Personal Loan eligibility checklist for salaried and self-employed applicants

[Abhilash Rathore]

Personal Loans have recently become an increasingly popular financial tool, providing individuals with the flexibility to meet various financial needs. From credit scores and income to age requirements and documentation, this eligibility checklist covers everything you need to know before applying for them.

Eligibility checklist for salaried applicants

If you are wondering whether you can apply for a Personal Loan as a salaried individual in India, the answer is yes. Most banks offer varied eligibility criteria for salaried and self-employed professionals, making it easier for them to avail of finance when necessary. Salaried individuals have a set eligibility, which includes:

Age

To apply for a Loan at the bank, you must be at least 21 years old and less than 60 years old. Most banks prefer younger borrowers because their repayment abilities are higher, and the chances of defaulting are lesser.

Employment

You should have a stable job with one or two years of experience. Some banks may also consider your employer’s reputation or the industry you work in before sanctioning the Loan amount.

Income

You should meet the minimum income criteria set by the bank by providing salary slips or bank statements. A high salary means higher disposable income and better repayment abilities. If you are regular with your Loan repayments, your credit score increases, and so does your Personal Loan eligibility for better interest rates.

Credit scores

A good credit score, usually above 650, increases your chances of Loan approval. You can use the banking website or mobile application to apply for a Loan without too much paperwork within minutes. Upon approval, the bank disburses the sanctioned amount to your account. After that, you pay the Loan EMIs with interest every month.

Debt-to-income ratio

Your monthly debt obligations, including the new Loan, should generally be within a certain percentage of your monthly income. The ideal ratio should be 40% or lower. The lower your debt-to-income ratio is, the better your chances of approval.

KYC documents

You need to submit a list of KYC documents to the bank, such as identity proof (PAN Card, Aadhaar Card, and passport), address proof (utility bills, ration card, and rental agreements), and income proof (last three months’ salary slips and Bank Account statements).

Eligibility checklist for self-employed individuals

You can also apply for a Personal Loan as a self-employed individual. The eligibility requirements are the same as salaried individuals, with minor changes, such as:

Business continuity

Banks often look for business continuity of at least three years or more. Running a business for a longer period increases your credibility as a borrower and assures the bank of timely repayment.

Income

You must furnish proof of income, such as audited financial statements, income tax returns for certain years, and Bank Account statements.

Conclusion

By understanding these key considerations and improving your eligibility, you can increase your chances of availing of Personal Loans from banks at favourable terms.