Instant personal loans have become extremely popular over the last few years. They have emerged as the best financing solution to help people in need of urgent funds. Amid the rising cost of living and inflation in India, instant personal loans from lending institutions have become the ultimate need for salaried employees. They can use a personal loan for various reasons, including a family vacation, wedding, medical emergency, home improvement, etc.
Compared to entrepreneurs and self-employed professionals, getting a personal loan for salaried person is easier. These applicants have a regular income that assures timely payment to the lenders. Here is some vital information for salaried employees who want to qualify for instant personal loans.
Factors Affecting Personal Loan Eligibility
Before applying for a loan, it is crucial to understand the factors affecting a salaried employee’s eligibility for the same. Find below the several factors most NBFCs consider while assessing an applicant’s eligibility.
- Age: Ideally, the applicants should be in their prime earning years instead of at the beginning or end of their career. Therefore, many lending institutions set eligibility conditions regarding the applicant’s age.
- Residence: The city where the applicants live helps a lending institution determine their standard of living. It helps the lending institution understand the applicant’s financial obligations and determine eligibility.
- Debt-to-Income Ratio: The applicant’s current DTI ratio indicates their financial well-being and obligations. If the DTI ratio is too high, the lender may be concerned about the applicant’s ability to repay. It could hurt their chances of getting personal loan approval.
- Monthly Income: It is one of the most vital factors affecting a salaried employee’s loan eligibility. It is a decisive factor in the applicant’s capacity to repay the loan.
- Employer: The company for which an applicant works plays a vital role in determining their loan eligibility. Chances of approval improve if the employer company is established and reputed.
- Work Experience: Lending institutions consider applicants who keep changing their jobs frequently as high-risk borrowers. They have a higher risk of losing their job, making it harder for them to repay the loan. To easily qualify for a personal loan, the applicants must work in the same company and have work experience in the same field for at least a few months.
- Credit Score: An individual’s credit score represents their financial management caliber. It demonstrates the applicant’s sense of responsibility towards credit, based on which the lenders approve loans, offer loan amounts, and determine interest rates.
Tips to Improve Personal Loan Eligibility
Applicants may use a personal loan calculator to find their eligibility and loan amount. However, salaried employees may not qualify for a personal loan. There is no need to despair, as here are a few tips to improve loan eligibility in multiple ways.
- Eliminate or Reduce Debt: Outstanding payments towards home loans, student loans, or credit cards may reduce an applicant’s eligibility for a personal loan. Paying them off before applying for a new loan reduces the DTI ratio and improves the chances of easier approval.
- Maintain a Regular Job and Steady Income: Lenders always prefer applicants who have a regular job with a steady income. Therefore, those planning to apply for a personal loan should avoid changing jobs too often. It reflects poorly on their repayment capacity and hurts their loan eligibility.
- Improve Credit Score: A credit score of 750 or above is often considered a good score to avail of a loan. Anything below that number indicates a lack of efficient financial management. Those who want to apply for a personal loan but have a low credit score may increase it in several ways. Maintaining a consistent repayment history, reducing the DTI ratio and credit utilization rate, retaining old accounts, and diversifying the credit portfolio are some best tricks to improve the credit score fast.
- Limit Loan Applications: The lenders look into the applicant’s financial history and credit report while assessing their eligibility. If the applicant has made multiple loan applications within a short period, the lending institution feels that they are credit-hungry borrowers with poor financial health. Ideally, an applicant should not apply for more than one loan at a time or within a six-month duration.
The loan amount a salaried employee can get on their salary depends on their income, work experience, DTI ratio, employer, and other factors. Keeping the above factors in mind and using the tips above improves an applicant’s eligibility for a personal loan. However, the key is to ensure timely repayment and manage finances responsibly.
