The requirements of a personal loan vary by lender. While some banks and financial institutions are very particular about credit scores, others rely on the income of the applicant when granting loan approval. You must consider exploring online personal loan apply requirements before you start shopping for a loan. Check out the common qualifications you must meet and the documents you will have to provide to be eligible for personal loan approval. Often we tend to ignore these technical details and skim through the requirements just to land the personal loan interest rate section. However, these pieces of knowledge streamline the application process and make you stand in a stronger position to qualify.
5 Must-Have Requirements of Personal Loan
Following is a list of 5 key requirements that you must be prepared with to qualify for a personal loan:
1. Credit Score
This parameter is usually considered by all banks and NBFCs when you apply for a personal loan. A credit score is a three-digit number on a scale of 300 to 900. It is determined based on several factors, including:
- Payment history
- Outstanding debt amount
- Length of credit history
- High-credit utilisation ratio
Most lenders prefer candidates with a 600+ credit score. However, you will be able to find a few lenders in the market who approve applicants with no credit history.
A lender is always in search of assurance, i.e., the money they are lending will be paid back with interest. Thus, they impose income requirements to ensure that only those applicants get shortlisted who can actually pay it back.
The minimum income requirements will depend on your chosen lender. There opting for online personal loan apply, do find time to check out their specific income requirements. Your lender will ask you to submit income tax return papers, monthly bank statements, duly-signed paychecks by employers or other relevant documents. However, it is worth considering that this criterion is often negotiable.
3. Debt-to-Income Ratio or DTI
This factor plays a crucial role in deciding your personal loan approval. The Debt-to-income ratio (DTI) is a percentage representing the portion of the applicant’s income that goes towards the repayment of their monthly debt. Lenders use this percentage to evaluate the borrower’s ability to make timely payments on new debt. A DTI of less than 35% is considerable, while higher percentages, i.e., above 50%, decrease your power as a strong borrower.
When considering applying for a secured personal loan, you must be ready with collateral. Typically, in the case of a home loan or a vehicle loan, the subject of the loan, i.e., the house or the vehicle, serves as collateral. However, some loan lenders allow the pledging of other valuable assets/ collateral, including investment accounts, cash accounts, real estate, and collectables such as gold coins or precious metals.
You must be mindful that in case you default on your loan, the lender has the right to take possession of your collateral to make up for the remaining personal loan balance.
5. Age Requirements
This factor again depends on who you choose as your personal loan provider. Typically, the age limit set by different loan providers is 21 to 80 years. However, the upper age limit signifies the individual’s age at the end of the loan tenure.
Your credit score, income, DTI ratio, collateral, and age requirements play a crucial role in your personal loan application approval. You should be prepared with the documents, including KYC documents- Aadhar card, PAN card, Passport, Voter Id, as well as salary slips or bank account statements when you opt for an online personal loan apply.