Personal loans are a popular form of borrowing, especially when meeting emergency financial needs. They are unsecured loans, which means you do not need to provide any collateral to avail of them. However, to qualify for a personal loan, you need to meet certain criteria. In this article, we will discuss the five criteria that you must meet to apply for a personal loan.
1. Good Credit Score
A credit score is a three-digit number that ranges between 300-900 and represents your creditworthiness. A higher credit score indicates that you have been a responsible borrower and have a good track record of repaying debts. Banks and financial institutions consider a credit score of 750 or above good. A good credit score is essential to be eligible for a personal loan.
If you have a low credit score, you may still be able to get a personal loan, but you may have to pay a higher interest rate. Some lenders may even reject your application if your credit score is too low.
2. Residency Status
Your residency status is also an important criterion for getting a personal loan. If you are an Indian citizen, you can easily avail of a personal loan. However, if you are a non-resident Indian (NRI), the eligibility criteria may differ.
Some banks and financial institutions may offer personal loans to NRIs, while others may not. You may need to provide additional documents, such as your passport and visa, to prove your residency status.
3. Stable Income
A stable income is another important criterion for getting a personal loan. Banks and financial institutions need to know that you have a regular source of income to repay the loan. They may ask for salary slips or bank statements to verify income. Lenders typically prefer borrowers employed with the same employer for at least two years.
If you are self-employed, you may need to provide additional documents such as your income tax returns, balance sheet, and profit and loss statement. Lenders may also look at your business turnover to determine your loan eligibility.
4. Age
Most banks and financial institutions have a minimum age requirement for personal loan applicants. Typically, you must be at least 21 years old to apply for a personal loan. Some lenders may require you to be older, depending on their policies.
Similarly, there is also a maximum age limit for personal loan applicants. This may vary between lenders, but typically, you need to repay the loan before you reach the age of 60 or 65 years.
5. Debt-to-Income Ratio
Debt-to-income (DTI) ratio is the ratio of your total monthly debt payments to your monthly income. Lenders use this ratio to determine your loan eligibility. A high DTI ratio indicates that you have a lot of debt compared to your income, which may make it difficult for you to repay the loan.
Most lenders prefer a DTI ratio of 40% or lower. If your DTI ratio is higher than this, you may still be able to get a personal loan, but you may have to pay a higher interest rate.
Parting Thoughts
If you plan to apply for a personal loan, you must meet certain criteria. You must have a good credit score and stable income and meet the age and residency requirements. You should also have a low DTI ratio to be eligible for a personal loan.
Remember, different lenders may have different eligibility criteria, so checking with your lender before applying for a personal loan is important. You can apply for a personal loan online or visit your nearest bank branch if you meet the eligibility criteria.
SBI personal loan is a popular choice among borrowers in India. SBI offers personal loans for various purposes, such as marriage, education, medical expenses, and home renovation. To apply for an SBI personal loan, you must meet the eligibility criteria mentioned above and SBI’s specific requirements.
