You may require emergency funds for different reasons like home renovation, the wedding of a family member, medical treatment, debt, repayments, deal with losses in your business, etc. If you did not plan in advance and do not want to drain your savings, consider applying for a personal loan. Personal loans are mortgage-free and you can repay back in EMI (Equated Monthly Instalments). But there are certain personal loan eligibility criteria, that you have to fulfil since the lenders place much importance on them. Read on to know about the conditions and documentation process of personal loans in detail.
The first step is to apply for the loan and wait for the lender to scrutinise your eligibility and approve it. You will see that the eligibility conditions vary between different lenders.
Common requirements that almost all banks or finance companies would ask for:
- You should be residing in India
- You have to be a salaried employee or a self-employed individual having a steady source of income
- The lender would not require any security to assure loan repayment but will focus on your income and financial stability
- A minimum net monthly income cut-off as specified by the lender
- For self-employed people, disclose the number of years that the business has been
- operational, like three to five years.
- For business owners, proof that the business is profit-making, projected cash flows for
- the next couple of years, its financial viability, etc.
- If you are a salaried employee, you have to be employed in a government sector including public sector undertakings, central and local bodies, a public or private limited company
- There is a minimum-age criteria for the applicant, generally 21 years or above
- The maximum age at the time of maturity of the loan may be 60 years
- Ensure that you have a good credit score. You can do this by making your loan payments on time like the credit card bills, monthly loan instalments, etc.
- Proof of staying in your current location for a minimum number of years
- You may get a low-interest personal loan if you meet the eligibility requirements and get an offer with the sanctioned amount, tenure of loan and interest rate
- If you accept the offer, the lender will transfer the funds to your bank account instantly.
Carefully go through the list of personal loan documents that you have to submit. The lender will cross-check the documents with your declarations on the application form.
Some standard documents that almost all lenders require are:
- Age and identity proof like Passport, Aadhaar card, Voter ID card, etc.
- Address proof like house registration certificate, sales deed, Aadhaar card address, mobile bill or bank passbook address, etc.
- PAN Card
- Income proof consisting of Form 16, salary slips, bank statements, income tax certificate, etc.
- Passport-size photographs.
- Filled up and signed personal loan application form.
Determining your eligibility after submission of the documents involves several steps by the lenders and that consists of:
- Checking of data provided by you with your bank balance, salary deposits in the bank account, EMIs (Equated Monthly Instalments) being deducted from your account, if any.
- Verification of identity, address and contact details with the KYC documents. In certain cases, the bank or lender’s employees may visit your residence and your workplace to find out the details.
- The lender would analyse your income tax return and salary slips to identify your repayment capacity. It would also determine the amount of loan that you would be eligible for.
- Some lenders would analyse your CIBIL score. Higher scores would increase your chances of getting the loan.
- The lenders also review your age, a number of years of employment remaining, your salary growth prospects, etc. to decide on the amount of loan that they would approve and fix the loan repayment period.
- To check the status of your application, visit the lender’s website, call up customer care or visit the branch office of the lender in person.
- For checking the finance personal loan status, use the loan application reference number, your registered mobile number, and date of birth.
- Once the lender approves the loan, he will inform you through phone messages or email.
The above eligibility criteria and required documents would almost be the same for different types of personal loans that you are applying for, including:
Personal loan for purchase, repair or renovation of houses
You may decide to buy a house of your own, carry out some repair work or renovate the house and this would require a lumpsum amount of money. A personal loan can help you in the process and can be a convenient solution.
Personal loan for wedding
For weddings, the costs may run up to lakhs for a moderate function. Using up your savings or borrowing from friends or relatives may not be convenient at times. A personal loan can cover the expenses and you can repay back in EMIs.
Personal loan for travelling or vacation
You can get personal loans to cover your travel expenses, whether for domestic travel or for abroad. It is a convenient and economic option. Instead of paying for the entire expenses with a credit card, you can apply for some amount of personal loans. It may help you to save on interest costs.
The working capital requirements in the case of a business is important and without fresh funds, everyday operations can get affected. A personal loan can be an option to meet your short-term working capital requirements for accounts payable, wages, etc.
Top Up Personal Loan
Some lenders may provide the option of a Top-up personal loan facility by which you can borrow a certain amount over your personal loan. The interest rate for a top-up loan may be higher than a regular personal loan.
Personal loans are convenient for meeting your fund requirements compared to other forms of loans without draining your savings. If you meet the personal loan eligibility conditions, the lenders would disburse the amount quickly. The documents that you submit should match the details that you mention in the application form.