Personal loans are excellent solutions to meet immediate financial requirements. However, rushing towards loan applications without knowing the intricate details, like loan tenure, capital requirements, interest rate, etc., is not ideal.
It is crucial to learn about the loan process and the lender to make an informed decision for an instant personal loan. It is also helpful in getting better loan offers. So, here’s a checklist to know the requirements of a personal loan before applying and ensuring a smoother borrowing journey:
5 Typical Personal Loan Requirements to Know Before Applying
- Calculate The Loan Amount You Need:
You will need to mention the loan amount you require while filling out the loan application form. Hence the first prerequisite while applying for any loan is to gauge your requirements. In some cases, you may also have to determine why you need the loan and the amount required to meet the objective.
It is easier to do this. Top lenders in the market provide low-interest personal loans of up to 25 lakhs, and you can calculate the precise amount on the platform’s EMI calculator. The EMI calculator will also assist you in determining your monthly payout as loan repayment, tenure, and interest rate. Based on this information, you make an informed decision.
- Good Credit Score:
You can get a loan amount of up to 25 lakhs based on the eligibility factors. Since personal loans are collateral-free, the lenders give more weightage to your income and credit score. Your credit score indicates your financial habits and timely loan repayments to check your creditworthiness. The scores above 750 are typically high.
Moreover, a higher credit score translates to better loan deals like low-interest personal loans, increased loan amount, and longer repayment tenure. If your credit score is not optimum, you can take steps to improve it. In some cases, you can avail of the loan for a higher interest rate; here, the interest rate is high because the profile will be considered risky.
- Check Eligibility Criteria:
You must meet the NBFC’s loan eligibility criteria before applying for the loan. Applying for a loan that you are not eligible for leads to rejection of the loan application. Hence, it is crucial to meet the eligibility criteria:
- Age: Your age should be between 21 to 60 years.
- Profession: You should be a salaried or a self-employed individual
- Minimum Income:
- Salaried: 25000 per month in metro cities and 20,0000 if in other cities
- Self-employed: Last two years’ ITR and yearly profit
- Work Experience: 1 year in total (You should have worked in the current company for at least six months)
It is also necessary to check the maximum loan amount you can avail of based on your profile using the personal loan eligibility calculator.
- Lower your Debt-to-Income Ratio:
If your loan amount eligibility is on the lower side, the chances are that your salary might be going towards other loans. The debt-to-income ratio is the ratio of your monthly debit commitment against your net income.
Therefore, if you have other loan commitments, the chances are that you will get lower loan eligibility or loan rejection. Clearing off smaller debts before applying for your loan will help improve your credit scores along with your loan amount eligibility.
- Collate Personal Loan Documents:
A personal loan requires relevant documentation for sanction. the necessary documents for a personal loan are:
- ID proof – Aadhaar card, PAN card, Passport
- Address proof – Utility Bills, Voter’s ID
- Signature proof – Passport, PAN card etc.
- Income proofs:
o Salaried: Salary slips and income tax returns or form 16
o Self-Employed: Balance Sheet and income computation for past two years, ITR for two years, business proofs, IT assessments, Income Tax Challans/TDS Certificate
Calculate your Loan EMI and Tenure
Before filling out the application, you must understand the monthly EMI you will have to pay for the loan. You should also choose the required tenure to pay the EMI comfortably. Calculating these factors beforehand will help you determine if the loan meets your affordability.
As mentioned above, the EMI and tenure calculations can be done instantly using the free EMI calculator available on the lender’s website. Computing these essential milestones will help simplify the loan process.
Understanding the above personal loan requirements will help you apply for the loan effortlessly and get quick approvals. It is the right time to apply for a personal loan at flexible repayment tenure and make your finances manageable.