How Can You Qualify For Personal Loans?

Banks and financial institutions provide loans because they earn money from the interest that they get on the loans they offer.

Most banks and lending institutions offer personal loans, however, there are certain criteria that you need to fulfil in order to secure this loan. Your past and present credit details, along with the lending standards of the financial institution determine whether you qualify for a personal loan.

Before making the loan to you, these organisations make sure that you are capable of repaying the loan, will utilise the money for the right purpose and will continue to associate with the financial institution for future dealings as well.

Each bank or finance company differs from the other and has separate standards that establish whether a person qualifies for a personal loan. However, the basic criteria are the same everywhere.

You must have a permanent job or be running a successful business
You must be working for a company or organisation for at least six months if not more
Should have been residing at the same address for six months and above
Must be listed in the electoral register
Must have some kind of personal assets such as a car or a house

Apart from these factors, it is also essential to have a strong credit history if you wish to secure a personal loan. People seeking personal loans are more than often rejected because they have a bad credit rating, which is generally due to loan default or a missed payment or late payment of dues. This clause has become all the more rigid due to the ongoing global financial crisis that has weakened even the strongest of economies. While most banks will not offer personal loans to people with bad credit rating, some may offer the loan at a higher APR, but only if the borrower has a bad rating because of late payments.

Banks assess the borrowers ability to repay the debt and if the income is lower than the debts that have to be paid, the bank will positively reject the personal loan application. So, if you need a personal loan make sure you have a good credit rating, only then will you qualify for the loan.

Tom Smith
14th Dec 2011