Personal Loan Eligibility

You may be eligible for a personal loan from one or more banks in India if you meet the following eligibility conditions:

• Age: Minimum 21 years and maximum 65 years.
• Loan Amount: Minimum 1 Lakh and maximum up to 50 Lakhs. However, for most banks, 25 Lakhs is the upper limit on a Personal Loan. You may also come across banks that only offer a maximum Personal Loan amount that is 10-22 times that of your net monthly income.
• CIBIL Score: For most banks a high CIBIL Score is a must for lending a Personal Loan; usually, the ideal is a score of 700 or more.
• Net Monthly Income: A regular salary and flow of income is a must to get a Personal Loan easily. Most banks prefer at least 25,000 net monthly income of borrowers.
• Work Experience: Banks usually prefer a work experience with the current employer to be at least 1-3 years.
• Ongoing EMIs: Any ongoing equated monthly installment (EMI) is a liability and harms your personal loan eligibility. It is always better to clear off existing loans before applying for another one.

Personal Loan Eligibility for Salaried

• Minimum age - 21 years at loan application
• Maximum age - 60 years at loan maturity
• Minimum Monthly income - 20,000
• Minimum work experience - 2 years continuous job
• ITR - Last 2 years ITR
• Credit score - 700 & above

Personal Loan Eligibility for Self-employed

• Minimum age - 25 years at loan application
• Maximum age - 65 years at loan maturity
• Minimum profit after tax - 2 Lakhs as per audited financials
• Minimum turnover - 40 Lakhs for non-professionals and 15 Lakhs for professionals, as per audited financials
• Minimum business stability experience - 3 years (in a profitable condition)
• ITR - Last 2 years ITR
• Credit score - 700 & above

There are two ways of calculating the personal loan eligibility:

• Multiplier Method: Under this method, the banks apply a multiplier to your net take-home salary to calculate your Personal Loan amount eligibility. The higher the salary and reputed the company, the higher the multiplier and the loan eligibility.
• FOIR (Fixed Obligations to Income Ratio): Under this process, the Personal Loan amount eligibility is computed based on maximum EMIs or monthly installments you can pay about the net income after accounting for all other fixed expenses like rent and EMIs. The FOIR percentage can vary from lender to lender and for high-income borrowers, this can be up to 65%.

The eligibility criteria for availing of personal loans vary from bank to bank. There are a few common guidelines that the majority of lenders follow when it comes to approving a Personal Loan.

The basic variables that determine an individual's eligibility for applying for a personal loan are:

• Age Criteria: The main guideline followed by most banks and other financial institutions is that for availing a Personal Loan, a salaried individual must be between the age group of 21 years to 60 years while for a self-employed person, it has to be within 25 years to 65 years of age.
• Credit Rating: The credit history of an applicant is an important aspect that lenders look into while approving Personal Loans. Delays and defaults in paying monthly EMIs of other loans or credit card dues are considered which can lower the eligibility for Personal Loans from banks and other financial institutions. 
• Employment Stability: The employment stability of the person who takes loan also forms a crucial eligibility criterion. According to the banks and other financial institutions, a salaried person with a minimum of 2 years of service with 1 year in the current profession and a self-employed person with a minimum of 5 years of total earning tenure with at least 2 years in the current profession is eligible for taking a Personal Loan.
• Employer: As a Personal Loan is an unsecured loan, thus the kind of employer the applicant is working with is given due credit while deciding on the eligibility criteria for Personal Loans. The employees in the public sector who are working with established private companies are better eligible for availing personal loans as compared to others as their income is stable.
• Financial Situation: The financial condition determines the loan repayment capacity of an individual who has taken a loan and hence the lenders give maximum importance to this aspect while giving an unsecured Personal Loan to any individual.

• Apply jointly with an earning co-applicant to enhance your loan amount eligibility.
• Clear your existing loan dues, if you have any.
• Check your credit report and credit score, and check if there are any problem areas.
• Opt for a loan amount that you can service comfortably.
• Opt for longer repayment tenure and shorter EMIs.
• Improve your credit score. It should be minimum 700 or above.

The documents to be submitted while applying for Personal Loans are as below:

• Duly completed loan application form
• Recent passport-size photographs
• Bank account statements or passbook for the last six months
• Proof of residence (photocopy of recent telephone bills or electricity bills)
• Proof of identity (photocopies of Voters ID Card/ Aadhaar Card/ Passport/ Driving License/ PAN Card).
• IT returns details for the three years for self-employed professionals
• Form 16 or IT returns for the last two financial years for salaried employees