Here’s a detailed guide on loan eligibility criteria based on salary, credit score, and other factors. It applies broadly but can vary slightly by lender, loan type, or region.
✅ Loan Eligibility Factors
1️⃣ Salary-Based Eligibility
Lenders assess your repayment capacity by considering your monthly or annual income. Key points:
| Loan Type | Minimum Salary Requirement (Indicative) | Notes |
|---|---|---|
| Personal Loan | ₹20,000 – ₹50,000 per month | Higher salary means higher loan amount |
| Home Loan | ₹25,000 – ₹75,000 per month | Depends on EMI-to-income ratio (often ≤50%) |
| Auto Loan | ₹20,000 – ₹40,000 per month | Based on vehicle cost and EMI affordability |
| Education Loan | Student’s income not required; co-applicant’s income considered | Parents’ or spouse’s income helps in eligibility |
| Business Loan | ₹30,000 – ₹1,00,000+ per month | Turnover and profit are also evaluated |
✔ Lenders usually prefer an EMI-to-income ratio below 40–50%
✔ Salaried individuals have easier approval than freelancers or self-employed persons
2️⃣ Credit Score-Based Eligibility
A credit score reflects how reliably you’ve repaid past loans and credit facilities.
| Credit Score Range | Loan Approval Chances | Interest Rate Implication |
|---|---|---|
| 750 – 900 | Excellent approval chances | Lowest interest rates |
| 700 – 749 | Good approval chances | Competitive interest rates |
| 650 – 699 | Moderate approval chances | Slightly higher rates |
| 550 – 649 | Poor approval chances | High interest rates or collateral required |
| Below 550 | Very risky profile | Likely rejection or secured loan only |
✔ A score of 750+ is ideal for personal, home, or auto loans
✔ Scores below 650 may need guarantors or additional security
✔ Regular repayment history, low credit utilization, and no defaults improve eligibility
3️⃣ Other Eligibility Parameters
| Parameter | Considerations |
|---|---|
| Age | 21 – 65 years is typical; younger borrowers have fewer assets, older ones need pension proof |
| Employment Type | Salaried, self-employed, professionals, business owners — each requires different proofs |
| Existing Liabilities | Loans already taken reduce eligibility unless consolidated |
| Documentation | Identity proof, income proof (salary slips, ITR), address proof, and bank statements |
| Residential Stability | Longer residence history improves approval chances |
✅ How Lenders Evaluate Eligibility
- Debt-to-Income Ratio (DTI) DTI=TotalEMIpaymentsMonthlyincome×100DTI = \frac{Total EMI payments}{Monthly income} × 100DTI=MonthlyincomeTotalEMIpayments×100
- Preferably < 40%
- Credit Report Analysis
- Late payments, defaults, and credit inquiries reduce eligibility
- Employment Verification
- Employers may be contacted for confirmation of income
- Collateral (for Secured Loans)
- Property valuation, gold weight, or vehicle registration checked
✅ Improving Loan Eligibility
✔ Maintain a credit score above 750 by paying dues on time
✔ Keep existing EMI obligations manageable
✔ Avoid multiple loan applications at once
✔ Provide complete and accurate documentation
✔ Opt for co-applicants with steady income (for education or home loans)
📌 Example Scenarios
- A salaried individual earning ₹60,000/month with a credit score of 720
→ Eligible for personal, auto, and home loans with reasonable documentation - A self-employed business owner with irregular income and a credit score of 640
→ May need collateral or a guarantor for business loans; personal loans may be harder to obtain - A student applying for an education loan with parents earning ₹1,00,000/month
→ Easily eligible, with moratorium options and lower interest rates