How Does Your Age Influence Your Personal Loan Eligibility?
Ketki Jadhav
Nov 29, 2022 / Reading Time: Approx. 3.5 min
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The high rate of interest and processing fees make personal loans one of the costliest loans available. Hence, to maintain your financial health, it is best to avoid availing of personal loans. However, there could be certain situations, such as a medical emergency, sudden loss of income due to a job loss or demise of a breadwinner, and many more when you cannot avoid taking personal loans. A personal loan is an unsecured loan, which makes it a good choice for instant cash as the loan process is quick and easy. However, it comes with certain eligibility parameters that an applicant must meet.
The most important factors that determine your personal loan eligibility are:
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Monthly income
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Credit score
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Age
A financial emergency can knock at any time, and hence there is no right time to avail of a personal loan. However, your age is the initial parameter checked by the lenders for loan approval. Therefore, the personal loan eligibility criteria differ for different age groups. This article elucidates how age influences your personal loan eligibility.
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Personal loan eligibility and an applicant's age are inversely related. The younger you are, the more the chances of getting a personal loan approved, provided the other factors remain the same. Let us see how your age influences your personal loan eligibility:
1. Age And Loan Tenure:
Personal loan duration typically ranges from 1 year to 5 years. In exceptional cases, when the loan amount is very high, some lenders may consider offering a loan tenure of up to 7 years if you meet certain criteria. Since young individuals have more employment and earning opportunities than older individuals, lenders prefer young individuals for personal loans. This is one of the reasons why personal loan is generally not offered to retired individuals. If you are in your 50s, the lender may not offer you a personal loan with a longer duration, whereas if you are in your 20s or 30s, there are more chances of you getting a longer-duration personal loan.
2. Age And Loan Amount:
Most banks and Non-Banking Financial Companies (NBFCs) offer personal loans up to Rs 20 lakhs to 25 lakhs. Since younger individuals are considered to have more employment and earning opportunities, they are eligible for high amounts of personal loans. On the contrary, it is considered that those nearing their retirement might not be able to repay the high loan amount. Hence, older individuals are generally eligible for small amounts of personal loans. However, in certain cases, young individuals (those in their 20s) may not have adequate income and credit scores, but those in their 50s might be earning well and have good credit scores. In such cases, older individuals may get loan approval for a high amount of personal loan for a shorter duration. In comparison, those in their 20s might not be eligible for a high amount of personal loans.
3. Age And Interest Rate:
Your credit history plays a crucial role in determining interest rates. Young individuals may not have to build a strong credit history and high credit scores. In contrast, old individuals are assumed to have a strong credit history and high credit scores, as the number of loans they would have availed since they started working could be high. Since older individuals are believed to have a high credit score, they can get a good deal on a personal loan interest rate. However, if they do not have a good repayment history and a good credit score, the lender may charge them a high-interest rate.
4. Age And Repayment Capacity:
Since young individuals have less debt burden & other family responsibilities and more income opportunities, they are generally considered to have a good repayment capacity. This opens the door for quick loan approvals. However, retirees generally depend on their pension, investment, or children's income to meet their ends. Hence, due to the instability in income, most lenders avoid lending to retirees. However, those nearing retirement with good credit scores and income may get good deals if they are fine with a shorter loan duration.
Final Thoughts:
Unlike secured loans, such as home loans, car loans, loans against properties, etc., there is no security or collateral in personal loans. Hence, the applicant's income, credit score, and age largely influence his/her personal loan eligibility. Traditionally, lenders consider retirees as high-risk individuals due to the lack of stable income and fewer employment opportunities. However, retirees may need a personal loan for several reasons, as many times when the loan requirement is of a small amount, availing of a secured loan might not make sense. Hence, considering this fact and the increased demand for personal loans from retirees and individuals in their 50s, more and more banks and other financial institutions are opening doors for older individuals with different personal loan offers. Many lenders are now considering older applicants' other sources of income, such as pension income, income from retirement plans, fixed-income investments, income from mutual fund investments, income received as rent, etc., to assess their repayment capacity. While currently, there are only a few personal loan options for older individuals, you can consider opting for secured loans that can offer high loan amounts at considerably lower interest rates and other charges.
Warm Regards,
Ketki Jadhav
Content Writer