6 important Personal Loan Requirements to know Before Applying

Having all of the facts on hand can be advantageous. A personal loan is the same way. It increases the likelihood of your loan being accepted quickly. It’s natural to examine your credit score, interest rates, and hidden fees when applying for a personal loan. Analyzing these aspects will help you choose what works best for you.

Personal loans vary based on various lenders. Having proper knowledge about the criteria and other requirements can help an individual streamline their application process and may improve the chances of getting the loan granted in their name. But, there are a few considerations that every financial organization looks for before lending a personal loan to someone.

Following are some of the common aspects or requirements that a financial institution emphasizes before providing a personal loan to a customer:

Credit Score and Credit History

A credit score or the CIBIL score of a customer represents their creditworthiness based on the history of credit repayment. It’s a three-digit number. A credit score of a customer generally ranges from 300 to 850. The credit bureau organization gives the score based on their payment history of previously taken loans, amount of personal debt, and the length of credit history of the individual. 

Many financial institutions require a customer to have a minimum credit score of 700 to qualify for the criteria for getting a loan. A lower credit score of an individual refers to lousy debt management by an individual. A lower credit score may also lead to charging a higher Rate of Interest(ROI) from the customer by the lender. At the same time, some money-lender financial institutions may offer personal loans without looking at the customer’s credit history or credit score. 

Monthly Income

Lenders impose income requirements to ensure that the loan borrower has the means to repay the loan they would have applied for. Since collateral doesn’t back personal loans, a person needs to look at their financial repayment capacity before applying for a loan. 

Minimum income requirements vary for different financial institutions. The income requirements also vary based on the borrower’s location. The financial institution that lends a loan may ask for evidence of their income. The evidence may include salary slips of the company or organization the borrower is working currently, bank statement of their salary account, income tax return filing statement, etc.  

Debt-To-Income Ratio

The debt-to-income ratio of an individual refers to all the monthly debt payments divided by the gross monthly income of that person. It is one of the ways lenders use to measure the ability of a borrower to manage their monthly payments in order to repay the money that would be borrowed as a loan. 

Lenders use the Debt-To-Income ratio to predict the ability of the prospective borrower to make payments on the current and the new debt. 

Liabilities

Liabilities are an essential aspect of a personal loan. The current liabilities can create problems in getting approval for a personal loan from the credit manager of the financial institution. If the borrower already has enormous credit card bills or home or any other loan EMI’s or any other debts pending, it may create problems for the borrower to get the loan approved. The borrower may already have enough EMIs to be paid every month, which may not leave enough money to pay for any other loan in the future.

Category of the Company

The company or the organization an individual is working for can be another deciding factor for the lender when approving the loan. Certain Financial Institutions have listing categories for private limited companies and government institutions. It may also range from Category A to category E, based on which the lender decides the ROI to be fixed for the loan, etc.  

For example, suppose the prospective borrower currently ranks as category A for that financial institution. In that case, the borrower may expect to get the approval of the loan quickly with a minimum ROI.  

Choose the right loan amount

You purposely need a loan to achieve objectives such as buying a car and financing a wedding, right? You can calculate the exact amount you need to borrow based on the costs and expenses associated with your needs. If the amount you require is uncertain, A Flexi personal loan is a good option.