How Lenders Determine Your Personal Loan Eligibility in India


Money is required at every step of life. You need it to fund your child’s tuition fees or pay medical bills. The expenses arise regardless of how much you earn. And budgeting is never easy. But what if a financial emergency occurs? Don’t worry. You can overcome the problem by simply taking a personal loan. The process is easy and quick. Visit the website of a lender and check their personal loan eligibility requirements. If you are eligible, submit the application form along with the necessary documents. 

Of course, you may have questions about the personal loan eligibility criteria

  • Who can get a loan? 
  • What are the income requirements? 
  • Does your job profile make a difference?

… and so on.


Here is a closer look at what it entails to be eligible for a loan:

  • Your age: Typically, working individuals who are between 21 and 65 years of age are eligible. However, the actual age range may vary from lender to lender. The reasoning is this: Lenders offer credit only to people who can realistically repay the debt. So, someone who is too young to work or has not yet joined the workforce might not get a loan. Similarly, someone who is approaching retirement might be considered a red flag, for their income source could soon dry up.
  • Your credit score: This is a numerical representation of your creditworthiness. Lenders avoid giving loans to people who have a low credit score. This is because such borrowers may not have a good track record of repaying their debt. 
  • Your work experience: Salaried individuals would usually need to have been working at their current employer for at least six to 12 months. Lenders look for stability of employment when approving a loan application.

How personal loan eligibility is calculated

A lender like Bajaj Finserv offers personal loans of up to Rs.25 lakh. But how big a loan can you get? Lenders generally use two methods to calculate a person’s personal loan eligibility.

  1. Multiplier method

Lenders apply a multiplier to your take-home salary to assess the loan you are eligible for. The multiplier applied depends on your salary and the standing of your employer. For instance, say, you have a high salary and work with a reputed and stable company. The lender will use a higher multiplier in your case. This would improve your chance of getting personal loan. Plus, if your credit score is good, you could land up with an attractive personal loan interest rate.

  1. Fixed obligation to income ratio (FOIR)

Here, lenders assess how much you can afford to repay each month. They take into consideration any debt repayments that you are currently making. If you have an ongoing car loan, for instance, this would be considered one of your ‘fixed obligations’. In some cases, your house rent would also be factored in. 

Most lenders allow a FOIR of around 45% to 50%. This means your debt repayment each month cannot exceed 45% to 50% of your monthly income. The idea is that the rest of your income should be used to cover your daily expenses. If your FOIR is high, the lender might reduce the loan amount it offers you. Or, it might increase the tenor and thus reduce the equated monthly installment (EMI).

Summing up 

Now that you know the basics of personal loan eligibility, choose a lender that best meets your requirements. Look out for pre-approved offers available to you. This could save you time and much of the hassle. For instance, an NBFC like Bajaj Finserv offers pre approved personal loans as well as other financial products. Simply share a few basic details to check out your pre-approved offer.

In any case, there are ways to increase your chances of getting a favorable personal loan. Start by clearing your outstanding dues, avoiding overuse of credit cards, and making credit repayments on time. This will give you better negotiation power with your lender.

Must Read: Pros And Cons Of Instant Personal Loan


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