Personal loans are a universal solution that can meet any unclassified and contingent funding needs. This can happen to any of us, usually due to reasons such as medical emergencies, marriage expenses, or even vacations. But, do you know how to apply for a personal loan?
Eligibility factors to apply for a personal loan
The eligibility criteria for approving personal loans vary by lender. To qualify for SBI's personal loan, no matter whether you have a payroll account in the bank or how much you have on the bank's website, the minimum monthly income should be 15,000 rupees.
If it is an HDFC bank, the age of individuals eligible for personal loans should be between 21 and 60 years old and should have worked for at least two years and at least one year in the current employer.
Individuals who can take a Personal Loan:
1. Salaried Employees
2. Employees of public and private limited companies
3. Government sector employees including Public Sector Undertakings, Central and Local bodies
- Minimum age of 21 years
- Maximum age of 60 years at the time of maturity of the Personal Loan
- Net monthly income of minimum Rs. 15,000
Documents to apply for personal loan
Personal loans can be a source of large amounts of personal cash. When applying for a personal loan, customers are required to submit certain documents. The documents may vary from lender to lender and also depend on whether the applicant is a salaried, self-employed, pensioner or non-resident Indian (NRI).
Document required for Salaried Personal loans
1. Duly filled application form
2. KYC documents
3. Loan Agreement duly signed and Standing Instruction (SI) Request / ECS Forms
Steps to apply for a personal loan
An unsecured loan is a loan issued by the lender based on the borrower’s credit limit rather than the ownership of the asset. This type of loan does not require any collateral to obtain a personal loan. Normally, check the credit score of the borrower and only approve the loan in the credit history. Credit cards and quick loans provided through loan apps are a good example of unsecured loans. The money is deducted directly from your account.
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Step 1. Assess your loan requirements
1. The customer’s first step is to determine the amount they need and plan how and when to repay this amount.
2. Considering their current income and other foreseeable expenses, customers should carefully analyze to choose the amount of EMI they must pay.
Step 2: Find eligibility for personal loan
1. The second and fastest step is to determine whether you are eligible to obtain a personal loan.
2. Customers can also fill the detailed information such as:
- Monthly income
- Other recurring monthly expenses, including any current EMI
- Employment history: current working years
- Current residence time - Whether it's renting, owning, or mortgage
Step 3: Make a call and make sure that you have all the necessary documents, including Know Your Customer (KYC) and proof of income. Customers should ensure that they have the following documents:
1. Application form
2. Personal ID:
- Driving license
- Aadhaar card
- Voter number
3. Address proof: Valid ID proof form with a permanent address
4. Proof of income: bank statement of the last three months
Factors affecting interest rate on a personal loan
(credit score, loan amount, tenure, repayment capacity, etc.)
Before approving a personal loan, the lender will consider several factors, such as the loan the amount you applied for, repayment ability, and the company that may work with you. You can get a personal loan at a lower interest rate through the following methods.
1. Maintain a good credit score
You can improve your credit score by gradually clearing debt over a period of time. A score of 750 and above gives you a better chance of obtaining a better personal loan agreement.
2. Good Repayment history
Try to pay your credit card bill in full and settle your debt every month. You should also repay the equivalent monthly installment (EMI) of other loans on time. This helps you get better deals when you borrow another loan in the future. This is because if your EMI repayment history is good, you will have a better chance to negotiate interest rates with lenders.
3. Compare interest rates and look for seasonal offers
Based on loan eligibility and requirements, loan applicants should consider visiting online financial markets to compare and choose among various lenders that provide personal loans. In addition, you must also check with existing lenders that you have a relationship with, as they usually, provide personal loans at relatively cheap interest rates and better service conditions.
4. The calculation method of checking interest
It may happen that although the lender provides you with a low-interest personal loan, you may end up paying higher interest at the end of the loan term. This is because the method of calculating the total interest payable may differ between lenders. Therefore, you should always understand the calculation method of interest payable before obtaining a personal loan.
5. The credibility of the employer
Employees who cooperate with well-known/blue-chip companies, multinational companies, etc. may receive preferential treatment. This is because their employers are more capable of providing stable jobs. Therefore, it is expected that the borrower will be more likely to receive a stable income and be able to repay the loan owed on time.
Tips to get a low personal loan interest rate
Here are some tips that can help you lower your interest rate:
1. Improve your credit score: A higher credit score means you are in good standing. Banks and financial institutions offer the lowest personal loan interest rates to applicants with high credit scores. Therefore, you should check your credit score before applying for a personal loan. If your credit score is below 750, you should look for ways to improve it. If your credit score exceeds 750, you have more opportunities to obtain low-interest personal loans.
2. Avoid missing the repayment period: If you miss the loan or credit card repayment period, your credit score may be adversely affected. The loan provider usually considers your repayment history before deciding on the loan interest rate. Those who have paid past EMI and credit card bills on time may charge lower interest rates.
3. Pay attention to the quotation: During the holiday season, banks and financial institutions usually provide special interest rates for a limited time. If you apply for a loan while such an offer is running, you may get a lower interest rate.
4. Comparing interest rates: Before applying for a personal loan from a specific bank, it is necessary to compare the personal loan interest rates charged by each NBFC and the bank. This will help you get a personal loan at a competitive interest rate.
5. Negotiation with the lender: If you are an existing customer of the bank or have a good relationship with the loan provider, you can negotiate the lowest interest rate. In doing so, it is recommended to make a formal written request to the loan provider.
Even in the best times, researching loan options can be daunting. If you are dealing with a personal financial emergency or facing regional or national economic problems (such as issues related to COVID-19 or economic recession), you may already feel stressed and unsure of how to respond.
Remember, your situation is unique to you, and your credit history is also unique. It is up to you to decide whether a personal loan is suitable for you and which kind of loan is most suitable.
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