How Does a Personal Loan Eligibility Calculator Work
A personal loan eligibility calculator is a free-to-use online tool that lets you check if you qualify for a personal loan or not. Most banks and non-banking financial companies (NBFCs) have different eligibility criteria. The most common ones include monthly income, credit score, type of employment, and repayment capabilities.
An eligibility calculator provides an estimate of the loan amount based on these factors. It is advisable to check your personal loan eligibility before applying. Knowing details about the loan beforehand can help in planning your loan accordingly and reduce the risk of rejection.
How Does a Personal Loan Eligibility Calculator Work
A personal loan eligibility calculator requires you to input basic details. The calculator takes all the details you have provided into account and gives you an estimate of the loan amount that you qualify for. Here is how a personal loan eligibility calculator works:
- Visit a website that offers a personal loan eligibility calculator.
- Go to the eligibility calculator section of the website.
- Enter the following details:
- Age
- Net Monthly Income
- Expenses, including any existing EMIs
Based on the details that you enter, the calculator will display the loan amount that you are eligible for.
Factors Considered by a Personal Loan Eligibility Calculator
A personal loan eligibility calculator is a useful tool that helps you compare different loan options. This calculator uses different factors to give you an estimate of the loan amount you may be eligible for. These include:
Monthly Income
Your monthly income plays a crucial role in deciding the loan amount you may be eligible for. A higher monthly income could help you qualify for a higher loan amount. The lender will thoroughly assess your monthly income to check your loan repayment capacity.
Employment Type
The eligibility criteria for a personal loan differ for salaried and self-employed individuals. Salaried employees could find it easier to qualify for a personal loan since they have a stable source of income. On the other hand, a self-employed individual will need to provide consistent proof of earnings over time while applying for a personal loan.
Credit Score
At the time of applying, ensure that you have a good credit score because it helps improve your personal loan eligibility. Most lenders prefer a score of 750 or above because it shows that you are responsible with credit and make repayments on time. A low credit score may reduce your estimated loan amount or even lead to rejection.
Existing Debts and Liabilities
Your debt-to-income ratio is another important factor to consider and will be reflected in your financial history. If you have ongoing loans and other financial commitments, then this could impact your loan eligibility. In case you have a higher debt-to-income ratio, then the approved loan amount may be lower. Clearing any existing debts could improve your loan eligibility and provide more favourable lending terms.
Loan Tenure
The tenure you choose could affect the loan amount you may qualify for. A longer tenure lowers EMIs but increases total interest outflow, while a shorter tenure raises EMIs but decreases the overall interest paid.
Age of the Borrower
A lender will consider your age when assessing the eligibility of your loan application. A younger applicant may qualify for a higher loan amount with a longer tenure since they have a steady source of income. An older applicant may be eligible for a loan but with a shorter tenure and smaller loan amount. This could impact the overall loan eligibility.
Benefits of Using a Personal Loan Eligibility Calculator
A personal loan eligibility calculator is an important tool that offers several benefits. Here are some of them:
Saves Time
Checking eligibility for each lender manually can be time-consuming and tedious. A calculator provides instant results, and you can compare several different lending options within minutes.
Helps in Loan Planning
This tool allows you to understand if you meet the lender’s loan eligibility criteria or not. These details help you plan your finances better by comparing the different tenures and their impact on the estimated loan amount.
Prevents Unnecessary Rejections
Every time you apply for a personal loan, a lender will conduct a hard inquiry on your credit score. Too many loan application rejections could lower your credit score. A personal loan eligibility calculator helps you check whether or not you meet the lender’s eligibility before applying, thus reducing the risk of rejection.
Avoids Hard Inquiries on Credit Score
Every time a lender conducts a credit score check, it leads to a hard inquiry. Too many hard inquiries may lower your credit score. A personal loan eligibility calculator does not impact your credit score.
Helps Compare Lenders
Every lender has different eligibility criteria, and it is important that you understand them before applying. A calculator allows you to compare the different loan options and choose the one that fits your needs.
Provides Clarity on Loan Terms
Understanding the terms associated with a personal loan in advance is important. A personal loan eligibility calculator provides clarity on the estimated loan amounts and the EMI you will be paying. You can adjust the loan tenure and repayment plan accordingly to find a loan amount that is suitable for you.
Helps in Improving Eligibility
The calculator provides a clear idea of the lender’s eligibility criteria. If the estimated amount that you receive is too low, then you can take the necessary steps to improve your eligibility. This includes reducing your existing debt, improving your credit score, or increasing your monthly income.
Conclusion
A personal loan eligibility calculator is a useful online tool that allows you to check eligibility, compare offers from different lenders, and plan finances. It provides you with an estimate of the loan amount based on important factors such as income, credit score, and tenure. Use this tool before applying for a personal loan to save time and reduce the risk of rejection.
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