Factors Affecting Personal Loan Benefits and Eligibility Criteria

Personal loans are the loans sanctioned by the bank to cater the various personal requirement of the people. It is a loan that can be availed to finance any of the personal or professional needs such as the renovation of the house, purchasing a new asset for the company, education of the child, marriage of the daughter etc. This type of loan is suitable for the people who do not have any collateral or security to present to the lender. Because this loan is provided without any mortgage it is called signature loans. The borrower is the sole guarantor, therefore the credit profile of an individual is thoroughly judged before sanctioning the loan.

All lenders set eligibility criteria on the basis of which the evaluation is done. So, before applying for the loan an applicant must check the eligibility criteria and apply personal loan only when the criteria match the profile. Though the eligibility criteria differ per lender but in general criteria is as below:

Personal Loan Eligibility Criteria: To avail the benefits of personal loan the individual must meet the following parameters:

• Age - The minimum age of the applicant at the time application must be 21 years but not more the 60 years at the maturity of the loan.
• Employment Category -  The loan is provided to the candidates employed in the legal entities or is self-employed.
• Income - The income of the applicant plays a pivotal role in deciding the disbursal amount and the eligibility of the candidate. The candidate must be earning a handsome salary in order to secure a loan.
• Work Experience - The candidate must have a minimum experience of 2 years in the line of business and should have stable job experience.
• Credit Score -  The CIBIL report is the crucial factor that affects that decides whether the applicant is fit to give a loan or not. The idle score ranges from 350-900.

Factors Affecting Personal Loan Eligibility:

• Monthly Income - It is the basic factor that contributes in determining the loan amount the candidate is capable of receiving based on his repayment capacity.
• Age - The age of the applicant matters while accessing the profile of the candidate. The person belonging to the age group of 21 - 60 years can apply for the loan.
• Savings - Since the repayment will be made out of the savings, the lenders consider the amount an applicant is able to save after excluding all the expenses from the income.
• Any Other Running Credit - The running credit is also taken into consideration while computing the repayment capacity of the individual. If the applicant has the potential to repay both the loans simultaneously, the new loan is sanctioned.
• Credit History -  It is important to have a clean debt record otherwise, it may hamper the loan eligibility of the candidate.
• Job Stability - The work experience and business continuity are important factors that contribute in enhancing the individual’s profile. The applicant must have been engaged in the line of occupation for a desirable period of time and should have a stable job.

Uses of Personal Loan:

The personal loan can be used for any purpose. There is no specified end usage of the amount disbursed under the personal loan. The borrower has the flexibility to use the loan amount in the way he/she wants. It could be used for any of the following purposes:

• Purchasing a car
• Paying off debt
• Buying furniture and fixtures
• Going on a tour
• Funding child’s education
• Organizing daughter’s wedding
• Accelerating business
• Renovating a house

Benefits of Personal Loan:

• Flexibility to Use Loan Amount - The loan amount can be used for any purpose.
• No Collateral Required - No collateral or security is required to procure the loan.  
• Minimal Documentation - Less paperwork is involved in processing the loan. Very few documents are required which include proof of identity, address proof and income proof.
• Quick Disbursal - The amount is disbursed within a day or two after the loan is approved and the amount is credited to the individual’s account.
• Less Processing Time - The loan application is processed shortly thus providing finance for the sudden and urgent needs.
• Short Duration -  Since it is an unsecured loan, the duration is short ranging from 1 year to 5 months.
• Easy Repayment - The loan amount is to repaid in the form of EMIs at a specified date of the month.
• Fixed Rate of Interest - The rate of interest on the personal loan is mostly fixed. That is, the rate remains same throughout the tenure of the loan.