When applying for personal loan what factors determine your personal loan eligibility?

Getting a personal loan is one of the best ways to get rid of financial hassles. This type of loan can be availed to address various financial emergencies that can take away your peace of mind. The loan is usually a multipurpose loan that can be utilized for dealing with personal reasons like wedding, home renovation, medical expenses, medical emergencies and others. While applying for a personal loan is now easy all due to the digital revolution, but you must cater to the lender’s eligibility criteria to get your loan sanctioned. Read on to know about the factors that determine your personal loan eligibility.

What is a personal loan?

A personal loan is a short-term loan that can be availed to meet short term cash requirements without having to offer any collateral. This type of loan is unsecured and is offered based on your credit eligibility and credit score. Not complying with the eligibility criteria of the lender can lead to rejection of the loan or approval of the same at high interest rate. So, before you apply, you must be aware of the lender’s eligibility criteria. 

Factors determining your personal loan eligibility

Age: Your age is indicative of your financial stability. If you have started working in your 20s then by your 30s you would be financially stable to repay the loan with ease. Over the years, you would have good work experience in your field and also have enough salary to be eligible to apply for a personal loan. After 20-25 years of employment your earning window becomes smaller due to which chances of your loan getting rejected are higher as you will have only a few years to repay the loan. 

Credit score: Your credit score is one of the most important factors considered by the lenders when assessing your loan application. The score helps lenders determine your creditworthiness, thereby reflecting your capacity to repay the loan. The score helps lenders understand your credit behaviour-timely repayment of EMIs, loan settlements, number of loans, credit utilization ratio and others. Defaulting on any EMI payments or credit card dues can lead to decrease of your score. Generally, a score of 700-800 is considered to be an ideal score for getting a loan or credit card. On the other hand, a score of 300 is a low score and lead to instant rejection of loan.

Income: Your income represents your repayment capacity. Lenders assess your income capacity considering your existing liabilities, dependents, source of income, tenure of loan and other factors. This is an important determinant as having less income can increase your chances of defaulting on the loan. For instance, if your income is Rs. 25,000 per month then you can be eligible to get loan up to Rs. 2.5-3 lakh if you don’t have any existing liabilities. 

Existing credit: In case if you have a high income to debt ratio i.e. have a high existing credit utilization then chances of loan rejection are higher. Lenders are less likely to approve your loan application if you have too many financial obligations. The ratio of your existing credit must be below 50% as a high percentage decreases the chances of your loan getting approved. With this, always ensure that you hold a mix bag of loans i.e. secured and unsecured ones as this helps you in improving your credit score. 

Home ownership: Lenders in India as a part of their loan eligibility check your residence status i.e. whether you stay in a rented apartment or ownership one. In case you live in your own house, then chances of your loan approval are higher as opposed to residing in a rented space. This is because residing in a rented space means that you are obligated to pay rent and have less disposable income in hand.

Reputation of your organization: The reputation of your organization plays an important role determining the personal rate of interest you are eligible to get. The more stable your organization is higher are the chances of your loan getting approved. This is because employees working in reputed organizations are considered to be more stable and makes you more responsible towards payment of your debt.


The above personal loan eligibility factors may vary from lender to lender so you must check on the eligibility criteria listed on the lender’s website or application. Before applying for a loan, it is also essential that you check your loan eligibility using a personal loan eligibility calculator that helps you get an estimate of the loan amount you are eligible to get. Along with the eligibility criteria, when applying for a loan it is also essential that you have your personal loan documents in place to get the loan amount you wish to avail.

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