Personal Loans are an effective and convenient tool to manage unexpected financial needs or planned big-ticket expenses. However, lenders ask you to meet their eligibility criteria. When you apply through an instant Personal Loan app, you should be prepared beforehand. In this regard, knowing how to check your eligibility can streamline the process and set you up for a successful application. 

Let’s dive into what determines your eligibility and how you can check it before you apply. 

What Does Personal Loan Eligibility Mean?

When lenders evaluate your application, they look at several key factors to decide if you qualify for a loan and how much they’re willing to lend. These factors typically include your credit score, your earnings, where you work, and any other debts you might have.

• Credit Score: This is a significant contributor. A high credit score means you’re good at managing your money, which could lead to quick approval of your application and possibly better interest rates.
• Income: Obviously, lenders need to see if you can afford to repay the loan. They might ask for your payslips or bank statements to prove your earnings.
• Job Stability: If you’ve been in your current job for a long time, it shows that you have a reliable income, which makes you a safer candidate for lending.
• Debt-to-Income Ratio: This is all about how much debt you have compared to what you earn. Less debt makes you more likely to get another loan.
• Age and Nationality: Lenders often have rules about how old you must be and whether you need to be a resident or citizen.

Checking Your Loan Eligibility

Use Online Tools

Many lenders and financial institutes have calculators on their websites and apps that let you input details like your income and outgoings to get an idea of whether you’d get a loan.

Read Up on Lender Requirements

It’s a good idea to check out lenders’ websites directly to see exactly what they’re looking for. This can save you time by ensuring that you tick all the boxes before you apply.

Talk to Customer Service

If you’re unsure about your eligibility, a quick call or chat with customer service can clarify any questions. They can offer guidance tailored to your financial situation.

How Do Lenders Determine If You’re Eligible?

Lenders consider several aspects to make their decision, but the two most common methods are the multiplier method and FOIR.

• Multiplier Method: They might multiply your take-home pay by a certain number to figure out how much they’ll lend you.
• FOIR (Fixed Obligations to Income Ratio): They’ll look at what you owe each month and determine if you can handle another loan. Keeping this ratio under 40% of your income is a good rule. 

What You Need to Provide 

You’ll need a few basic sets of documents and information when applying. The exact list may vary from lender to lender, but the overall list remains the same. These include – 

• Proof of Who You Are and How Old You Are: Accepted documents include your passport, driving licence, or any Government of India ID like Aadhar or PAN.
• Proof of Income: These include recent payslips or bank statements.
• Proof of Where You Live: A bill or lease in your name could be necessary.
• Proof of Employment: Some lenders might want something from your employer confirming you work there. ID cards and employment letters are generally accepted.

Tips for Boosting Your Loan Chances

Once you have determined your eligibility, it is time to apply for your loan. While basic eligibility is a good starting point, other things become important for final approval. But the good news is that you can do the following to increase your chances of getting approved.

• Boost Your Credit Score: Keep on top of your debts and pay bills on time.
• Boost Your Income: More money can improve your debt-to-income ratio.
• Reduce Your Debts: Paying off loans and credit cards can make it easier to take on new credit.

Wrapping Up 

Knowing how to check your personal loan eligibility is critical in securing a loan. By understanding what lenders are looking for and ensuring you meet their criteria, you can smooth the path to getting your application approved. Just remember, always borrow within your means and responsibly use lending tools like an instant personal loan app to keep your finances healthy.