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Personal Loan Eligibility – Everything You Should Know


Gone are the days when applying for a personal loan was a cumbersome process. Not only did a borrower need to stand in a queue, but they also had to take photocopies (and printouts) of scores of documents. 

Fast forward to 2022, and you can apply for a personal loan from the convenience of your home, office, a train, a bus, or while walking on the road. Thanks to technology, applying for a personal loan is no longer time-consuming. 

However, since personal loans are collateral-free, lenders carefully evaluate the borrower’s eligibility before approving such loans. The following sections discuss personal loan eligibility at length, elaborates on the factors affecting the eligibility, and inform you of ways to increase your eligibility.    

What Is Personal Loan Eligibility?

Personal loan eligibility refers to the evaluation process undertaken by Indian lenders to decide whether to approve the loan or not. It is part of the KYC (Know Your Customer) process. 

According to RBI (Reserve Bank of India) guidelines issued in 2004, KYC is a mandatory process to be followed by all Indian lenders. KYC helps Indian government authorities tackle money laundering and identify customers accurately. 

Let us look at the primary eligibility requirements of a personal loan:  


The borrower’s age must be between 21 and 60 years. You can submit documents like an Aadhar card, PAN card, driving license, birth certificate, or passport to prove your age.  


You must be an Indian citizen to apply for a personal loan in India. Documents like PAN card, Aadhar card, voter ID card, ration card, driving license, passport, etc., can prove your identity. 

Monthly Income

Although the monthly income criteria differ widely among lenders, your earnings should be more than a specific sum stipulated by the lender to be eligible to apply for a low-interest personal loan. 

A quick scan of the top Indian lenders reveals that the minimum income threshold starts from INR 15,000 and may go up to INR 50,000.

Job Or Business Profile

The nature of the borrower’s job or business also plays a pivotal role in personal loan eligibility. For instance, if you have a full-time, stable job, your eligibility will be higher, and the lender may offer you an attractive personal loan interest rate. 

Similarly, if your business is stable and has a recession-proof format, lenders may reduce the interest rate for you. Conversely, if your job or business is unstable, the lender may not only increase the interest rate but may reject the loan application.

Credit Score

A credit score is assigned by credit rating bureaus in India. The score speaks volumes about a borrower’s credit profile. If the score is high, it suggests that the borrower keeps their debt in control. Conversely, if the credit score is low, lenders may believe that the borrower frequently defaults on loans or card repayments.

Now that you know the top parameters affecting personal loan eligibility check some tips to increase your eligibility to get the lowest personal loan interest rates in the following section.

Top Tips To Increase Personal Loan Eligibility

Nurture The Credit Score

Increasing your credit score is not difficult if you repay loan and card dues timely and keep an optimal credit mix. 

However, keeping the credit score high is challenging when you have breached the magic figure of 725. It is wise to know that lenders prefer loan applications from borrowers with a credit score of 725 and above.

So, after you reach 725, ensure you do not default on loan or card repayments. Also, check your credit score once or twice a year to ensure your lender transfers the latest records to the credit rating bureau. 

Sometimes, lenders delay transmitting the news of loan repayment, resulting in a reduced borrower’s credit score without any fault of the latter. Hence, keeping your credit score above 725 is the first thing you should do to increase your personal loan eligibility.

Loan Amount vs. Monthly Income

As already mentioned, lenders specify the minimum monthly income to ensure every personal loan applicant can repay the loan.

However, if your monthly income is considerably higher than the lender-specified minimum income, you can negotiate the interest rates in your favour. Conversely, if your monthly income is just around the threshold, you may reduce the loan amount to increase your personal loan eligibility and get the best interest rates.

So, evaluating your monthly income and repayment capability is wise before deciding on the loan amount. 

Apply For A Personal Loan At A Young Age

Since age is a prime consideration for determining personal loan interest rates, the lender also considers it while deciding personal loan eligibility. Although unlike a home loan or loan against property, a personal loan is not a long-term loan, lenders still prefer young borrowers since they have more years to repay the loan. 

For instance, if you are 57, you can get only three (3) years to repay the loan. In contrast, if you fall under the minimum age bracket, you can get as many years as the lender allows for the loan repayment.

Remember, your personal loan eligibility and the probability of getting the lowest interest rate also depends on your age. 

The Stability Of Income

While a decent income can provide the right thrust to your personal loan eligibility, it does not guarantee the best interest rate. To increase your eligibility to get the best rate, you must prove that your income is stable. 

Generally, lenders consider the eligibility of a salaried professional in a full-time job higher than someone in a part-time job. Similarly, if your earnings are from a stable, recession-proof business, your eligibility will be higher.

If you cannot show that your income is relatively stable, it is wise to submit proof of your bank deposits. Fetch the records of all fixed deposits and mutual fund investments and show the documents to your lender to prove that your savings are enough to care for the loan repayments.


Personal loan eligibility is easy to understand and quick to fulfil. Keep an eye on your credit score, monthly income, age, and job profile to expedite the loan approval and get the best interest rate.

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