credit score
A credit score is a 3-digit numerical figure based on the applicant’s credit history, profile, etc. There are several credit rating bureaus in India that provide this score; however, CIBIL is one of the leading bureaus in India. The range of CIBIL score is between 300 and 900, further, the higher your CIBIL score, the better your personal loan eligibility criteria.
2. Alternate source of income
Your source of income is one of the core determining factors that influence your personal loan eligibility in India. Thus, before choosing to apply for an instant personal loan, ensure that you have a stable source of income. You can further improve your personal loan eligibility by creating an alternate source of income. This alternate source of income can be the rent from your second property or your spouse’s income source.
3. Your repayment history
Before applying for any type of financial assistance, the applicants must ensure that they have repaid all their pending EMI’s and credit card bills on time. After all, an applicant’s repayment history is one of the key factors that influence your personal loan eligibility. You can easily calculate your existing instalments by utilizing an EMI calculator available on new-age financial institutions’ websites. This online calculator will help you compute your personal loan instalments based on your repayment tenure, interest rates, and principal amount.
4. Your credit utilization ratio
Yet another important factor that influences your personal loan eligibility criteria is your credit utilization ratio. A credit utilization ratio is the total available credit amount versus the amount that you have utilized. Generally, a good credit utilization ratio is anything below 30% of your total available credit amount. Further, you must also avoid applying for multiple loans at the same time, as it negatively impacts your credit score.
Hope your understood the importance of personal loan eligibility, and the various factors that determine these criteria! Good luck and all the best.