Are you planning to carry out any repairs around your home?
Want a holiday trip to Goa with your family next month?
It’s a great idea to avail a personal loan to cover for the impending expenses. But before zeroing on a personal loan with the affordable personal loan rates, it is essential that you should be sure about your personal loan eligibility. Having a thorough idea of personal loan eligibility will not only hasten and simplify your application process but will also help you to get the best personal loan rates.
However, the personal loan eligibility criteria are different for different lenders, and many factors are considered before setting these criteria. Various financial service providers like Afinoz.com provides efficient tools named personal loan eligibility calculator, which provides a checklist for you to ascertain your eligibility.
How do online calculators determine personal loan eligibility?
The personal loan eligibility can be calculated with the help of two methods-
FOR or Fixed Obligation to Income Ratio method
In this method, the lender takes into account the maximum EMI a borrower can spend, about his net income. The lender also considers the other fixed expenses of the borrower like existing EMIs and rents. Usually, a lender accepts 50% to 65% of the monthly income to be consumed by EMIs, credit card outstanding, or other fixed obligations. If such obligations exceed further, the lender may either reduce his loan amount or may increase the loan tenure. Some lenders practice a bit of leniency in case of high-income borrowers.
In this method, the lender applies a multiplier to the take-home salary of the borrower to calculate his personal loan eligibility. This multiplier is a function of his company profile and the take-home salary. For a borrower with a hefty salary and high company reputation, the multiplier will be high enough, and it will impact his personal loan eligibility in a positive way. It will also mean that the borrower will be able to get the best personal loan rates too.
What factors are considered while assessing personal loan eligibility online?
Different financial service providers like Afinoz.com facilitates assessing personal loan eligibility online. The below-mentioned factors are usually taken into consideration while doing so-
The Income of the borrower – Perhaps, it’s the most crucial factor which your personal loan eligibility depends on. The higher is the income; the higher is the personal loan amount you are eligible for. Personal loans being of unsecured (mostly) type, the lenders would seek credibility about your repayment ability, and a higher income provides them better credibility.
Housing situation- The housing situation of a borrower plays another vital role in ascertaining his personal loan eligibility. He will stand a better chance of becoming eligible if he stays in his own house rather than someone who stays in a rented house. The reason being, living in a rented house lowers his disposable income and, in turn, reduces his repayment capacity.
Location of the borrower- The place of residence of the borrower is an important criterion to assess his eligibility for a particular personal loan. These criteria are different for persons living in metros and for those living in semi-urban or rural areas.
Current credit situation-If the borrower needs to pay for existing loan EMIs or credit card payments every month, his chances of availing a new loan is slimmer than someone who has no existing credit to repay.
Credit History- The credit history and credit score of the borrower will have a significant effect on his personal loan eligibility. A credit score in the range of 700 or above will boost his chances of getting his much-needed personal loan. It may also help him to avail the HDF personal loan rates and the loan amount he desires.
The organization, the borrower works for- The organization for which the borrower is currently working for also has a say in whether he will be eligible for a personal loan or not. Working for a stable and reputed organization will convey the borrower as a safe proposition for the lender, and hence, the lender will not hesitate to grant a loan to him at the best personal loan rates.
How to increase your personal loan eligibility?
Here are some tips that would help you a great deal to boost your personal loan eligibility.
Check your credit score periodically and take steps to improve it
Obtain your credit report from any of the credit bureaus to verify your credit score and rectify errors, if any. Make consistent efforts to improve your credit scores (such as paying off your debts fast, paying EMIs on time and so on).
Apply only for the amount you require
Before you apply for a personal loan, you should be sure of your repayment capability. Do not go for a loan amount that is beyond your affordability. Online platforms like Afinoz have facilitated useful tools such as personal loan eligibility calculator which can give you a better understanding of your financial position. It will help you to apply for the exact personal loan amount that best suits your financial needs. Using the personal loan eligibility calculator at afinoz.com is free and simple.
Check your debt to income ratio
DTI or your debt to income ratio indicates to the lenders whether you can repay the EMI amount in time every month and whether you are responsible enough in handling your money. A high DTI percentage indicates you are consuming a considerable part of your income to pay your debts. Hence, check your DTI and if it’s over 43%, consider paying off some of the existing debts. It will boost your personal loan eligibility to a great extent.