Personal loans are unsecured loans that come in handy during emergencies and other financial purposes. Both self-employed and salaried individuals can apply for these loans without putting up any collateral.
Salaried individuals depend on their monthly income for daily expenses but may require personal loans to finance significant expenses. It includes weddings, medical needs or an expensive travel plan. However, lenders may reject their applications if they find certain risk factors involved with the borrower.
Hence, it is essential to make sure that you always remain eligible for a loan. Below are some of the best tips to improve your loan eligibility.
5 Tips for Salaried Employees to Qualify for Personal Loans in India
It is a desire of every borrower that lenders approve their loan applications in one go. However, that is not always the case. Here are a few tips for salaried individuals to qualify for personal loans in India.
- Keep and Maintain a Healthy Credit Score
By maintaining a healthy credit score, say 750, and above, you can make your loan application visible to lenders. A good or healthy credit score reflects that you timely repay your debts. It will paint a credible image for you in lenders’ eyes. Thus, with a good credit score, you can easily qualify for a personal loan with your preferred lender.
Another imp point is to ensure that we don’t delay the payment or bounce on Emi as this might get reflected in CIBIL, if not in the bank statement (As most banks request for Emi clearing bank statement), if not they would request for SOA from individual to cross-verify the same. So latest bounce in loan track and delay payment might effect (Pls rephrase and add this point as well)
- Avoid Making Multiple Loan Applications in Short Intervals
Lenders consider you as debt hungry when you send multiple loan applications in small intervals. Therefore, they tend to turn down your application. Furthermore, frequent application for a loan also brings down your CIBIL score as lenders make multiple hard credit checks.
Borrowing money at short intervals means you will likely accumulate a lot of debt, which can overburden you. It can negatively affect your cash flows and ultimately lead to missing several EMI dates. Therefore, a salaried individual must maintain a length of time between making two loan applications and avoid rejections as much as possible.
- Mention All Your Sources of Income
While providing documents of your proof of income, consider submitting proofs of all your income sources. It includes house rent, income from tuition fees, etc., along with your monthly salary. It will give lenders a full overview of your income sources and allow them to decide on your credibility quickly.
Your loan eligibility will greatly increase if you have substantial income from sources other than your salary.
- Employer Reputation and Job Profile
For salaried applicants, their credibility in lenders’ eyes will increase if they are an employee of a reputed organisation. Also, one’s job profile is important to qualify for a personal loan.
Your job profile and the company’s reputation determine your job security, which affects how likely you are to keep receiving a steady income. In addition, it makes you a low-risk investment, according to lenders. Hence, they can trust you with their money at competitive interest rates.
- Maintain a Low Debt-to-Income Ratio
Debt to income ratio refers to the ratio of the total debt taken by a person to their net income. Lenders tend to turn down loan applications from people with a high debt-to-income ratio. Therefore, consider paying your previous debts on time to maintain a low debt-to-income ratio. It will help you qualify for a personal loan.
What Are the Eligibility Criteria for Personal Loans in India?
While the exact eligibility criteria for personal loans differ from lender to lender, here are some of the parameters that most lenders look into before sanctioning a personal loan:
- You must be an Indian citizen residing within the country’s territory.
- Your age must range between 21-60 years.
- A loan applicant can be an employee of private companies, MNCs, and State or Central Government undertakings.
- A regular monthly income (most financial institutions would require a minimum monthly income of Rs. 15,000).
Before getting a personal loan, consider calculating all your monthly EMIs. It will help you decide your loan amount and tenure, which you can easily repay. You can calculate it manually or opt for personal loan calculators available online. Also, consider following the above tips to qualify for instant approval of a personal loan as a salaried employee.
Frequently Asked Questions (FAQs)
What hidden charges should I know about while applying for a personal loan?
While applying for personal loans, you must be careful of certain extra charges. These are:
Processing fees and GST
Late payment charges
Cancellation or foreclosure charges
How do lenders evaluate personal loan eligibility?
Lenders consider several factors in evaluating whether an individual is eligible for a personal loan. It includes credit history, monthly income, employer’s reputation, geographic location and existing credit.
What is the minimum credit score for a personal loan?
To be eligible for a personal loan, you must have a minimum credit score of 650. Some banks also consider a credit score of 750 as its minimum limit for a personal loan. However, this can vary between banks and other financial institutions.
Who should I approach to get a personal loan?
To get a personal loan, you can approach commercial banks, NBFCs (non-banking financial companies), online lenders and cooperative banks.