Apply for a Personal Loan – Eligibility and Steps

When you approach any lender for a Personal Loan, they assess two main things – your creditworthiness and your capacity to repay the borrowed sums on time. To ascertain your creditworthiness, they ask you to fulfil certain conditions known as their eligibility criteria. If you fulfil these conditions, you can apply for the loan. Today, let’s learn about Personal Loan eligibility criteria and the methods to apply for Personal Loans online and offline.

Personal Loan Eligibility Criteria

Here are some general but crucial factors lenders consider while evaluating your Personal Loan application.

·         Your age:

Lenders set minimum and maximum age limits based on your employment status – whether you are a salaried professional or a self-employed individual. As a salaried professional, you should be in the 18-60 years age group, but if you are self-employed, you should be between 23 and 65 years of age. Some lenders also take your retirement age and adjust loan repayment tenures accordingly.

·         Your income

The monthly income you earn is another critical eligibility criterion lenders consider when you apply for Personal Loans. Your net (in-hand) monthly income, after the applicable tax deductions, should be at least ₹15,000 – ₹ 25,000, if you are a salaried employee (depending on your lender and area of residence). Self-employed individuals must show a minimum annual income of ₹300,000.   

·         Your credit score

Your credit score is the most critical parameter lenders consider while evaluating your Personal Loan application. This score is a 3-digit figure that gives your potential lender insight into how you handle debts. Most lenders require you to show a credit score of at least 700/750 points to be eligible for the loan. A lower score affects eligibility and may result in lenders charging higher interest rates.

·         Your duration of employment and stability

Lenders also assess your duration of employment with the same firm. As a salaried applicant, you should ideally be employed with the same organisation for a minimum of 1 year. You should also be continuously employed for at least 2 years (even if you change jobs), with no long gaps in between. If you change jobs frequently, lenders take that into account while assessing your application.

·         Your FOIR and Debt-to-Income Ratio

Lenders need to know if you have any existing debts. Additionally, they evaluate your monthly income against your Fixed Obligations to Income Ratio (FOIR), i.e., your unavoidable monthly expenses such as rent, utility bills, living costs, etc. Together, your FOIR and Debt-to-Income Ratio should not exceed 50%-60% of your monthly income for lenders to deem you eligible for the loan.

Based on the above parameters, lenders determine your eligibility and the loan amount to sanction.

Applying for a Personal Loan – The Online and Offline Processes

Online Personal Loan Application Steps

1.       Research different lenders, choose one you prefer, and head to their website or download their mobile app.

2.       Head to the ‘Loans’ section on your chosen platform, select ‘Personal Loans’, and click ‘Apply Now’ or a similar call-to-action button.

3.       A Personal Loan application form will pop up; fill it out, providing details like your name, address, Registered Mobile Number (RMN), monthly income, employment type, etc.

4.       Examine the list of accepted documents for identity, address, and income proof. Self-attest and attach scanned copies of the listed documents to complete the application process.

5.       Review the duly-filled online Personal Loan application form and the documents attached and send it forward to your lender.

Your lender shall evaluate your application, conduct the e-KYC/video KYC process, and take a decision. If your application is approved, you can expect fund disbursal within 4-48 hours.

Offline Personal Loan Application Steps

1.       Check if you are eligible for the loan. You may check the eligibility terms online or call the lender’s customer care helpline to assess your eligibility before visiting the lender.

2.       Carry originals and photocopies of your basic documents like PAN, Aadhaar, and income proof. The lender checks the original documents before accepting the photocopies.

3.       Approach the lender’s representative at the bank or NBFC office, inform them about your requirement, and obtain the loan application form.

4.       Fill out the Personal Loan application form, ensuring you provide all accurate, verifiable data. Do not provide any false information, as it can impact your loan approval chances.

5.       The lender verifies your application and documents and checks your credit score. If everything is in order, the lender will approve the loan and disburse funds shortly.

Final Note: Lenders today set incredibly basic Personal Loan eligibility criteria. Moreover, the application process, whether online or offline, is also streamlined, which is why most lenders approve Personal Loans swiftly. If you need an Instant Personal Loan, your best option is to apply for the loan online. Likewise, if you prefer traditional modes of application, you can visit the lender at their branch/office and complete the application process there.

Disclaimer: This article is published in association with HDFC Bank and not created by TNM Editorial.