Updated: Feb 15, 2019
Personal Loans acts as a saviour at the time of financial crisis. Being one of the quickest loans, personal loans become handy when it comes to financial urgency. Although, family and friends are there to offer you their best support, but everyone has their own personal obligations to look out for and their contribution may not be sufficient to fulfil you requirement. Since Personal Loan is an unsecured loan, the lender takes due diligence while granting the loan.
How to Apply for Personal Loan?
Personal Loan Eligibility
The first and the foremost thing lender?s take into consideration is the income of the borrower. Income together with the living expenses decides the repayment capacity of the borrower and the rate at which the loan will be granted is thoroughly based on this. Living Expenses includes the household expense plus EMI of any other outstanding loans.
This information can be sought with the help of Form 16 and bank statement. Bank statement gives the overview of the monthly cash flows. In case the borrower is a high earner, but his expenses are also high than he may get a loan at high interest and vice-versa.
Apart from the cash flows, borrower?s credit score also plays a major role in rejection or accepting loan application. Credit Score is a journal of borrower?s payment history of various dues and delinquencies he made while paying any dues such Medical bills, credit card dues and other financial obligations. The credit score of 750 is considered good and can be obtained from CIBIL by paying minimum charges.
In addition to above factors, there are few other points taken into account such as an age of the applicant, remaining job years, type of job, relationship with the bank etc.
Personal Loan Documentation
1. Photo Identity Proof such as PAN card, Aadhar Card, Passport, Voter ID etc. is required to be furnished as part of KYC norms.
2. Along with Photo ID, Address Proof is also required to furnish which can be a copy of passport, Aadhar Card, Voter ID, Ration Card, Latest Telephone Bill, Latest Electricity Bill etc.
You can give single?document?for both Photo ID and Address Proof such as Passport Copy, but a copy of PAN card is must.
3. Bank Account Statement for the last 6 months will have to be submitted. This information is asked to make sure that the account is operative as well as to ascertain the monthly cash flows.
4. Income Proof which includes Form 16 of Last 2 years, IT Return of last 3 years and Salary Slip of last 6 months.
5. In case the applicant is self-employed, the documents including audited balance sheet of last 3 years, Income Tax Returns of last 3 years, Service Tax or Sales Tax Return, Business Registration Document, Registered Office Address etc. are required to be furnished.
Usually, the above-mentioned list of documents is sufficient to get loan approval but the bank may ask for any other documents also.
Personal Loan Interest Rates Comparison
Interest Rate or Lending Rates of Personal Loan range between 11.99% p.a. to 23% p.a.
Benefits of Personal Loan
1. Many banks offer the online facility for applying Personal Loan for example Axis bank grants personal loan via Mobile Application.
2. Personal Loans gets approved quickly. Certain banks approve the application within a day.
3. Existing Customer of Banks do not require to furnish Photo ID and Address Proof for KYC, the only to furnish their Income Tax Returns for 3 years or service/sales tax return.
4. Personal loans are personal in nature, so there is no need to disclose the reason of taking it to the banks. It can be used for travelling, medical purpose, marriage or even for something risky.
5. Personal Loan comes with varied tenures and interest rates to choose best, according to your need.
Transferring Personal Loan
Since Personal loans are unsecured loans i.e. there is no backing of a pledge, charge or hypothecation, few banks take over such existing loans. For Instance HDFC offers Balance Transfer on Personal loans.
Points to Ponder before taking Personal Loan
The cost of taking a personal loan is very high and sometimes becomes cumbersome task to bear the cost, so it is advised to go for a personal loan only at the time of utter need. One should look at the choose personal loan after considering following costs:
- Interest Rate
- Pre-Payment Charges
- Processing Fees
- EMI Option
- Late Payment Charges
This is a Guest Post written by Rakesh Jain, who is working in a private bank and blogs frequently.