A personal loan is a sum of money you can borrow and spend on many things. For instance, you may utilize a personal loan to pay off debt, finance home improvements, or finance your ideal wedding. Personal loans are offered by banks, credit unions, and online personal loan lending companies. The borrowed money must be repaid over time, typically with interest. Furthermore, certain lenders may charge fees for personal loans.
Loans for personal use might be secured or unsecured. A secured personal loan needs some sort of security as a prerequisite for borrowing. You may, for instance, use a physical item, like your car or boat, or monetary assets, like a savings account or certificate of deposit (CD), to secure a personal loan. The lender can keep your collateral as payment for any missed payments.
No collateral is needed to get an unsecured personal loan. Qualified applicants can obtain secured and unsecured personal loans from banks, credit unions, and online personal loan lenders. Due to the absence of collectible collateral, banks typically see the latter as riskier.
Eligibility Criteria For Personal Loans
The eligibility may vary depending on banks, but below mentioned generally accepted eligibility criteria for obtaining personal loans:
| Age Limit | 21 – 68 years |
| Type Of Employment | Salaried, Business owner, Self-employed professional, Retired, Student & Homemaker |
| Employment Status | Employed/ Running business for at least 2 years |
| Net Monthly Income | Rs. 5000 and above |
| Work Experience | 1 to 3 years and above |
| Credit Score | CIBIL score of 650 and above |
| Maximum EMI | Upto 65% of income |
Factors Affecting Personal Loan Eligibility
Geographical Location
Your eligibility for a personal loan will be heavily influenced by the region in which you live.
Income
Your income will also affect your eligibility for a personal loan. The loan amount for which you would be qualified will depend on your income level.
Residential Scenario
You will have a higher chance of getting your application granted if you live on your property. Renting lessens your income from discretionary sources, which lowers your ability to make payments.
Current Credit
Your chances of obtaining a new loan will be reduced if you have previously taken out a personal loan than if you have no other debt to repay.
Company
The company you work for will also affect your ability to get a personal loan. If you work for a reputable company with a good reputation, you appear to have consistent employment.
Credit History
Your credit score and history are the main factors affecting your ability to get a personal loan. The personal loan rate, loan period, and loan amount you are qualified for will be influenced by this factor.
Documents Required
Below are the required documents for personal loans depending on the category you fall in:
For Salaried And Self- Employed Employees
| Photo Identity Proof | Passport/Voter’s ID/PAN Card/Driving Licence/Aadhar Card |
| Residence Proof | Passport/Aadhar Card/Utility BillRation Card/Driving Licence |
| Proof Of Ownership Of Residence | Property Documents/Electricity Bill/Maintenance bill |
| Income Proof | Salary Slips for the last 3 months along with Form 16/Bank Statement for the previous 6 months where the salary has been credited |
| Proof of Job Continuity | Employee certificate from current employer/Certificate of experience/Appointment letter from current employer (if the employment period exceeds two years) |
| Proof of Investment | Fixed deposits/shares/ fixed assets/ mutual funds, etc |
| Photograph | Recent passport-size photograph |
For NRIs
| Identity Proof | 1 copy of your passport/Copy of your visa |
| Employment Proof | Appointment Letter Job Contract Identity/Labour Card (if Applicable)Official email ID or HR email ID |
| Income Proof | Bank statement of last 6 months Salary slips/Salary certificate |
| Photograph | Recent passport-size photograph |
Effect of Missing Documents on Personal Loan Approval
Loan applications may be delayed or rejected if eligibility requirements are unmet or required documentation is not provided. It could also impact the personal loan rates and loan size the lender provides. Therefore, before applying for a personal loan, it is crucial to thoroughly check the eligibility conditions and document requirements and ensure all required papers are in order. Following rules will increase applicants’ chances of getting approved for a personal loan and getting the money they need to cover their debts.
The Bottom Line
When someone needs money to pay bills, consolidate debt, or deal with a cash flow problem, applying for a personal loan might be a fantastic financial solution. To guarantee a smooth loan application process and improve the likelihood of loan acceptance, it is crucial to satisfy the eligibility requirements and provide the required documentation. Before submitting a loan application, it is essential to thoroughly check the eligibility requirements and needed paperwork. People can improve their chances of obtaining a personal loan that will fit their financial demands by properly completing the required documentation.
