Published on Jan 6, 2023Updated on Oct 18, 2023
In India, loans are taken up for a variety of reasons. Personal loans, business loans, and home loans are the 3 most popular loans in India. Of these, personal and a few kinds of business loans are unsecured, which means they do not require any collateral to be presented to the lending institution. Home loans usually require collateral.
Before the application step, you must know whether your profile is qualifying for a loan. Different lending firms adhere to differing conditions, usually revolving around factors such as your income, your geographic location, credit score, your financial stability, and much more. This article talks in detail about loan qualification.
The following loan eligibility factors must be kept in mind while applying for a loan:
Credit score or CIBIL score is one important eligibility criterion that needs to be fulfilled. Before passing out any loan, the lender checks your credit score, which is the representation of your capability to repay the loan. It shows every sort of lending history, timeliness of bill payments, total debt, etc. If your credit score is high enough, it'll be easy to qualify for a loan. A good credit score (which ranges between 700 and 900) plays a crucial role in getting instant approval for a loan.
To be precise, if your credit score is less than 700, then there are rare chances of you getting the desired loan. Your credit history is reflected in your credit score. Make sure it is sufficient to get approved for a loan.
Debt-to-income ratio is expressed in percentage and is divided between your gross monthly income and monthly debt payments. Lenders always care about your debt repayments and have one major concern, about whether your monthly income can cover this new timely payment. To find out about your debt-to-income ratio, add all the required monthly debts, then divide the sum by your total gross monthly income. The average DTI ratio that is accepted is around 35% and lower. If your DTI lies within this ideal 35% bracket, then there are chances of successful application.
Your age also has a significant amount of influence on loan eligibility. Multiple factors impact getting a loan and age is among them. Most of the NBFCs that offer personal loans have kept their age criteria between 21 to 60 years of age. The maximum age when one can reap benefits is till 60 years. Also, it can vary according to companies' terms and policies.
Your income is another important factor for qualifying for a loan. The higher and more stable the income, the higher are the chances of repayments. This applies for salaried as well as self-employed professionals.
Do note to mention all sorts of income sources be it part-time, freelance or even rental. This will however increase the chances of eligibility that applicants can repay the loan from variable sources. A consistent and steady income is a must for getting into the criteria that demonstrate that you can afford it.
Here are the loan documents required:
It's to your best advantage to prequalify whenever it's possible and confirm with the lender what standards you need to fulfill because each institution has its own minimum requirements. For this, you can take the help of an online loan eligibility calculator. By doing this, you'll be sure that any loans you apply for will fit your particular financial position. Strong loan qualification not only helps in increasing your chances of approval, but also means affordable loan interest rates. Take up a personal loan up to INR 25 lakhs* along with minimal documentation and seamless approvals.
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*Terms and Conditions apply. Loans are disbursed at the discretion of SMFG India Credit.