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Unsecured loans are those loans which do not require you to pledge a collateral security to avail them. That is why when you require funds urgently and have no asset to pledge for the loan, unsecured loans look like the perfect solution.

However, lenders are careful in offering unsecured loans because they face a very high risk of default. That is why they measure your credibility before offering you an unsecured loan. One of the main factors which lenders assess before offering the loan is your credit score. Your credit score determines whether you would be allowed the loan or not. Do you know what your credit score means?

Loan Factor

Your credit score is the measure of your creditworthiness. It lets the lender know how likely you would be able to pay off the loan. Unsecured loans require a minimum CIBIL score of 650. This means that if your credit score is 650 and above you can avail an unsecured loan. If, on the other hand, the score is low, lenders reject your loan application. Though the credit score is an important criterion, is it the only one?

No, unsecured loans require other eligibility criteria as well. These include the following –

    • Age

Your age should be in the range of 21 years and 65 years. Some lenders also insist on the minimum age to be 23 years and above. However, you can find lenders where 21 years is the minimum age limit for making a loan application.

    • Income

Your income is also an important factor based on which the loan quantum is decided. The minimum monthly income required for the loan is INR 15, 000 if you live in a non-metro city or INR 20, 000 if you live in a metro city. In the case of an unsecured business loan, the annual turnover of the business is taken to be an important criterion to judge the income of the business.

Loan Income

    • Nature of occupation

An unsecured loan can be availed only by individuals who are either salaried or self-employed. This means that the loan is allowed to individuals having an occupation. Unemployed individuals are not granted a loan.

    • Work experience

Besides having an occupation, your total work experience is also taken into consideration by lenders offering unsecured loans. For salaried employees, a minimum work experience of 1 year is required. Moreover, they should be employed in the current organization for at least the last 6 months. For businessmen, a business vintage of 3 years is required. This means that their business should be in existence for the last 3 years to avail an unsecured loan.

 

Work experience

    • Existing debts

The last factor, besides credit score, is the existing debt of the borrower. If you have an existing loan or credit card debt, your repayment capacity would reduce which would also reduce the amount of loan available to you. So, the amount of existing loans is also taken into consideration as an eligibility criterion for unsecured loans.

Unsecured loans, therefore, have various eligibility parameters based on which the loan is offered. Though the credit score is an important criterion, it is not the only one. The above-mentioned criteria are also factored in by the lender when issuing an unsecured loan.


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