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While applying for and getting a personal loan can seem like a simple process, checking your eligibility and giving you a loan offer is a complex process for a lender. They have to consider multiple factors to gain the risk associated with providing you with a loan offer. Age is one such factor. But how important is age as a personal loan eligibility criterion?
Lenders look at age as a key determinant of your capacity to repay your debt. For instance, a younger applicant has the ability to make more money as a result of several promotions and a broad variety of prospects that lie ahead of them. An older applicant does not have this leverage and hence, lenders become more careful about them.
The maximum age for obtaining a personal loan might range anywhere from 18 to 70 years old, depending on the lending institution. If your current age doesn’t fall within this bracket, you may not be eligible for a personal loan.
Age is a crucial factor when it comes to personal loan interest rate as well. Lenders fix interest rates according to the amount of repayment risk you pose. If you are an older applicant, a lender might see a higher repayment risk and offer you a higher interest rate. Similarly, if you are too young, lenders could see a similar risk.
But age is not the only factor that can affect your personal loan eligibility criteria and personal loan interest rates. Below are some other important factors.
Your creditworthiness, or the likelihood that you will repay a loan on time, is represented by what is called a credit score. Your credit report, which is a record of your credit history, is the source of the information used to determine this. A higher credit score implies a stronger credit history and a reduced risk to lenders, which may result in more favourable loan conditions, such as a lower interest rate.
Credit scores are a tool that lenders use to assess the level of risk associated with lending money. If you have a high credit score, it shows that you have a strong credit history and present a lower risk to the lender than someone with a lower score would. As a direct consequence of this, you can be eligible for a personal loan with a more favourable interest rate. On the other hand, if you have a poor credit score, it may imply that you are a risky borrower for the lender. As a result, the lender may offer you a personal loan with a higher interest rate or may even reject your loan application.
It is essential to have stable employment and income when applying for a personal loan because they provide lenders with information about your financial stability and ability to repay the loan. Lenders will often require proof of employment and income when evaluating your application for a personal loan.
Having a stable job and sufficient income may increase your eligibility for a personal loan, while being unemployed or having unstable or insufficient income may decrease your eligibility. In addition to demonstrating your ability to repay the loan, your employment and income may also be used by lenders to determine the loan amount and terms, such as the interest rate.
You may be considered credible if your FOIR (fixed obligation to income ratio) is between 50-60 per cent. Having a lower FOIR infers you hold lower financial obligations than your monthly income. This, in turn, boosts the lenders' confidence in you as they consider you less risky because you may be able to pay your EMIs more easily than applicants with a higher FOIR.
Ending note
Age is one factor that lenders consider when evaluating a personal loan application, but it is not the only factor. It is a good idea to consider all of the above discussed factors when applying for a personal loan to improve your application’s chances of being approved and getting a loan with favourable terms. Additionally, it is always a good idea to compare offers from multiple lenders to find the best online personal loan option for your needs.
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