Determining whether you qualify for a personal loan is an important step in the borrowing process. Lenders assess multiple factors, such as your credit history, income, and financial obligations, to evaluate your ability to repay the loan. This page provides an overview of the key eligibility criteria most lenders use when reviewing personal loan applications.

Credit Score

Your credit score is a crucial factor in determining both your loan eligibility and the interest rate offered. Lenders typically classify borrowers as follows:

Credit Score Categories
Excellent Credit (750+): Most favorable loan terms, low interest rates Good Credit (700-749): Competitive rates, slightly higher than excellent Fair Credit (650-699): Higher rates, but still eligible Poor Credit (below 650): Difficult approval, very high rates, may need co-signer

Income and Employment Status

Lenders generally require proof of stable income to ensure you have the financial capacity to repay the loan. Commonly required documents include:

  • Income Verification: Pay stubs, tax returns, or bank statements
  • Minimum Income Requirements: Some lenders set minimum income thresholds to ensure borrowers have sufficient income to manage monthly payments
  • Employment History: Lenders typically look for a stable job history, with at least six months to one year at your current place of employment

Debt-to-Income Ratio (DTI)

The DTI ratio is a key indicator that lenders use to assess your financial health. It is calculated by dividing your total monthly debt obligations by your gross monthly income.

DTI Calculation
DTI = (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100 A lower DTI ratio indicates a greater ability to manage new debt. Lenders typically prefer a DTI ratio of 36% or lower.

Additional Considerations

  • Age: Borrowers must generally be at least 18 years old (21 in some jurisdictions) to qualify for a personal loan