There are times when you don’t have the funds to meet your personal needs or fulfil your wishes. At times like these you think of availing personal loans in order to meet those needs. These needs can be going on a vacation, paying medical bills, renovating your house, getting married, buying consumer durables, etc. It can be anything. Personal loan is not for specific purposes unlike home loan or car loan which you can avail only if you want to buy a house or a car.
The most important benefit of personal loan is that it is unsecured which means you don’t need to pledge any collateral to receive funds. Availing one is easy – you just need to apply online and use the money to meet any expenses.
But as always, there is a catch – what exactly is needed to avail one?
There are several factors you might need to consider in order to get a personal loan. Lending institutions scrutinize these factors first to sanction you the loan amount.
Income – In order to avail the personal loan you must have an income. Before giving you the stamp of approval, lenders want to make sure you are having a steady income coming in to direct toward your payments. The income should be credited directly into your account or by cheque. No bank accepts salary by cash.
Lenders really care about one thing – after accounting all your other existing debt payments, can your income cover this new monthly payment? This is why lenders always consider your Fixed Obligation to Income (FOIR) ratio that how much more you can pay against your existing obligations.
Healthy Credit Score – The one and foremost important factor is maintaining a healthy credit score. Your payment history carries the most weight when it comes to determining your credit score – a single late payment will stay in the credit report for years. Most lenders are going to look at how good your CIBIL score is.
Again Lenders are looking for is some degree of reassurance that you will in-fact make good on your personal loan payments. A solid track record of making on-time payments will increase your odds of getting your personal loan approved.
Stable Employment – One should have a stable employment, in order to get the loan approved. If you have stable employment that assures the lenders that you have you have a regular source of income and hence you are able to make the payments on time without any delay. Bank requires a minimum 6 months of stability in the current organization.
Documentation – In order to get the personal you should have the right documents to submit, that includes –
- ID Proof: Aadhaar Card, Voter ID Card, Driving License, PAN Card, Passport, etc.
- Address Proof: Ration Card, Utility Bills (Electricity bills, telephone bills), PAN card, Aadhaar Card, Voter ID card, Passport, etc.
- Income Proof: 3-6 months latest Bank statement and latest 3 months salary slip.
Age – In addition to above mentioned factors, Bank also considers your age. You must be above 21 years of age and maximum should be 60 years at the time of maturity of the personal loan.
How much you need to borrow and for how long
You must know how much loan amount you are looking for and for how many years. You should always ask questions to yourself if you are capable enough to repay the amount you are taking as getting a personal loan might seem easy but it is also important to repay the same by making timely payments.
This is no small question. Just because you qualify for a personal loan on paper doesn’t mean your budget can realistically absorb the new monthly payment. Hence it is advised to ask these questions to settle for any deal.
Applying for a personal loan doesn’t have to be stressful. Be prepared and explore as much as you can, provide the required documentation, and you will likely have a smooth and easy experience borrowing the funds you need. But don’t forget you don’t just owe the lender the amount you borrowed, you will also owe all the interest that accrues during your repayment period, so be sure to shop around for the best lender offering you the best interest rates and lowest fees.