Are you thinking about applying for a personal loan? You may have seen the words ‘eligibility’ and ‘approval’, and maybe are wondering whether they are the same. While similar, they are not identical, and knowing the difference is critical to a successful application process.
Knowing the distinction between those two stages can help you come to terms with your expectations and prepare more effectively. The first step is to find out if you are eligible for a loan, even a small one, like a 2000 loan. It simply means you meet the basic criteria a lender has set. On the other hand, approval means that they have finally decided to hand you the loan after reading over your application in detail.
This blog will break down what each of these terms means, what factors are considered in each stage, and how you can increase your chances of moving from being eligible to getting approved.
What is Loan Eligibility?
A person’s eligibility is the first step in the loan application process. Consider it the basic, entry-level requirement you need to meet simply to be considered. These standards are in place so that a lender can say no to applicants who are not promising. They are then based on simple, easy-to-verify factors that provide an approximate sense of whether a borrower is a fit for the loan.
Common eligibility criteria include:
- Age: You must be within a specific age range, usually 18-21 to 60-65, to apply. This ensures you have legal standing to enter into a contract and a suitable earning period ahead of you to repay the loan.
- Income: Lenders need to be sure you have a steady source of income. This might be a minimum monthly salary or a certain annual income. The amount is different for each lender and depends on how much borrowing you want to do.
- Citizenship/Residency: You are often required to be a citizen or permanent resident of the country where you are applying for the loan.
- Credit Score: There’s a more involved credit check as part of the approval process, but a credit score of at least a certain number is often a minimum eligibility requirement. If not, your application may never even make it past that point.
Meeting these criteria is a good sign, but it’s crucial to remember that it’s not a guarantee. It simply means you’ve passed the initial screening, and your application will now be moved forward for a more detailed examination.
What is Loan Approval?
If the basic personal loan eligibility check is the deep dive. This is the point when the lender really looks at your financials to make the decision whether you should actually get the money. The approval process is an in-depth review of your application and financial history in order to determine the risk of giving you a loan.
During this stage, lenders look at several factors, including:
- Credit History: This is beyond your credit score. Lenders will also pull your full credit report to see your history of repaying debts. They are likely to want to learn whether you have a history of making payments on bills, how much debt you are currently in, and whether you’ve had any defaults. A good credit history demonstrates that you are a trustworthy borrower.
- Employment Stability: Lenders like to see some work history. Having been at your current job for a while means you get a regular paycheck.
- Financial Documents: This is where you hand over proof of income (such as salary slips, bank statements, or tax returns) and identity documents. The lender will check your details and cross-check all the statements you have made in your application.
The result of this analysis is acceptance or rejection. And approval indicates the lender believes you will be able to pay back the loan and is prepared to help finance the deal. A rejection, on the other hand, means they have found a potential risk and have decided not to proceed.
Key Differences Between Eligibility and Approval
To put it simply, eligibility asks, “Do you have what it takes to apply?” while questions of approval are, “Are we sure you can pay us back?” Here is a brief rundown of the primary differences between the two stages:
- Nature of the Process: Eligibility is an initial, high-level screening. Approval is a detailed, in-depth evaluation.
- Outcome: Being eligible means you are basically allowed to apply. The outcome of the approval is the last word on whether or not to give you the loan.
- Certainty: Qualifying doesn’t guarantee approval. That said, approved is approved, so if the terms and conditions are met, the loan will be disbursed.
- Factors Considered: Age and minimum income are two basic criteria that are used to decide who is eligible. They look at many things, such as your work history, your full credit report, and any debts you have.
Conclusion
In the personal loan universe, it’s important to know the difference between being eligible for a loan and being approved for one. Fulfilling a lender’s requirements is a great first step, but the approval process is what really decides if you’ll get the money or not. If you take the time to actively manage your finances and think twice before creating your loan application, you will breeze through both stages with confidence and improve your chances exponentially of obtaining your desired loan. Platforms like Stashfin are making structured borrowing simpler in India by providing innovative loan products.
FAQs
Q1. Can I still be refused for a loan if I am eligible?
Yes, this is very common. Eligible is a fancy way of saying you meet the minimum criteria to apply, but a rejection can follow after scrutinizing your credit report, and overall finances reveal a red flag.
Q2. How long does it take to get approved?
The timeframe varies by lender. Some can approve only within the focus of a few minutes or hours, while others can take even a couple of days, especially if there is manual checking of documents.
Q3. If my application is denied, what do I do?
First, establish why you were rejected. Creditors must give a reason. From there, you can address the specific issues that caused you to be denied, like the need to improve your credit score or to lower debt balances before you reapply.
