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 loan is one of the simple ways to resolve urgent requirements of liquidity. This requirement varies from time to time and age to age. Personal Loan, Education Loan, Home Loan and many others which are categorized according to the human requirement. And as there are different categories of loans there are equally different norms, which need to fulfill if you want to avail the benefit. These norms are designed or drafted by financial experts, government bodies, and financial institutions. These designed norms are called loan eligibility. 

There are three basic principles, which need to be followed when you are planning to apply for a personal loan. 

1. Well-defined Requirement - You must be clear about your requirement and then only proceed with the loan application process, which will lead you to step 2. 
2. Loan Eligibility - This is a technical step where the bank will go through your financial status. Banks will analyze your financial status on different criteria of eligibility.
3. Repayment Schedule - This step is very important and must be clear in your mind how you're going to repay the loan from your income.

These are some of the basic fundamental principles which one has to follow when going for a loan. And if the repayment schedule is followed one will definitely succeed in getting the benefit of loans. This can be understood with the help of an example. Mr. Ramesh is working in a multinational firm; the firm gives various benefits, which include financial help for domestic requirements. Recently Mr. Ramesh has purchased a home with the help of a home loan, but now he wants some funds for furniture. For this fund requirement, he wants to apply for a personal loan. So in Mr. Ramesh’s case, his fund requirement is well defined and now he has to check his loan eligibility and repayment schedule. As Mr. Ramesh has taken a home loan so he has to check carefully the loan eligibility criteria of the selected bank.  After checking all the criteria, which include re-paying capacity. In this case, Mr. Ramesh has taken a home loan, and the EMI of the loan is approximately 80% of his monthly income. So in these circumstances, if Mr. Ramesh will still move loan proposals with concerned banks so his file will not be approved by the bank. The bank will simply refuse with the ground that Mr. Ramesh is not in a position to pay the EMI’s. We can understand the same with another example and this time Mr. Ramesh’s home loan EMI is approximately 60% of the monthly income. This means Mr. Ramesh’s loan file is fulfilling all other criteria including criteria of repaying the loan amount. 

Eligibility Criteria of Personal Loan of Salaried Class

Age Group	21 years to 60 years
Minimum Monthly Income	Rs. 1,500
Work Experience	6 months with the current organization

N.B:- The above eligibility criteria are indicative, banks or financial institutes are free to add other criteria or give relaxation on the above points. 

Eligibility Criteria of Personal Loan for Self-Employed Applicant

Age Group	25 years to 65 years
Minimum Annual Turnover	Rs. 15,00,000
Minimum Profit excluding Tax of Previous financial year	Rs. 2,00,000
Minimum Business Experience	3 years

N.B:- The above eligibility criteria are indicative, banks or financial institutes are free to add other criteria or give relaxation on the above points. 

Since all the loans are taken to fulfill your requirement, some of the loans are taken for specified requirements like if you are purchasing a home and short of funds you will go for a home loan, similarly, if you want to purchase a vehicle then you will go for a vehicle loan. But there are some requirements, which are not specified, and these requirements come under a personal loan. A personal loan is a short-term loan generally with a tenure starting from 1 year to 5 years. Since it comes in shape with personal requirements, banks and financial institutions have strict Loan eligibility form approval. And if loan eligibility is not fulfilled, the bank will reject your loan application. So one has to be very careful while applying for a personal loan. 

Below are some of the points one should keep in mind while applying for a Personal Loan: 

1. Choose the personal loan (PL) scheme well-matched with your requirement. After choosing the best scheme, try to compare it with offers from different banks and financial institutions.
2. After choosing the best product, read the loan offers, loan eligibility, and other information, which includes documents, required, repayment schedule, careful to avoid any financial trapping. 
3. Nowadays, banks and financial institutions have appointed loan managers who explain and help you to understand all criteria. Make sure you always go for written documents as verbal assurance is not acceptable in money matters.
4. Submit personal financial documents in a professional way and provide all information that is required for verification and approval. Salary/ Income Certificate, address proof, and others should be clearly visible to avoid any kind of miscommunication. 
5. Maintain a credit report and avoid late payments before applying for a personal loan.

Now let us discuss some of the Specific Reasons for PL Rejection

1. Incomplete & Non- verification of Documents- This is the major reason for almost 70% of loan rejection. All the verification is done on the behalf of these documents and if documents are incomplete or not clear then there will be a negative report in your loan verification column.  

Here is the list of the documents, which are required to avail of a personal loan.

Documents Required for Personal Loan of Salaried Class:

• Residence proof
• Identity proof
• PAN card
• Bank statement of last 3 months
• Income proof of last 3 months
• Photographs passport size

Documents Required for Personal Loan for Self-Employed Applicant

• KYC Documents- Identity proof, residence proof, birth certificate matched with Aadhaar card
• Firm address proof
• Financial documents 
• PAN card
• Bank statement of last 6 months

2. Negative Credit Profile- The loan approval is based on 3 magic numbers, which are based on your previous/current financial status and previous loan repayment. These magic numbers depend on how your financial obligation likes repayment of credit cards and loans in the past. These numbers vary from between 300 to 900.  The chance of approval of a loan is higher when the credit score is near 900.  This can be understood with the help of Mr. Ramesh’s example. For instance, Mr. Ramesh is availing home loan but due to some unavoidable conditions, he is unable to pay the home loans on the due date. This late payment will affect his financial rating and his credit score will incline towards 300 marks. This inclination will lower his chance to get further other loans.

3. Current Financial Liabilities - If current financial liabilities are very much on the higher side then getting approval for a personal loan is very difficult. The lending bank will not be comfortable in lending the amount as the bank is not sure that he or she will be able to pay his or her EMI’s.

4. Monthly/Annual Income/ Turnover - All the banks have a benchmark of monthly or annual income for salaried class and Annual turnover for self-employed. If your loan application is not meeting that mark, your file is likely to get rejected.

5. Stable Workplace - Stable job, stable business with regular income is one of the guarantees of getting the loan approval. The lender bank does not like changing jobs frequently, this also reflects in your financial statements.

To improve personal loan eligibility, you can follow the steps below:

Verified Documents	Identity Proof, Residence Proof, Birth certificate matched with Aadhaar Card
Maintain Credit Score	These numbers vary from between 300 to 900
Reduce Current Financial Liabilities	Maintain your monthly & annual Income
Introduce Co-borrower	Applying with a co-borrower (close family member) by this you can share loan criteria