The number of financial institutions that offer personal loans has increased. The terms and conditions with which loans are given have also become more strict. Due to growing scrutiny, banks have mandated personal loan eligibility requirements. Every applicant has to meet these before they become eligible for a loan. Eligibility is the first step, so knowing how to qualify for a loan can make or break your desire to take one out.
In this article, you will read about personal loan eligibility. It also discusses the qualifying criteria for a five lakh personal loan.
What Is a Personal Loan?
A personal loan is a loan sought by an individual from a financial institution for various purposes. These include paying old debt, clearing medical bills, or buying furniture. For example, an entrepreneur can take a personal loan to finance their expansion. A lender will sanction the fund after checking your loan eligibility.
There are many types of personal loans. You may apply for a personal loan for your vehicle, home renovation, education, etc.
Check Personal Loan Eligibility
You can apply for a personal loan if you are a resident of India and above 18 years of age. You should also have a permanent source of income. These are the most basic personal loan eligibility requirements prescribed by every lender. The loan amount you are eligible to get is limited to Rs 5 lakhs. Other guidelines should be kept in mind while applying for a loan.
Lenders have also mandated personal loan eligibility requirements like identity and address proof.
Documents Needed for a Personal Loan
The documents sought by the lender will be submitted along with the application. Here are documents that will help meet the personal loan eligibility set by lenders:
- Identity Proofs: The applicant’s name should be displayed on the document. You can submit any government-issued photo ID like an Aadhaar or driving license.
- Age Proof: If the documents are in the applicant’s name, the age proofs are applicable. One can use Aadhaar, Voter ID, Driving Licence, etc.
- Residential Proof: The address in the application shall not be rented or leased. Although, in some cases, the bank may allow you to use it.
- Employment Proof: You should prove that you have a stable and regular source of income. It is needed because you will use this income’s funds to repay the loan.
- Loan Purpose: You can apply for a loan for any purpose. Some lenders may ask you to submit a letter along with your application. The letter must outline the purpose for which you seek the loan and how you plan to repay it.
Process of Applying for a Personal Loan
A person who wants to take a loan must fill out an application form. It can be obtained from the bank or an NBFC where the loan is offered. On filling out the form, the applicant must mention all details. These include the loan amount, loan purpose, repayment period, and interest rate. The documents mentioned in the personal loan eligibility section must also be provided. If the loan is approved, the interest rate will be mentioned on the form. After submitting the form, the loan application is transferred to the loan department.
The loan officer sees the application form and decides if the applicant should be given the loan. The loan officer has the authority to approve or reject the application. The decision will be based on personal loan eligibility. They would also decide the terms and conditions of the loan. When the loan is approved, a formal letter confirming the same is sent to the address in the application.
Interest Rate for a Personal Loan in India
The type of loan you are taking will determine the interest rate you will have to pay.
There are two types of personal loans available in India. One is an unsecured loan, and the other is a secured loan. An unsecured loan has no collateral attached to it, while a secured loan has some asset (such as a car loan) as a security. While applying for a loan, you should decide which type of loan you want. An unsecured personal loan has an interest rate of above 10 per cent. A secured loan has an interest rate of 8 to 10 per cent.
Repayment Schedule of Personal Loan
The repayment schedule of a loan would depend on the amount you take and the repayment period you choose. The repayment term for a personal loan ranges from one to 15 years. Options to extend it beyond that exist in some loan programs and with certain lenders. The lender would decide the repayment schedule of a loan. It will be based on the borrower’s repayment ability. The repayment will be in the form of EMIs spread over a few years, as agreed between you and the lender. Most personal loans come with a minimum tenure of one year. Banks insist on having this minimum term as they want to make sure that they earn interest. Moreover, in some cases, you may even have to pay the penalty if you are paying before the stipulated time. Doing so causes a loss of interest to the bank.
Now that you know what a personal loan is, who is eligible for one, and how to apply for one, you are ready to find the best deal on a loan. Before applying for a loan, make sure you know the interest rate. Other terms and conditions of the loan must also be read. You must also check the personal loan eligibility details. That way, you can make a better decision about whether or not to take out a loan. A good way to do this is to find a lender with flexible loan programs. It includes Piramal Finance, known for excellent services and flexible loan terms.