How to avail personal loan: If you’re dealing with an intense financial emergency or your financial situation has suddenly turned too fluid, there are a pool of options available by banks that can help you get through the distress. For sudden financial needs, one of the most common and safe methods is opting for a personal loan. Generally, personal loans are sanctioned to salaried, non-salaried and self-employed individuals. The documentation and rate of interest is different for personal loans granted to self-employed individuals. Personal loans come with tenures ranging from 12 months to 60 months. Some lenders offer tenures starting from 6 months as well.

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However, there are certain situations where a lender does not allow you personal loans. It can be very discomforting considering you need cash soon. 

Talking about personal loans, Aditya Kumar, Founder & CEO Qbera.com said, "The popularity index of personal loans in the current day has hit the roof, thanks to an increased number of lenders offering these loans to salaried and self-employed individuals in India. Fundamentally, personal loans are unsecured credit products – meaning, they don’t particularly require consumers to pledge any form of collateral – there isn’t any legal asset tied to these loans unlike home loans or car loans."

However, Kumar also adds, " While this is true, there can be isolated instances where lenders would require certain customers to secure their loan with an asset."

It isn’t hard to qualify for a collateral-free personal loan as long as one satisfies the lender’s eligibility criteria. There are various eligibility parameters that lenders want potential customers to meet. 

Let’s look at these eligibility parameters that you will be required to meet if you are to qualify for a personal loan without collateral, as per Kumar. 

Your credit score: 

The first parameter that lenders look at while determining whether you can qualify for personal finance is your credit score. The credit score threshold is different for different lenders. 

While top banks require individuals to have a credit score of at least 750, Fintech lenders and certain P2P lending platforms entertain applications even with a credit score of 600.

Your repayment history: 

An unblemished repayment record on past credit instruments associated with your profile is another important aspect that not only influences the approval or rejection of your loan application, but also the rate of interest you’re offered. Most lenders use risk-based pricing models to adjust interest rates on applications. 

This means that if an individual’s profile is suggestive of high risk, a higher interest rate is offered to cover the risk quotient. Most private banks require customers to have an above average repayment record with no instances of defaults and late payments in the past. 

Fintech lenders are, however, fairly lenient in this context, and can approve applicants even with a high-risk profile. While a few instances of late payments are considered, defaults are certainly not.

Employment stability and employer reputation: 

Another parameter that becomes relevant while assessing applicants for collateral-free personal loans is the employment stability. Factors like the total number of years of employment experience and reputation of the employer are taken into account. 

You might have often witnessed employees of big multi-national companies being promised the lowest rates on their loans – this is because lenders also look at the employer’s reputation as a whole, and individuals employed with big enterprises are less likely to lose their jobs and default on their monthly repayment. 

Also, certain private banks sometimes refrain from offering credit services to individuals employed with uncategorized companies, but this isn’t the case with Fintech and P2P lending platforms.

Income: 

Most lenders have a minimum income criterion that individuals will have to satisfy. Again, there is a distinction in the criterion set by popular private banks and Fintech lending companies. 

Most private banks, particularly the popular ones, have fixed their income eligibility criterion at the Rs. 30,000-Rs. 50,000 range. With Fintechs and P2P lenders in the picture, you can be eligible for an instant personal loan even with an income of Rs. 15,000 per month.

Age: 

Your age is another parameter that becomes relevant. Most lenders offer personal loans to individuals in the age group between 23-55 years.

Hence, make sure the above-mentioned criteria's are in check if you plan hassle-free personal loans.