Factors That Affect Personal Loan Requirements In 2024

Before applying for a personal loan, it is important to understand the various factors that can impact your borrowing experience. This comprehensive guide will explore all the crucial factors to consider before you apply for a personal loan, empowering you to make informed decisions while prioritizing your financial well-being. 

Whether it is a dream wedding, home renovation, or unexpected medical expenses, a bank personal loan can provide the necessary funds to bridge the financial gap. So take time to explore whether a personal loan is a good fit for you before rushing to apply. 

Key Factors For Personal Loan Application in 2024

1. Personal Loan Interest Rates

The personal loan and interest rates serve as the anchor, directly impacting your total borrowing cost and monthly repayments. To ensure the best terms, compare rates from different banks and lenders. A lower interest rate can save you money over time, freeing up funds for other essential needs. With the right interest rate on a personal loan, you can set sail on a smoother financial journey, unburdened by high-interest expenses. Keeping a keen eye on personal loan interest rates is like having a compass guiding you toward economic efficiency.

2. Personal Loan Eligibility

Before applying for a bank personal loan, check your eligibility to sail smoothly through the process. Lenders have specific criteria based on income, credit score, and age. Knowing your eligibility beforehand helps you target suitable lenders and increases your chances of approval. Being aware of the personal loan criteria status is like having a navigational map, steering you towards lenders more likely to welcome you aboard. With a clear understanding of your eligibility, you can chart a course for a successful loan application.

3. Loan EMI 

Financial institutions consider both income and employment stability when determining eligibility for a personal loan. These factors assess your repayment capacity and future financial stability. Generally, those with stable jobs and a regular income are seen favourably. The minimum monthly salary required can vary based on several factors. 

Self-employed individuals must provide evidence of a stable income and a successful business to qualify for a personal loan. If you belong to this group, you need to submit documents such as bank statements, salary slips, income tax returns, and other relevant income-related paperwork to confirm your income and employment status. 

4. Loan Tenure

Loan tenure is a vital aspect of navigating the ocean of personal loans. A longer tenure means lower EMIs, but it extends your time at sea, resulting in higher interest payments. On the other hand, a shorter tenure means higher EMIs but faster debt repayment. Evaluate your financial capacity and choose a tenure that balances affordability and interest savings. The right tenure sets the pace for your financial voyage, aligning it with your long-term goals. A carefully chosen tenure ensures a steady course toward financial freedom.

5. Hidden Charges

Beware of hidden rocks in the form of charges while traversing personal loans. Despite an attractive interest rate, lenders may impose additional costs like processing fees or prepayment penalties. Scrutinise loan terms to identify any hidden expenses that may affect your financial voyage. Being vigilant about hidden charges is like having a seasoned navigator, helping you steer clear of any financial hazards. Paying attention to the fine print allows you to sail confidently, avoiding unforeseen obstacles in your borrowing journey.

6. CIBIL Score

Consider your credit score as the captain's log of your financial journey. Lenders use it to assess your creditworthiness. A healthy credit score opens doors to better loan offers and favorable terms. Review your credit report, fix discrepancies, and improve your score before setting sail on your bank personal loan journey. A strong credit score is like a wind in your sails, propelling you towards smoother loan approvals and favourable interest rates. Maintaining a good credit score is essential for a smoother and more rewarding financial voyage.

7. Loan Amount

Avoid overborrowing, as it can lead to rough waters ahead. Assess your needs realistically and borrow only what's necessary. A well-calibrated loan amount ensures smooth repayment and prevents you from getting burdened by excessive debt. Staying within your financial means is like adjusting your sail and maintaining balance as you navigate through your financial journey. Borrowing responsibly allows you to navigate through the waves of financial challenges with ease.

8. Repayment Flexibility

Like life at sea, your financial journey is unpredictable. Seek lenders offering repayment flexibility, allowing prepayment or foreclosure without hefty penalties. This adaptability helps you steer through unforeseen financial circumstances without being confined by rigid loan terms. Repayment flexibility acts as your safety net, allowing you to helm through changing surges easily. Having the option to adapt your repayment plan ensures that you can steer your financial journey according to your changing needs.

9. Loan Disbursal Time

Time is of the essence, especially when you need funds urgently. Seek lenders known for quick loan processing and disbursal. A swift disbursal can make a difference, helping you quickly seize time-sensitive opportunities and manage financial emergencies. Quick disbursal is like having favourable winds, propelling you towards timely financial goals. Choosing a lender with a reputation for fast disbursal ensures you can set your financial plans in motion without unnecessary delays.

