Borrowing money at times is inevitable to solve your unexpected bills or finance a big project that is important to you. But do you meet the criteria of getting a personal loan? Your personal loan eligibility score determines whether you will get the amount you need or not.
By the end of this article, you will fully understand personal loan eligibility and how it’s calculated. You can also use the eligibility calculator below to see what amount you could qualify for. Depending on the private loan eligibility calculator result below, you will receive top low-interest lenders to get your cash faster.
Eligibility Calculator Box
To easily digest this free resource, we have included a table of content below. You can skip to the different sections you are most interested in. But I will recommend you read the whole article to have a complete understanding of Personal loan eligibility.
Table of Content:
- What does personal loan eligibility actually mean?
- How is it calculated?
- How to check if you are eligible for personal loans or not?
- What is the minimum score to get a personal loan?
- How to qualify for a personal loan?
- Best tips to increase your personal loan eligibility.
What does personal loan eligibility actually mean?
Simply put, personal loan eligibility is the different measures and criteria a bank or a lender uses to determine if you qualify for a loan or not. These banks/lenders try to minimize the risk of giving out loans to borrowers likely to default on repayments.
Although banks and lenders prioritize the criteria and measures differently, they at least have standard metrics they use. If you meet most or all requirements set by a particular lender, you will have favorable loan terms and low-interest rates. But how is the eligibility calculated? You are about to find out in the section below.
How is personal loan eligibility calculated?
Do you remember we made mention of measures and criteria banks and lenders use to calculate your eligibility? Personal loan eligibility is calculated based on your age, employment status, monthly income, loan term, credit score, the loan amount you need, and your current EMI(Equated Monthly Installments).
Depending on your employment history, monthly income, loan term, EMI, and credit score, the lender will decide if you qualify.
Let’s say you are 35years old and your net monthly income is $2500(euros or Pounds). You have a monthly expense of $1400. So every month, you are left with an extra $1100. You still have your job, and you have a fair credit record.
Now, you need $52,800 for your home improvement project. The interest rate the lender is willing to offer you is 15%, and the maximum loan term is five years. So your monthly repayment for this amount is $1012 for five years.
You can get this loan effortlessly based on your salary, monthly expense, credit score, and the number of years you still have to work. In this case, the lender will consider you as a less risky borrower.
But if you have collateral, the lender might not pay much attention to your monthly income. So long as the collateral is valuable, you stand the chance of quickly getting approved.
How to qualify for a personal loan?
There are four critical steps required to qualify for a personal loan. Ignoring these steps will increase your chances of getting disapproved. I know you might be in a hurry to secure a personal loan, but follow these steps, and you can quickly get the amount you need in your bank account.
Be sure of the amount you need:
Before the application process, make sure you know the exact amount you need to borrow. Since most lenders have an origination fee between 1% to 8%, you might want to consider adding that to the amount you need.
Remember, borrowing an extra amount for leisure purposes won’t serve you any good. Don’t forget you will be paying interest on whatever you borrow. I know you wouldn’t want to take a loan for leisure things.
Check or know your credit score:
If you know your credit score before applying for a personal loan, the processing will be much faster. Lenders will request a copy of your credit score as part of their reviewing process. So it is better to know what’s on the report to see if there are any discrepancies.
You can quickly get your credit report from one of the three major bureaus; TransUnion, Equifax, or Experian. If you find any inaccurate data on the credit report, quickly clarify it with them to adjust it. With accurate credit score data, you will know what the realistic amount to borrow is.
You could also use AnnualCreditReport.com to check your credit score for free. You have the right to a free credit score check every 12 months.
Prequalify for the loan:
The prequalification step is significant since it enables the lender only to give you offers you are likely to get approved. All you need to provide is your name, employment status, monthly income, and the amount you need.
Prequalification will increase your chances of getting a personal loan from the right lender. This step will also save you time by filtering away the junk offers and offers for which you won’t get approved.
After the prequalification step, it’s time to compare lenders to check the best rates that are suitable for you. Compare at least three offers before finally applying for the one that resonates better with your needs.
We know this is a tedious step, so we have put together some fantastic loan offers below to consider. Of course, you could always check from elsewhere since there are many great offers out there.
How to check if you are eligible for a personal loan or not?
At times it might be a good idea to know if you will be eligible for a loan amount or not. Your best chance to see if you qualify is through a personal loan eligibility calculator.
The eligibility calculator considers the following; your date of birth, monthly income, and expenses. Once you fill in this information, you will quickly see the amount you are eligible for. You can use the calculator below to check your eligibility.
What is the minimum score to get a personal loan?
Depending on which lender you are getting the personal loan from, the credit score requirement may vary. Most banks/lenders will favor you if you have a good or excellent credit score from 690 and above. But if you have a credit score below 630, some lenders will also accept and approve your loan application.
In most cases, you will need a minimum credit score or FICO score of 610 and above to get a personal loan. Although other lenders will lend you money with bad credit, the cost is high interest rates.
Best Tips you can consider to increase your personal loan eligibility.
Won’t it be nice to know there are things you could do to increase your chances of getting a personal loan? Yes! you can definitely increase your personal loan eligibility if you consider taking these five actions;
- Boost your credit score
- Reduce your debt-to-income ratio
- Don’t apply for many loans at the same time
- Showcase all of your income
- Don’t try to get too much money that exceeds the amount you really need.
Although taking the above measures is not a 100% guarantee that you will get the loan, it will increase your chances.
Always check your eligibility for a personal loan before applying for one. Use the eligibility calculator or know your credit score to better bargain on the lender’s interest rates.