How to Check Loan Eligibility While Applying for a Personal Loan

Applying for a personal loan requires a clear understanding of your eligibility. Lenders assess various criteria to determine if you qualify for a loan. Knowing your eligibility beforehand can help you avoid rejections and negotiate better terms. Here’s a guide on how to check your loan eligibility before applying for a personal loan.

Understand the Key Eligibility Criteria

Before checking your eligibility, you must understand the key factors lenders assess. These criteria vary from lender to lender but typically include:

• Age: Must be between 21 and 65 years (can vary by lender)
• Income: Minimum monthly income as required by the lender (varies for salaried and self-employed individuals)
• Employment: Full-time salaried employment or steady self-employment is essential
• Credit Score: A CIBIL score of 750 or higher improves your chances of approval
• Work Experience: Lenders may require at least 1-2 years of work experience
• Debt-to-Income (DTI) Ratio: This ratio highlights your repayment capacity after accounting for existing debts

Check Your Credit Score

Your CIBIL score is one of the most critical factors in determining your loan eligibility. The minimum CIBIL score for a personal loan is usually about 650. However, a higher score (750 or above) makes you a low-risk borrower, increasing your chances of approval. Here's how to check it:

• Visit the official websites of credit bureaus like TransUnion CIBIL, CRIF High Mark, Experian, or Equifax
• Request a free annual credit report
• Conduct a credit score check and also look for any errors

If your score is low, take steps to improve it before applying for a loan.

Verify Your Income and Employment Details

Lenders assess your income to determine your repayment capacity. For salaried employees, this includes salary slips and bank statements. Self-employed individuals may need to provide financial statements and income tax returns (ITRs). Ensure that:

• Your income meets the lender's minimum requirement
• You have consistent employment or a stable source of business income
• You have proof of income, such as payslips or bank statements

If you have variable income or are self-employed, it's essential to showcase all your revenue streams.

Calculate Your Debt-to-Income (DTI) Ratio

The Debt-to-Income (DTI) ratio represents how much of your income is used to pay debts. If your DTI is too high, lenders may view you as a risky borrower. To calculate your DTI ratio:

• Start by adding up your total monthly debt payments (including EMIs, credit card payments, etc.)
• Divide this amount by your total monthly income
• Now, multiply the result by 100 to get the ratio of your DTI

Lenders usually prefer a DTI ratio of 40% or less. If your DTI is high, consider repaying some debts before applying for a personal loan.

Evaluate Your Current Financial Obligations

Review your existing financial obligations, such as EMIs, credit card bills, and other debts. If you have too many ongoing debts, lenders may perceive you as a high-risk borrower. Take these steps to boost your eligibility:

• Pay off small debts or consolidate your loans
• Reduce credit card usage to lower your credit utilisation ratio
• Avoid taking on new debt before applying for a personal loan

Contact Your Preferred Lender

If you're unsure about your eligibility, contact your preferred lender directly. Banks and NBFCs often offer pre-approved loans for existing customers. You can request a pre-eligibility check with the following details:

• Your name, age, and employment details
• Proof of income and monthly expenses
• Existing loan obligations and outstanding balances

If you are an existing customer, lenders might offer you a pre-approved loan, which requires minimal documentation.

Review Your Documents Before Submission

Before submitting your personal loan application, ensure that all the required documents are complete. Missing or inaccurate documents can lead to rejection. The essential documents typically include:

• Address proof (Utility bills, rent agreement, etc.)
• Identity proof (Aadhaar card, PAN card, Passport, etc.)
• Income proof (salary slips, ITRs, bank statements)
• Bank account details and recent bank statements

Having your documents in place helps the lender process your application faster and avoids unnecessary delays.

Checking your loan eligibility before applying for a personal loan can save you time and prevent unnecessary rejections. Use eligibility calculators, review your credit score, calculate the DTI ratio, and ensure your documents are in order. If you're unsure, reach out to lenders for a pre-eligibility check. This preparation will increase your chances of approval and help you secure better loan terms.