Personal Loan

5 Factors That Affect Your Eligibility for a Personal Loan


Getting a loan is no longer seen as a last resort when purchasing an expensive item like a new smartphone or a home. People’s attitudes toward taking out loans have changed over the past decade or two. 

This is especially true for those who need instant access to funds but don’t have a large amount of money with them. 

On top of that, there are tax benefits associated with home and education loans. These lessen tax obligations and improve take-home pay.

Banks are making it more convenient for borrowers to get loans in better condition. For example, they offer streamlined processes, speedy eligibility checks, and low-interest rates. Also, they have enabled online applications and the uploading of necessary paperwork. 

Suppose you’re still nervous about applying for a loan and the review procedure. In that case, the lender will consider these seven important variables.

5 Factors That Affect Your Eligibility for a Personal Loan

Credit Score and Credit History

How you’ve handled previous loan repayments is very important. That’s because it tells a lot about how you’ll handle similar situations in the future.

The bank benefits from knowing if your payments will be consistent and timely. The longer a person has gone into default or been late, the lower their score will be.

A lack of credit history, such as no credit card or loan applications in the previous two years, is inconvenient. To avoid this, pay your credit card bill on time every month.

A CIBIL score between 700 and 800 is excellent. That makes you look like a reliable borrower because you have no missed payments on your record. 

Yet, if your credit score is below 500, your application may be denied. Banks use credit scores to determine applicants’ creditworthiness.

Profession and Employment History

Lenders consider your past and present work status when deciding whether to lend to you. The lender will seek assurances that your company is solvent. Also, it will need assurance that it has never missed or been late paying salaries. Job security is also important. 

Thus, working for an unfamiliar company or your own company won’t be as helpful. That’s because lenders generally view government occupations as safer.

Similarly, if you work with a prestigious organization, you’ll have a better shot at getting a loan. Also, professionals like doctors, accountants, engineers, and lawyers are immune to harm. 

Your ability to make loan payments hinges on your income. Hence, its stability and regularity are key considerations. Lenders prefer applicants who have spent more time at their places of employment. That’s because it shows they are more likely to remain there.


One important indicator of financial security is age. Suppose you begin working while you’re in your 20s. In that case, you’ll have under your belt five to six years of experience by age 30. In other words, you’ve finally established yourself financially. You are climbing the conventional corporate ladder to increase your pay. 

There will be less time in your working life to pay off your loans over the following twenty to thirty years. So, it’s likely that a loan application submitted during retirement will get denied.


Repayment ability is a function of income, as was previously indicated. When determining your borrowing capacity, banks look at:

  • Income in light of your current debt
  • The number of people who depend on you
  • Where it comes from
  • How long will it last

After EMI payments, the bank will look to see if there is enough surplus. The bank may feel that you’ll be unable to repay your debts if this is deemed inadequate. The bank will see you as financially stable if your ratio is higher.

Also, many lenders prefer applicants who have submitted their IT returns and paid taxes. Lenders prefer them more than those whose income is not taxable and has no tax liability.

Having extra proof of income, like your spouse’s wage, will increase your chances of approval. This is good for your ability to make your loan payments. That’s because it means you have more than one possible revenue source to fall back on. 

The same logic goes behind the availability of joint loans. Suppose two people apply for financing together. Then, their combined monthly income shows a greater capacity to repay a larger debt.


Consider a shorter repayment period if you want a greater chance of getting the loan. For example, lenders are more likely to approve loans with repayment terms of up to five years. The approval chances drop for each extra five years added to the tenure (10 years, 15 years, 20 years, and 25 years). 

Thus, keeping everything to a minimum is the best strategy to pursue to win the permission of a bank for a loan.

Bonus Factors


If you can give the bank enough security, you may be able to get the loan approved more quickly. A higher percentage of the collateral’s worth will apply to the loan amount. Thus, a more valuable asset could result in a larger loan amount being approved for your use. 

The asset could be either immobile (like a piece of land) or mobile (like a car). Personal loans, including credit card debt, are unsecured loans. But, getting a loan to buy a car or a house, start a business, or go to school typically requires some form of collateral.

Marginal Money

Lenders will often cover only a part of a loan’s actual costs (up to 80%) and will ask the borrower to come up with the rest. The bank won’t object if you can afford to put in more than 10–20% of the total. 

It will instead consider your willingness to mitigate the bank’s default risk. Also, your willingness to get the approval of your loan application. Your ability to put down a down payment is a major factor in getting approved for a loan.


These were the 7 factors that affect your eligibility for a personal loan. Your previous dealings with the bank are also important. Long-term customers with good credit histories have a better chance of approval. Yet, the bank’s ability to assess your current financial health depends on a few factors.

Additionally, certain lenders, such as Piramal Finance, simplify the personal loan application process. They simplify everything, from verifying qualifications to submitting applications and submitting paperwork online. Also, for some customers, the loan disbursement process takes as little as 10 seconds.