Personal loan eligibility calculator: From eligibility criteria to documents required, key things to keep in mind

The particular prerequisites for applying for a personal loan may slightly vary depending on the lender. However, here is a general summary of the common requirements:

Personal loan eligibility criteria

• Age: The majority of lenders necessitate that borrowers are a minimum of 18 years old, and certain ones may also impose an upper age limit.
• Citizenship: Typically, you will need to be a citizen or resident of the country where you are seeking the loan.
• Employment: Numerous lenders favour borrowers with consistent employment and a minimum income level.
• Credit Score: Possessing a favourable credit score typically enhances your approval prospects and makes you eligible for more favourable interest rates.

Although minimum age, income, and credit score are essential considerations, lenders conduct a thorough evaluation to determine your eligibility and creditworthiness.

Documents required for personal loan

• Identity verification: This may involve providing documents such as your Aadhaar card, PAN card, passport, or Voter ID.
• Address proof: This might involve presenting documents like utility bills (electricity, water), rental agreements, or a passport displaying your address.
• Income documentation: Salaried individuals may need to provide salary slips, while self-employed individuals might be required to furnish bank statements as proof of income.
• Bank statements: Presenting recent bank statements may be necessary to evaluate your financial status.
• Employer information: Depending on the lender, you may be required to provide your employer's contact details or a letter of employment.

Lenders might consider some additional factors too including:

• Debt-to-Income ratio (DTI): This metric compares your overall monthly debt commitments to your gross monthly income. A lower DTI ratio signifies improved affordability and enhances the likelihood of approval.
• Credit history: Although a positive credit score is preferable, certain lenders may extend personal loans to individuals with a lower credit score, albeit at a higher interest rate.

Nevertheless, meeting these requirements does not assure loan approval. Lenders may have supplementary criteria or assess your comprehensive financial situation before reaching a decision.

What is a personal loan eligibility calculator?

A personal loan eligibility calculator is a convenient online tool designed to help you determine the maximum amount you can borrow through a personal loan. It evaluates your eligibility based on several key factors, including your income, loan tenure, and current financial commitments. Additionally, your CIBIL score can significantly influence the loan amount you're eligible for.

How to use a personal loan eligibility calculator?

Using a personal loan eligibility calculator is straightforward. Simply input your personal and financial details, such as your income, monthly expenses, existing debts, and the desired loan tenure. The calculator will then analyze these inputs to provide an estimate of the loan amount you may qualify for. With this information, you can make informed decisions about your loan application and choose the best loan option for your needs.

Frequently Asked Questions (FAQs)

Q. How can one save money on a personal loan?

With strategic planning, substantial savings on your personal loan can be achieved. To cut costs on your loan, contemplate choosing a shorter tenure, making timely prepayments, and comparing offers from various lenders to secure the most favourable interest rate.

Q. Why is your credit score important for taking out a personal loan?

A numerical representation of your creditworthiness, your credit score is a three-digit number. When you engage in financial transactions such as obtaining a loan or using a credit card, each transaction and repayment is documented in your credit report. Subsequently, a credit bureau such as CIBIL or Experian calculates and reflects this information in your credit score.

The scale for credit scores commonly spans from 300 (the lowest) to 850 (the highest). A higher credit score signifies improved creditworthiness and a track record of prudent borrowing. This may result in more advantageous loan terms, such as lower interest rates when applying for credit cards, personal loans, mortgages, and similar financial products. Your lender assesses your credit score and income to gauge your ability to repay as a borrower.

Q. Explain the “Cosigner” concept in a personal loan.

A co-signer for a personal loan is an individual who jointly signs the loan agreement with the borrower. By accepting the loan terms, the co-signer commits to repaying the loan if the primary borrower is unable to fulfill the payments. This co-signer can be a spouse, family member, or friend.

Adding a cosigner to your loan application is a prudent move if your credit score or income falls short of the qualifying criteria. Having a cosigner can expedite the approval process for your application and may result in more favourable interest rates.

Q. How do you use a personal loan for debt consolidation?

Debt consolidation is the process of acquiring a single loan to settle multiple existing debts. It essentially amalgamates various debts, such as credit card balances, personal loans, or medical bills, into one larger loan with the potential for a reduced interest rate and more straightforward repayment terms.

Consider a scenario where you possess multiple credit cards and an existing loan from the same lender. Although your lender might categorise this as a debt consolidation loan, it essentially functions as a personal loan. The amalgamation of various outstanding amounts into one loan simplifies the management of your loan account.

Additionally, a debt consolidation loan provides another advantage. Personal loans often come with a significantly lower APR compared to credit cards. This can result in substantial savings on interest payments, particularly in situations where you might miss a bill.

Q. What is the difference between hard inquiry and soft inquiry?

Lenders conduct a hard inquiry on your credit report and score to evaluate your creditworthiness when considering a loan application. These hard inquiries can marginally decrease your credit score, particularly if they occur in quick succession.

Soft inquiries happen when you personally check your credit score or when a lender pre-approves you for an offer without a formal application. Typically, these inquiries do not have an impact on your credit score.

Q. Is the estimate from the personal loan eligibility calculator accurate? 

The estimate provided by the calculator is based on the information you input and general lending criteria. For an exact figure, you should contact lenders directly, as they will consider additional factors in their evaluation.