Factors that can affect your Personal Loan eligibility

Your monthly income is one of the many factors that takes precedence when you apply for a Personal Loan. However, there are a host of other factors that lenders may evaluate - such as your credit score, debt-to-income ratio etc. Here are five factors that can affect your personal loan eligibility that you should know of:

  • Credit Score

    Your credit score is an indicator of your credit history, i.e., your loan repayments and credit card bill payments. Since Personal Loans are collateral-free, your credit score is the most crucial factor that affects your eligibility. A good credit score of 750+ indicates that you have been repaying your debts on time. This assures lenders that you will repay their money on time as well. Conversely, a low credit score results from poor financial planning, which lenders find unacceptable. However, you can enhance your score with timely repayments of EMIs and credit card bills.

  • Monthly Income and Debt-to-Income Ratio

    Besides your credit score, the lenders also evaluate your monthly income to know if it is sufficient to enable you to repay your loan EMIs. Most lenders typically require you to earn a minimum of ₹25,000 in hand to be eligible for a Personal Loan. They also approve loans faster if your debt-to-income ratio is lower. This means that your monthly income should surpass your monthly expenses, including any debts you may have.

  • Age

    Lenders also need to ascertain your age to assess your loan repayment capacity. The minimum age for Personal Loan depends on whether you are a salaried or self-employed individual. Typically, salaried employees between the ages of 21 and 55 years, and self-employed individuals between the ages of 25 and 60 years are considered ideal candidates for Personal Loans.

  • Employment Status 

    Your employment status and employer’s reputation can also impact the lender’s decision while considering your loan application. If you are employed with a reputed organisation, for an extended period of time, the chances of the lender approving your Personal Loan are considerably higher. Typically, lenders prefer applicants who have been employed with the same organisation for two or more years, and earning income consistently. If you are prone to switching jobs, lenders may consider this behaviour as a red flag, and you may not be deemed eligible for the loan.

  • Lender Relations

    You might be inclined towards opting for a loan from the bank where you have your Savings Account, Current Account, or Fixed Deposits. Moreover, if you have secured and repaid loans previously from the same bank, the bank may offer new loans at discounted interest rates. If you are an old customer, you may have the leverage to negotiate for preferential interest rates and higher loan amounts. The bank in good faith may agree to your conditions and approve the loan within shorter timeframes.

Tips to Enhance Your Personal Loan Eligibility

  • Repay your existing loans before applying for a new loan.
  • Ensure you clear your credit card dues on time and in full.
  • Continue maintaining a positive debt repayment and credit history.
  • Ensure your credit score is consistently above 750 points.
  • Show your additional income sources, such as variable pay, incentives, passive income from hobbies, etc, (if any) to enhance your eligibility.

Apply for a Personal Loan with HDFC Bank

At HDFC Bank, we offer a suite of loans to service your every financial need. Our online and paperless documentation process ensures that you can get high-value loans at lower interest rates. Just share soft copies of your ID, address and income documents to get started with the loan application. As an HDFC Bank customer, you may be eligible for instant disbursal on your Personal Loan application. Click here to get started.

You can read more about Personal Loan eligibility by clicking here

*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Personal Loan at the sole discretion of HDFC Bank limited. Loan disbursal is subject to documentation and verification as per Banks requirement.