Understanding Personal Loan Parameters Before Applying for a Loan

Understanding Personal Loan Parameters Before Applying for a Loan

In today’s evolving financial landscape, there are various credit options available to borrowers. These financial products are specially curated for those who wish to acquire funds for numerous end-uses. Out of all the available products, Personal Loan finance is gaining immense popularity in the country. 

As a result, various lending institutions and Non-Banking Financial Companies (NBFCs) are offering feature-rich Personal Loan finance to the masses. These loans are unsecured, which means the borrower does not have to submit collateral as security. However, before applying for a loan, it is important to understand some Personal Loan parameters to enjoy a hassle-free loan journey. 

Components of Personal Loan finance 

Credit score: Your credit score is one of the most important factors of the Personal Loan eligibility criteria. Having a high credit score increases your chances of availing of Personal Loan finance. 750 and above is considered a good credit score to get a Personal Loan. A credit score above 700 is considered healthy, however, lenders have their metrics. Despite that, a score above 700 will help you get your loan application approved. 

Additional Read – 3 Lakh Personal Loan

The table below shows credit score ranges and the acceptance rate associated with them: 

Credit Score Creditworthiness Approval Chances
<600 Not up to the mark Very low
600-650 Below average Doubtful
650-700 Average Good
700-750 Very good Very good
750-900 Excellent High

*Please note that this range bifurcation is indicative

Equated Monthly Payments (EMIs): Personal Loan finance is pay-off in the form of monthly instalments called EMIs. These instalments are calculated based on the loan amount, loan tenure, and the interest rate offered to you. Before you apply for Personal Loan finance, you can use an online Personal Loan EMI calculator to determine your monthly payments. Determining your monthly payments beforehand will help you create a repayment strategy, which, in turn, will help you manage your finances in a better way and you will not miss out on any monthly payments. 

Loan tenure: Your loan tenure is the period under which you are expected to repay your Personal Loan. You can choose your loan tenure according to your convenience. However, you need to keep in mind that the EMI amount will increase or decrease depending on your loan tenure. If you choose a longer tenure, your EMI amount will be lower. Similarly, if you choose a shorter loan tenure, then your EMI amount will be higher. 

Personal Loan interest rates: The interest rates offered on Personal Loans start from 10.99% per annum. However, various factors influence Personal Loan interest rates such as your credit score, your financial history, loan amount, and the lender’s policies. The interest rates also vary from lender to lender. If you have a stable monthly income, high credit score, and sound repayment history, you might get offered a lower rate of interest on your Personal Loan finance. 

Personal Loan eligibility criteria 

Criteria Requirement
Age  The applicant should be a minimum of 24 years old at the time of application and a maximum of 58 years old at the time of maturity. 
Citizenship  The applicant should be a citizen of India. 
Employment  Employees of state and central government, PSU, MNC, Listed, Unlisted Public Ltd., Private Limited Companies, LLP, schools, and colleges, and companies that are listed internally are eligible for Personal Loan finance. 
Work experience The applicants are required to have a minimum work experience of 24 months or should be employed with the current employer for at least 6 months. 
Monthly income  The applicant’s monthly take-home salary should be a minimum ₹40,000. 

 

Documents required for Personal Loan finance 

KYC documents  The borrowers are required to submit an Aadhaar card/ PAN card as KYC documents. 
Residential address proof (Current)  Utility bills/Passport/Rent agreement are accepted as current address proof. 
Income documents  The borrowers are required to submit their latest salary slips. 
Financial documents  Salary credit bank statement for the past 3 months. 
Employment proof Official email ID confirmation/ Emp ID card in case the email ID is not available. 

 

How to apply for a Personal Loan 

As most lenders are offering Personal Loan finance through online applications, you can apply for these loans with just a click of a button. You just must visit your chosen lender’s official website, go to the dedicated page for Personal Loan finance, and click on ‘Apply Now.’ Post that, fill out the online application form, upload soft copies of the required documents and await verification and disbursal.

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