A personal loan is a form of financing offered by banks, credit unions, or online lenders, to fund multiple uses, like medical emergencies or unexpected bills. The loan may be secured (backed by collateral) or unsecured (not backed by collateral).
The requirements to qualify for a personal loan vary from lender to lender, but here are some of the basic eligibility criteria.
Age of applicant: Lenders typically require applicants to be 18 years of age or older because individuals under 18 don’t have the legal capacity to enter into a lending contract by themselves. Some lenders may consider applications from borrowers under 18 years if they have a guarantor who is over 18. A guarantor is a creditworthy person who agrees to pay the loan if the original borrower is unable.
Minimum annual income: Not all lenders have a minimum annual income requirement. However, your income can influence the loan amount offered by lenders since it can affect your ability to repay your loan.
Your debt-to-income ratio (a measure of your monthly debt versus your gross monthly income) is a key factor here. If you have a low ratio, you will likely have sufficient disposable income to comfortably repay your loan.
Resident status: Your state of residence can influence which lenders you can access. The law requires lenders to have specific licenses in each state to offer personal loans; therefore, you can only access funding from lenders licensed to operate within your state of residence.
Employment status/income history: Salaried professionals who regularly receive deposited income into checking accounts show lenders that they will likely be able to repay their loans. This also applies to self-employed individuals, temporary workers, contract workers, and businessmen.