A personal loan is a loan that may be utilized for almost anything. There is no pre-determined reason for which the loan is granted, and the borrower is free to utilize the cash for any purpose he or she chooses.
Furthermore, the lenders do not require any type of collateral or security against it. A personal loan is an unsecured loan in which the lender does not mortgage any of your assets but nevertheless offers you the loan.
Because no asset is mortgaged in this scenario, the lender’s risk is considerable. Because the danger is larger, the interest rate on personal loans is a little higher as well. However, just because interest rates are higher doesn’t imply the lender will lend to everyone. Lenders use risk-based pricing to establish the interest rate on your loan after analyzing your profile against a set of factors. Individuals who have previously demonstrated a high risk of mismanaging their credit may find it difficult to get loans and will often be charged a higher rate of interest than those who have a clean credit history. So, what are these parameters, let’s find out.
- Your Employment Status
Your work status, whether self-employed or salaried, is the first factor that lenders consider. Lenders like to give personal loans to those who have a steady source of income.
- Your Credit Score
For lenders considering your loan application, your credit score is the most essential factor. Your credit score is a number that represents how you’ve utilized credit in the past and how healthy your credit is right now. The credit score is calculated using information from your credit report and is impacted by a variety of factors, including your total outstanding debt, the number of debt(credit) accounts you have, the duration of your credit history, and previous loan/credit card repayments. Fintech lenders require a credit score of 600 to qualify for personal loans.
- Your Repayment History
Your repayment history is the next important qualifying factor that lenders scrutinize attentively. Your repayment history reveals how consistent you’ve been in making your loan payments in the past. It emphasizes instances of late payments and defaults so that lenders can make an informed lending choice based on your credit management history. Any kind of default might harm your prospects of getting a loan or a credit card.
- Your Employment Experience
The length of time you’ve worked is referred to as your employment experience. Many private banks require candidates to have a minimum of 1-2 years of job experience, whereas Fintech lenders accept applicants with only 6 months of work experience. Working for a single company for a long time enhances your creditworthiness, and if your employer is a well-known international corporation, that’s even better.
- Your Income
Another crucial aspect that impacts not just your loan eligibility but also the amount that lenders will provide you is your monthly income. Lenders have different income qualifying criteria – some Fintechs allow you to qualify with an income of Rs 18,000 per month, while certain private banks require an income of Rs 25,000 or more.
- Your Age
Most lenders ask that you be between the ages of 23 and 55 years old. You can still qualify for a personal loan with a Fintech lender if you are at least 23 years old and have no credit history.
You may have witnessed instances where a lender is willing to provide you with a pre-approved loan. A pre-approved loan does not imply that the lender will not conduct a thorough investigation. In most situations of pre-approved loans, the lender already has access to some of your financial information, such as bank statements and credit card histories, and has evaluated your credit worthiness and authorized your personal loan based on that information. Home Credit provides easy & affordable personal loans to fulfil your every dream. Check your eligibility & start your loan journey today.