What Are The Factors That Affect Your Personal Loan Eligibility?
If you are seeking a personal loan, the first and the foremost thing that comes to your mind is the interest rate of the personal loan. Different banks offer different interest rates on a personal loan, and there is a criteria basis which your interest for a personal loan is determined. Let’s have a look at the factors that determine the interest on the personal loan.
Personal loans are an unsecured form of a loan which do not require any security, but every bank has its own criteria in terms of approving a personal loan.
Income of an individual
Although personal loans do not require any collateral security, banks consider the income of an individual as a criterion to sanction the loan. The higher the salary lower are the interest rates as the bank trusts you more on the repayment terms. Whether an individual is salaried or self-employed, the income of the individual plays a significant role in determining the interest rate.
Status of the company
The kind of organisation you work in also has a vital role on deciding your approval for personal loans and the interest that you pay. Banks determine the status of the firms based on their defined categories. Based on the categories, they classify the companies under each category. Employees working in the higher category companies have higher chances of getting a personal loan at low-interest rates. However, if your company is a start-up, still you can get a personal loan at a relatively higher interest rate.
Payment history and credit score
CIBIL score or your past repayment history plays an essential role in getting a personal loan. If you have a low CIBIL score, still you can be eligible for the personal loan but at a much higher interest rate. A CIBIL score above 800 is an excellent score, and the applicant can expect a relative drop in the interest rate by 0.25%.
Customer bank relationship
If you hold a salary account or savings account with the bank, then you are likely to get a personal loan at a lower interest rate. The banks, to retain their customers, offer attractive interest rates on personal loans. Those customers who are esteemed and hold credit cards with the bank can get personal loans at a much lower interest rate. Having a good relationship with the bank in terms of accounts or previous loans repayment help in a quick approval of personal loans at a more competitive rate.
If you are holding a bank account in a particular bank for a considerably long period and also have a good credit score, you can better negotiate with the bank to offer you a personal loan at a lower interest rate. You can also negotiate on the processing fee if any and the tenure for the repayment. Furthermore, with a better negotiation skill, you can also ask the bank for other offers other than low-interest rates.
The bank basis on the above factors decides whether to give a personal loan to the applicant or not and what interest rates and tenure to keep for the loan.