10.  Customer Reviews

In the vast ocean of lending options, customer experiences provide valuable insights. Dive into reviews to gauge the reputation and service quality of different lenders. Choose one with a track record of exceptional customer service, ensuring smooth sailing for your borrowing journey. Customer reviews serve as the lighthouse, guiding you to trustworthy lenders with a commitment to your financial success. Learning from the experiences of others helps you make an informed decision and drift away with confidence.

11. Association with the Lender

Association with the lender can be advantageous for securing a personal loan. If you have a history with a lender, you may be eligible for more favourable interest rates. Lenders tend to place confidence in borrowers whose financial history they are familiar with and they often aim to foster long-term relationships with their customers in this manner.

Your relationship with the lender can also expedite the approval process. When you have multiple offers from different lenders you have dealt with, using our EMI calculator can help you determine which offer is the best. 

12. Current Debt

Your debts will also be factored into assessing any personal loan offer. If you are currently repaying a loan, the lender will need detailed information on it. This is crucial as the bank must have confidence in your ability to manage both your existing debts and the new personal loan. 

13. Age of the Borrower

Lenders consider your age when assessing your eligibility for a loan. If you happen to be too young or still a minor, it is possible that you do not have a stable job or a strong ability to repay the loan. Likewise, if you find yourself approaching retirement age, you may encounter difficulties in repaying the loan without a source of income. Hence, it is generally preferred that loan applicants fall within the age range of 25 to 50. 

14. Other Factors

Inflation, recession, repo rates and other factors have a significant impact on the cost of your loan. During periods of inflation, lenders typically raise personal loan interest rates, whereas, during a recession, they tend to offer lower rates. It’s worth noting that low repo rates also lead to lower interest rates. The repo rate, which reflects the rate at which lenders borrow from the RBI, directly influences the interest rates you are offered for personal loans. While these factors are beyond your control, it is wise to take advantage of them by borrowing during a low-interest rate period to maximize your savings. 

What Should I Do Beforehand to Avoid Personal Loan Rejection?

As an applicant, there are several measures you can take to increase the likelihood of your loan application being approved. Consider these valuable tips to prevent your loan from being rejected:

• Lenders assess various criteria when accepting loan applications and the most crucial is the Fixed Obligations to Income Ratio (FOIR). A low FOIR indicates a higher disposable income and better repayment capacity, making you an ideal candidate for a personal loan.
• Lenders require a good credit score for loan approval. It shows responsible repayment behaviour and trust. A high credit score gives benefits like faster loan approval and better interest rates. 
• To avoid personal loan rejection, limit credit use by spreading expenses across multiple cards. This shows independence and the ability to manage within means. 
• Limit credit card use, and repay dues on time to maintain good credit scores.
• List additional income sources when applying for a personal loan to reduce the chances of rejection. 

How To Apply For a Personal Loan?

Follow these steps for a hassle-free personal loan application on Investkraft’s platform:

• Check Eligibility: Begin by assessing your eligibility for a bank personal loan, taking into account factors like credit score and income.
• Research Interest Rates: Compare different interest rates on personal loans to find the most favourable one for you.
• Gather Documents: Collect all necessary documents, such as proof of identity, income, and address, to expedite the application process.
• Online Application: Fill out the personal loan application form on the bank's website or visit a local branch to ensure accurate details.
• Complete Formalities: Fulfil any additional requirements like submitting collateral or providing references if needed.
• Wait for Approval: After applying, patiently await approval from the bank.
• Read Terms: Review the terms and conditions of the loan, including the interest rate and repayment plan.
• Accept Offer: Once approved, carefully accept the loan offer and sign the agreement.
• Receive Funds: The approved loan amount will be disbursed to your account, ready for use.
• Repay on Time: Keep track of your repayment schedule and make payments promptly to maintain a healthy credit record.

Following these steps will ensure a smooth application process for your bank personal loan, taking personal loan interest rates into account and securing the financial support you need.

The Conclusion

So, now you might have a better idea about what factors to look at while applying for a personal loan in India. No matter for what purpose you want a personal loan, keeping a close check on these factors would help you close the best deal in your favour. However, if you want to seek an expert’s guidance, don’t hesitate to call Inveskraft, which can help in everything from exploring different personal loan offers and applying for a personal loan right away. 

Author: Abhik Das