The table given below details some of the basic eligibility requirements for obtaining a loan in India: 

When you make repayments for a loan, you are required to pay a certain amount of interest as a part of your EMI payments. This amount depends on the interest rate you are charged for the loan. Given below are some of the factors that affect your loan interest rates:

Your income is the basic component of what determines your loan interest rate. It is viewed as the universal truth that financially sound people with higher disposable income have a better repayment potential than people with lower income. Usually, people with higher and more stable incomes receive the lowest interest rates on their loans. On the other hand, people with bad financial histories are more likely to get higher interest rates.

Credit scores play a crucial role in your loan approval. In the case of loans, it not only determines your eligibility but also affects the loan interest rate. Usually, credit scores are a reflection of the financial history of the individual in terms of existing debt, income, repayment history, and borrowing pattern. A higher credit score increases the lender's trust in the borrower's financial behaviour, even granting them loans at lower interest rates.

Since loans are generally unsecured lines of credit, lenders verify a number of factors that establish the borrower's creditworthiness. Your employer or the company you are employed in plays a key role in it. This is because applicants being employed by a reputed organization are viewed as being more financially stable and capable of making timely payments. Such applicants may also get better lending terms and conditions. 

Let's assume that the applicant is employed in a renowned organization and earns a high salary, but the majority of the applicant's income is diverted towards debt repayment. In such cases, the volume of the existing debt is sure to have an adverse effect on the loan interest rates.

A debt-to-income ratio can basically be defined as the ratio of all existing debts divided by the total income. Having a high debt-to-income ratio generally means that the applicant is already under high repayment debt, and the lender may charge a higher interest rate.

If the applicant has been a trusted and loyal customer of the lender, they might get a preferential interest rate. This is because a long and constant relationship might inculcate a sense of inter-dependability. This trust is simply not built overnight, it requires a long period of trustworthy and responsible behaviour on the part of the customer. The better the relationship, the more the chances of getting a loan on favourable terms. 

Similar to how a credit score works, if a lender finds a history of default in the applicant's credit report, it might lead to higher interest rates or even application rejection. Usually, lenders sanction loans to the applicant's with no defaults over the last 12 month period.

Given below are some of the common documents required for completing a loan application:

  Identity Proofs: Voter ID, Passport, Aadhaar Card, Driving License.
  PAN Card.
  Signature Proofs: PAN Card, Passport, etc.
  Address Proofs: Ration Card, Rent Agreement, Passport Copy, Aadhaar Card, Utility Bill, Voter ID Card.
  Bank account statement from last six months.

Given below are the documents required for salaried people to complete their loan application:

  Salary slips from the last 3 months.
  Form 16 or ITR returns.

Given below are the documents required for self-employed people to complete their loan application:

  P&L account and balance sheet from the previous 2 years.
  ITR from the last 2 years.
  Business Proofs, like GST Number, Registration Certificate, License.
  TDS Certificate, Income Tax Challans or Form 26 AS for declared income in ITR.