ELIGIBILITY CRITERIA OF A PERSONAL LOAN

 Before applying for a personal loan, the borrower is requested to check the personal loan eligibility criteria at the preferred bank or financial organization. And can make necessary changes in the application form or profile to meet all the eligibility criteria as mentioned in the specified bank or financial organization. 

The eligibility criteria for a personal loan differ from bank to bank, depending upon the policies of the bank. In general, the common way of determining the eligibility criteria by the income of the borrower, employment, history of credit, and some other criteria. Unlike other loans, there are no restrictions on the borrower to use the personal loan for a specific purpose. The eligibility criteria for availing of a personal loan are almost the same as every bank/financial organization, there are slight differences. When the eligibility criteria are not met will be become the reason to reject the loan application.

Listed below are the basic criteria for personal loan eligibility:

• Minimum and Maximum Age :-

          21 or 23 years to 65 years.

• Type of employment :-

1.  Salaried customers - they have higher chances of getting personal loans.
2.  Self-employed and businessman who has a regular income.

• Loan amount :-

         Up to Rs.25 lakh

• Monthly income :-

         A regular salary is important to get eligible for a loan. Approximately Rs.15,000 ( For rural ) and           Rs,20,000 ( For metro ).

• Work Experience:-

         At least  the borrower should have 2 to 5 years of working experience.

• OutStanding EMI’s:-

          An outstanding EMI can reduce the eligibility of  personal loans. One must pay their existing              loans EMI’s and can apply for a new personal loan.

• CIBIL Score:-

          A minimum CIBIL score of 650 and more. 

Personal loan eligibility can be evaluated in two ways:-

1. Multiplier Method
2.  Fixed Obligation Income Ratio

Multiplier Method:-

Under this method, the organization or bank applies a multiplier to calculate your loan amount eligibility. The bank applies a multiplier of range between 9 to 27. The multipliers are defined for different categories of salaries.

For example:- Mr. X has a monthly income of Rs.40,000 with no EMI’s to pay. He works in a company and it is in the ‘A’ category of a company, so the bank applies a higher multiplier of 20 to calculate the loan amount he is eligible for. (40,000*20=8,00,000). So Mr.X can get a maximum amount of 8 lakhs from the bank/lender/financial organizations).

Fixed Obligation Income Ratio:-

Under this method, the loan amount eligibility with respect to income after accounting. If the obligations exceed the norms then the bank can change the loan amount or increase the tenure of the loan.

For example:- Mr.X has a monthly income of Rs.50,000 and he wants to avail a personal loan for some personal requirements. He has no EMI’s to pay. The bank has a maximum FOIR ( Fixed Obligation Income Ratio) requirement of 50% and in this case, the bank/lender/financial organization will lend the loan amount where the EMI is restricted to Rs.25,00 and does not exceed that amount ( half of his salary) at the lowest interest rate and tenure of years.

The banks/lenders will calculate the borrower eligibility considering these two methods that are the multiplier and fixed obligation income ratio and they will approve the loan amount which will be slightly lower than the eligibility calculated under these two methods.

If a consumer wants to apply for a personal loan, then they can check the eligibility by using the personal loan eligibility calculator. There the borrowers need to fill the necessary details.

A personal loan eligibility calculator is a free tool, that provides clarity on the loan amount that the borrower is eligible at the various rates of interest and the tenure of the loan suited for the borrower.

YES Bank provides customers loans with an attractive rate of interest with various features and benefits.

CONCLUSION:-

It is best to assess all the eligibility criteria before applying for a personal loan. The process becomes easier as you become well known about all the details of the personal loan.