Factors affecting Personal Loan eligibility and Interest Rates

Personal Loans (PL) is typically, and unsecured loan offered by various banks and NBFCs basis your income and other different parameters. There is no collateral or security required to take a personal loan. Banks offer Personal Loan starting from 50k and can go up to 50 lakhs and above. The purpose of taking loan is not pre-defined in PL and can be used for any personal use like Home renovation, buying an old car, taking a holiday, marriage expense and the list goes on like that.

In this article we will discuss various factors that effect your PL eligibility and Rate of Interest.

· Credit Score

To avail a personal loan, you need to have a good credit score for loan approval. Credit scores denote your creditworthiness.?

· Occupation

Interest rates differ from occupation to occupation. A lender generally offers different interest rates for salaried employees, different rates for self-employed loan seekers to mitigate as a risk factor.?

·?Income

You income becomes a factor for repayment when you apply for a personal loan. If you have high income, you are likely to be charged a lower rate of interest due to lesser risk of default in repayment.

·?Age

Age turns out to be another factor that dictates interest rate on your personal loan. A younger applicant may be perceived as lesser risky, while an older applicant may be considered of higher risk; thus the interest rates will differ accordingly.

·?Employment Organization

Employees of well-known MNCs, Public limited Companies, and companies of good standing may receive better rates of interest compared to employees of lesser-known companies.

·?Association with Lender

Should you have a long-standing and good financial relationship with you lending organization, you are likely to receive better rates of interest due to you lender’s familiarity with to your financial records.