Personal loans have been known to save the lives of thousands and lakhs of people who needed extra cash to satisfy an immediate need or meet an imminent financial obligation. It is understandable that you would contemplate accepting this loan when you require more funds because of its simple approval and speedy disbursement.
Personal loan have been known to save the lives of thousands and lakhs of people who needed extra cash to satisfy an immediate need or meet an imminent financial obligation. It is understandable that you would contemplate accepting this loan when you require more funds because of its simple approval and speedy disbursement.
Examining Your Financial Situation
The lender will normally begin by determining your source of income and its amount. This is normally done by examining the appropriate documents you have supplied, such as Salary Slips, Bank Statements, and Income Tax Returns, as well as your P&L Statements if you are a self-employed business owner.
Adding Up Your Savings
While the amount of money saved varies by individual, most lenders believe that a person saves at least 20% to 30% of their monthly income. This means that if you make Rs. 1 lakh per month, you will save Rs. 20,000 at the very least
Taking Your EMIs Into Account
If you have a loan that you are currently servicing, the lender will subtract the amount you pay per EMI from your estimated savings. As a result, if your auto loan has an EMI of Rs. 7,500, the lender will infer that your net savings are Rs. 20,000 – Rs. 7,500, or Rs. 12,500.
Calculating the Amount of Your Ideal Loan
Because the lender knows you can save Rs. 12,500 per month, it will presume that this is your ideal EMI. Given that it is offering you a personal loan at a rate of 12 percent per year for a period of five years, the maximum loan amount you will be eligible for is Rs. 5,50,000. You may apply for an amount less than or equivalent to Rs. 5.50 lakh, depending on your needs.
That being stated, you should be informed that you can ask for a loan in excess of Rs. 5.50 lakh. In that instance, the bank may doubt your ability to repay the loan, but if your credit score is good enough and you have a stable financial situation, your lender will gladly extend you the necessary loan amount.
The question now is whether banks solely consider your income and debt-to-income ratio when determining personal loan eligibility. Fortunately, the answer is no!
In fact, there are a few more factors that your lender will consider before evaluating whether or not you are a good candidate for a Personal Loan. These elements include:
Documents Required for Personal loan
When applying for a personal loan, you will be needed to provide the lender with the necessary documentation.
Credit History
When it comes to establishing your eligibility for a Personal Loan, your credit history is crucial. A score of 750 or higher indicates that the bank is willing to lend you money without much thought. If your credit score is between 600 and 750, you may still qualify for a loan, but at a higher interest rate. If your credit score is below 600, though, your loan application is likely to be denied.
We hope you now have a good understanding of how banks determine your eligibility for a Personal Loan. You may now evaluate these criteria independently and apply for a Personal Loan or any other type of loan to meet your financial obligations.
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