Personal loans are the best financing options for people looking for funds to meet their urgent needs, achieve their life’s goals, or fulfil their desires. Borrowers often use these loans for their higher education, wedding expenses, foreign vacations, medical emergencies, or home renovations. However, salaried professionals often face financial constraints due to their limited income.
Since eligibility for a personal loan for salaried often depends on the applicant’s monthly income, those with a low income often face challenges getting loan approval. However, professionals from low-income groups can still obtain personal loans to cover their expenses. Lending institutions look at several other factors while evaluating loan applications. Let’s discuss how to get a personal loan with a low salary.
By applying for a personal loan for salaried, an aspiring borrower asks a lending institution to lend them a specific sum as a loan. These are unsecured loans that do not demand any kind of collateral, security or guarantor for backup. They might require this money for various purposes like funding marriage, education, college expenses, consolidating debt, going on a vacation, or making a big-ticket purchase. Once the applicant receives the loan, they must repay it to the lending institution in fixed installments over a set period.
While looking for a loan, one must understand that lending institutions have eligibility requirements that applicants must fulfil to qualify for a loan. These include the following:
- Income: An applicant’s monthly income is a crucial factor in all types of loans. The lending institution would want to ensure that the applicant has an adequate income to repay the loan on time. Since personal loans are unsecured, the applicant’s income has greater importance in determining their eligibility.
- Credit Score: A credit score is a 3-digit number that individuals get based on their credit history. Simply put, it lets a lending institution understand how diligently an applicant has handled credit in the past. The higher the credit score, the better the instant loan approval chances. For instance, most Indian NBFCs require a credit score of 630 or above for personal loan approval.
- Age: The applicant’s age helps a lending institution decide if they have sufficient working years to earn and repay the loan. In most cases, loan providers prefer salaried professionals between the age group of 21 to 58 years.
- Work Experience: Applicants with sufficient work experience are more financially secure than employees who have recently started their careers or joined a new job. The minimum work experience required for a personal loan for salaried varies between lending institutions. Ideally, they should have at least one year of total work experience, with a minimum of six months in the current organisation.
- Current Liabilities: The applicants’ existing financial obligations are crucial factors determining an individual’s personal loan eligibility. If they are already handling multiple loans with their current salary, the lending institutions would want their details to make the final decision.
Before applying for a personal loan, understanding the eligibility requirements in detail will increase the chances of approval. It will give an individual better-negotiating power to get a bigger loan sanction at the best interest rates. Here are a few tips to get approved for a personal loan with a low salary:
- Check the Eligibility Criteria: Checking and comparing the NBFC’s eligibility criteria is extremely important, especially if the applicant earns a comparatively low income than the minimum salary requirement. Doing that will minimise the chances of loan rejection and see if the applicant fulfils other eligibility conditions.
- Check Interest Rates: Loan companies charge an interest rate against the loan they approve. It affects the loan cost a borrower pays for getting the loan amount. Those with a low salary have higher chances of missing EMIs, causing lending institutions to charge a higher interest rate. A higher interest rate increases the loan cost and makes the finances more challenging for the borrower. Therefore, one must check interest rates from different lending institutions and opt for offering the least expensive deal.
- Maintain a High Credit Score: Lending institutions largely depend on an applicant’s credit score to determine their creditworthiness. Even with a low monthly income, they may get loan approval if they have a history of consistent loan repayments. Income might increase over time during the loan tenure and make financial management easier for the borrower. However, those with a habit of missing EMIs have no chance of gaining the lending institution’s trust.
- Opt for a Longer Tenure: Most NBFCs allow borrowers to opt for a loan term with budget-friendly EMIs. Those with a low salary must choose a longer tenure that significantly reduces the monthly EMI amount, making it more manageable. If an applicant chooses an EMI plan according to their monthly budget, they feel confident in getting their money back on time and approve the loan application.
- Reduce Financial Obligations: No matter how much an individual earns, they may find difficulty paying their EMIs on time if they have other financial obligations to fulfil each month. That is why most lending institutions prefer applicants with a debt-to-income ratio under 30%. Try to clear outstanding balances before applying for a new loan to get easier approval.
After fulfilling the lending institution’s eligibility criteria and ensuring that the credit score is above 630, aspiring borrowers must follow these steps to start the application process:
- Visit the lending institution’s website and fill out an online application form
- Enter a few personal, financial, and employment details
- Provide KYC details to get the documents verified
- Accept the loan offer after checking it carefully
- Activate the e-mandate to pay the EMIs regularly
One can improve their chances of getting instant loan approval with a low salary using the tips mentioned in this article. Check the lending institution’s eligibility criteria carefully and apply for an adequate loan amount to get the necessary funds in minutes. Despite a low income, those who match other criteria can get quick approvals without hassle.