GUIDESPERSONAL LOANS
GUIDES
Personal loans are great way to get your hands on some emergency cash.
The thing about personal loans is that they’re unsecured. Meaning that the lenders don’t ask you for a collateral against the loan amount you’re taking. This makes them somewhat easier to get, provided you have a credit score above 750, but also make them high interest loans.
In this article, we look at the criteria required to qualify for a personal loan.
Think about it - how likely are you to lend money to a stranger? Not likely at all, right?
When you establish credibility as a borrower, banks and other financial institutions are happier to loosen the purse strings for you. After all, your proven track record in the market is a sign that you are the perfect candidate to be eligible for a loan.
But with all the talk about credibility, how do loan providers know how to trust you? Surely, they must have access to some publicly-available metrics that represent your behaviour in the financial space.
Let's take a closer look at what makes or breaks your loan application:
Your CIBIL score is the single most influential factor in your loan application. This three-digit number (ranging from 300 to 900) is your financial report card, revealing your credit history and repayment behaviour to potential lenders.
Most Indian banks and NBFCs prefer a CIBIL score of 750 or higher for personal loans. With such a score, you're more likely to get approved and stand a better chance of securing favourable interest rates and terms.
But what if your score isn't ideal? While "personal loan for low CIBIL" or "personal loan without CIBIL" searches are common, the reality is more nuanced. Some lenders offer options for those with lower scores but expect higher interest rates to compensate for the increased risk. NBFCs are more flexible than traditional banks in this regard.
To improve your CIBIL score:
You can also calculate your EMIs for personal loan.
Lenders need assurance that you have regular income to service your loan. This is why income requirements and employment stability are crucial eligibility factors.
Most lenders require a minimum monthly income between ₹15,000 and ₹25,000 for salaried individuals, though this varies based on your city of residence and the lender's policies. Metros like Mumbai or Delhi typically have higher income requirements than smaller cities.
Self-employed professionals face a different evaluation process. Without regular salary slips, lenders assess your income through:
While searches for "loan without income proof" or "loan without salary slip" are common, the truth is that all legitimate lenders require some form of income verification. Alternative documentation like bank statements showing regular deposits or GST returns might be accepted, but proof of income remains non-negotiable.
Your DTI ratio measures how much your monthly income goes toward debt payments. It's calculated using a simple formula:
DTI = (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100
Most Indian lenders prefer a DTI below 40-50%, meaning your existing loan EMIs and credit card payments shouldn't exceed half of your monthly income. The lower your DTI, the stronger your loan application.
To improve your DTI:
Personal loans in India typically have age requirements. Applicants should be between 21 and 60 (though some lenders extend this to 65 for salaried individuals). You must also be an Indian citizen or resident with valid documentation.
Your current loan portfolio significantly impacts your eligibility. Too many existing loans signal potential repayment challenges, even with a good income. Lenders closely examine your repayment history and outstanding balances before approving new credit.
Different financial institutions have their internal eligibility parameters. Public sector banks prioritize employment stability, while private banks may emphasize credit scores. NBFCs often have more flexible criteria but charge higher interest rates. Digital lenders might consider alternative data points like spending patterns and digital footprint.
Unlike secured loans, standard personal loans don't require collateral – making them "unsecured" loans. This absence of security is precisely why lenders scrutinize your creditworthiness so thoroughly. However, suppose you're struggling to qualify for an unsecured personal loan. In that case, some lenders offer secured personal loan variants requiring collateral like fixed deposits, insurance policies, or gold to mitigate risk.
Preparing your documentation beforehand can streamline the approval process. Here's what you'll typically need:
Many lenders now accept digitally verified documents through DigiLocker or other secure platforms, making the application process faster and paperless.
Want to maximise your chances of loan approval? Follow these proven strategies:
By understanding what lenders look for and preparing accordingly, you can transform yourself from a questionable applicant to a preferred borrower. Remember, when used responsibly, personal loans are financial tools that can help you achieve important life goals or confidently navigate challenging situations.
A respectable record of clearing dues in the market is the number one way to get approved for a personal loan . But did you know that getting a personal loan is not as difficult as earlier?
You can get instant loans through Fi Money that arrive directly in your savings account. These are pre-approved personal loans made available to select users with good credit scores. But that’s not all! You can avail of the loans at competitive interest rates and tick some important things off your wishlist.
The good news is, yes - you can apply for a personal loan with a bad or low credit score. The only criterion is that either a guarantor has to tag along and vouch on your behalf, or you use collateral or security to assure the provider that you will pay back the loan.
In the end, your eligibility to get a personal loan boils down to these factors:
Your credit score significantly influences the likelihood of a personal loan approval. A higher credit score generally increases your chances of approval, as it indicates a lower credit risk to lenders. Conversely, a lower credit score may lead to loan denials or higher interest rates, as it suggests a higher credit risk to lenders.
Keep in mind that specific document requirements may vary among lenders and can depend on the loan amount, your credit history, and other factors. Always check with the lender for their exact documentation needs.
Yes, having a co-signer can significantly improve your chances of getting approved for a loan, especially if you have a limited credit history, low credit score, or unstable income. A co-signer is someone with a good credit history and stable financial situation who agrees to share responsibility for the loan.
The debt-to-income ratio (DTI) plays a critical role in the personal loan approval process. It's a measure of your financial health that compares your monthly debt obligations to your monthly income. Lenders use DTI to assess your ability to manage additional debt responsibly.
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