The need for emergency funds can arise at any time, and taking a personal loan is an excellent option to raise money quickly. Many lending institutions offer a personal loan if the applicants can fulfill the required eligibility criteria.
However, one should be wary that personal loan eligibility depends on multiple factors such as income, credit score, other debt obligations, and the applicant’s age. While the lending institutions will closely evaluate all these factors, this article aims to understand the relevance of the applicant’s age on their personal loan application.
The three critical aspects for any loan applicant are the (i) loan amount, (ii) interest rate or cost of the loan, and (iii) tenure of repaying the loan. Interestingly, the applicant’s age directly impacts all these critical aspects. So, what relationship does the applicant’s age have with the loan amount, interest rate, and tenure? Let us elaborate on the details:
The personal loan online application process mandates the applicant to disclose their age for the lending institutions to evaluate accordingly. The applicants must provide their correct age, which is also substantiated by their government-approved identification proof. The lending institution evaluates the age of the applicant for the following:
Why to Evaluates Applicant’s Age:
(i) Loan Amount:
The applicant’s age is an essential factor in determining the loan amount offered to the applicant. The applicant’s age is inversely proportional to the loan amount, i.e., a younger applicant is eligible to get a higher loan amount and vice-versa.
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A younger age signifies that the applicant has a more extended employment period than someone elderly. For example, an applicant in the 30s will have more extended employment than an applicant in the 50s. Hence, lending institutions can extend a higher loan amount to younger applicants than the older ones.
(ii) Repayment Tenure:
A personal loan usually comes with a repayment tenure of 1 to 5 years, which can also be extended depending upon the policies of the lending institutions. However, just like the loan amount, the repayment tenure is similarly impacted by the applicant’s age.
The lending institutions feel more confident in offering a longer repayment tenure to younger applicants since they have a more extended employment period ahead of them.
On the other hand, someone from a higher age bracket may not have the same opportunity to remain employed and have an active income source.
Thus, evaluating the applicant’s age for calculating the repayment tenure is a crucial requirement for lenders.
(iii) Interest Rate or Cost of the Loan:
The interest rate of the loan can vary for different applicants. This variation is an outcome of multiple factors, such as the applicant’s credit score, income, and age. The younger applicants, in this case, may lose out on lower interest rates since their income is usually on the lower side, and they may not have an active credit score yet.
Applicants who are applying for an instant personal loan a bit older benefit from the fact that they have employment experience of more than five years and a functional credit score that lays out their credit history.
Hence, in this case of determining the interest rates, the elderly applicants benefit as compared to the younger ones. However, as discussed earlier, the interest rate calculation is an outcome of multiple factors. While the applicant’s age has an impact, it is not the only factor used for calculating the interest rate.
It is quite clear that the applicant’s age has an inverse relationship with the loan amount, loan tenure, and interest rate. The younger applicants are more likely to get a higher loan amount, and higher tenure but also a higher rate of interest.
On the other hand, elderly applicants may comparatively get a lower loan amount and a shorter repayment tenure; however, they benefit from lower interest rates given their past employment record and repayment history assessed through their credit scores.
Also, it is important to understand that a lender will not approve or reject a loan application only based on the applicant’s age. It is a criterion used to evaluate certain aspects of the loan. However, being aware of its impact on the personal loan can help the customers make a timely application.