Last Updated on May 24, 2022 by
You may require loans for various reasons, and several financial institutions can come to your aid. However, each lender has specific criteria for the kind of individuals they extend their services to. These factors affect your eligibility as a loan taker and influence the decision-making of those who are trusting you with their money.
Today you can check your eligibility by using the loan eligibility calculator available online. You can quickly access your positives and work on the negatives to increase your chances of availing a loan.
Let us dig into the details of these factors and what you can do to improve your chances to avail a loan.
Table of Contents
What are the factors that affect your loan eligibility?
The following indicators are mainly responsible for determining your loan eligibility:
1. Income level and stability
Your income indicates your cash inflows, which eventually help you pay off your loans. Most lending institutions have a minimum requirement of Rs. 15,000 per month as income for salaried individuals who wish to take out a loan. However, this limit varies from bank to bank. If you are self-employed, such as a business owner or a professional, the minimum income is set at Rs. 5 lakh per annum. In general, the higher your income, the greater are the chances of you getting a loan.
2. Reputation of employer
Apart from how much you earn, another factor that may affect your credibility is the reputation of the organization where you work. Banks and other lending institutions prefer extending loans to those employed with reputed MNCs or government organizations. These ensure job security and a stable income. Moreover, you will have an edge over other loan seekers if you possess a good amount of work experience. For instance, many lenders have the criteria that loan seekers must have at least two years of work experience to make them eligible for a personal loan.
3. Housing situation
Having your own house has its perks. One such benefit comes in the form of higher chances of loan approvals. Living in a rented accommodation adds the pressure of monthly rent payments, which may take up a large chunk of your income. This reduces the amount you can spare towards loan repayments, making lenders skeptical of extending the loan. Moreover, the area where you live is also a factor that influences this. In a nutshell, you are better positioned to avail a loan if you have a house of your own in a preferred geographical location.
4. Age
Lenders lean towards those in the age bracket of 21-60 yrs while deciding to give out a loan. For most banks and other financial institutions, the maximum age till which you may avail a loan is 60 yrs. However, there are separate schemes available for pensioners that usually extend to those who are within 75 yrs of age.
5. Credit score and history
Your credit score is a numerical rating issued by credit rating agencies. In India, the most common credit score used is the one given by CIBIL. The CIBIL score ranges from 300 to 900. Most banks and NBFCs look for a credit score of at least 750 while extending a loan. However, you may avail a loan with a lower credit score as well, but at higher interest rates. Your credit history determines your score. To improve your rating, focus on timely repayments of all loans and not taking up more loans than you can handle.
With this, we better understand how your loan eligibility is measured. Let us now see what can be done to improve your chances of getting a loan.
How to calculate use loan eligibility calculators?
There are plenty of loan calculators available online. All major banks and other financial institutions offer this facility, with particular rules in place. Depending on where you wish to avail the loan, you can visit their website that has the loan eligibility calculator.
Select the kind of loan you wish to apply for and enter your relevant details. These include your employment information, monthly income or turnover (in the case of business owners), and your housing status. Moreover, personal details such as name, address, and date of birth are also asked.
Once you have filled up all the fields, you may be required to enter your phone number to receive an OTP. This ensures that your privacy is maintained and only you can get the information. After completing all formalities, press ‘Enter’ to get a detailed report of your loan eligibility.
Conclusion
Various factors affect your eligibility as a candidate who wishes to avail a loan. However, once you have in mind all the things that go behind deciding how trustworthy you are from a lender’s perspective, you can work to improve your chances. There are innumerable lending institutions, such as banks and NBFCs, that provide this service. All you have to do is find the right match that goes in sync with your financial requirements.
