A personal loan can be an extremely useful financial tool in case of emergencies. It allows you to make good use of money at the most opportune moments. However, if you want to get a loan, you need to know the eligibility criteria, the documents required, and the details of borrowing and repaying the loans. While conventional lenders tend to ask for printed hard copies of your documents, with the introduction of online lending through a personal loan app you can easily get a loan with digital documents.
Here is everything you need to know about the eligibility criteria and the documents needed to get a personal loan at the best interest rates –
Eligibility criteria for getting a personal loan
While exact criteria for availing a personal loan will differ from lender to lender, a basic broad-based set of criteria for taking a personal loan can be considered as under…
For people who are salaried and are trying to take the first loan, they should be at least 21 years of age to a maximum 58 years of age. People below 21 years mostly lack a stable source of income and those above 58 years are nearing retirement. However, if you are having a stable source of income then you may approach the lender with your income proof.
Many lending institutes have a minimum salary requirement. In most cases, the applicant should be earning at least Rs 15,000 a month. They should also be able to present their bank statement for at least six previous months in which they have received their salary. In case you have a business, then you can submit the balance sheet, ITR, and other documents that validate your income.
Most lending institutes easily provide loans to individuals who are working with reputed companies or MNCs. Government employees can also easily get a loan because of job stability. While individuals who work for start-ups, on a contract basis or freelancing, it might be a bit tricky to get the loan approved.
- Credit Score
The credit score is one of the most important parameters that a lender checks before approving a loan. The credit score is a detailed reflection of a borrower’s repayment behavior. People who pay their EMIs on time have a good credit score. Missing out on EMIs, going on loan default, not closing the loan accounts on time, and not keeping a tab on your credit score can impact your credit score negatively.
Documents needed to get a personal loan
Basically, you will need documentation that can be classified under three kinds when you apply for a loan. These categories cover the aspect that a document is meant to prove. The three categories will be documents to prove your identity, documents to prove your tax status, and documentation to prove your income. Here are the three categories in detail:
- Documents to prove your identity: These are government-issued documents that the lender will use to confirm that you are the person whom you claim to be in your loan application. As of now, most lenders will prefer your Aadhaar card because it can be used for quick identity authentication using an OTP. In the absence or unavailability of an Aadhaar card, many lenders also accept a smart card driving license as proof of identity. Many lenders will also verify the address given on your identity card.
- Documents to prove your tax status: This is a simple document that most individual possesses. The Permanent Account Number card, commonly known as the PAN card is another mandatory document that is needed when you take a loan from any lender. No, you do not need to pay income tax on any loan you take because it is not treated as income. The PAN card is only needed as part of the prevention of money laundering regulatory requirements.
- Documents to prove your financial status: Your personal loan lender would want to ensure your financial stability because that is the only way they can collect their money along with the interest. For this, the lender will require you to submit bank statements where you are getting your salary or for self-employed people, you may be required to provide statements from your bank account with the highest number of transactions. The statement expected is for the last six months. Generally, the same bank account is used to send your loan money. In some cases, the lender may also ask for tax returns as further proof of income.
In a number of cases, the lenders may also ask you to submit post-dated or canceled cheques from your bank as well but this is getting rarer with the introduction of EMI auto debit mandates for the collection of loan EMIs.
While submitting the documents you must always make sure that your documents are well within their validity period. Also make sure that the spellings of your name, address, and other details always match on all documents. If you submit documents with mismatching information, the lenders may reject your application. Examine all your documents carefully and get any mismatches or errors corrected before you apply for a personal loan.