A Comprehensive Checklist for First-time Applicants of Personal Loans

Loan Agreement

first time applicants

The desire to lead a comfortable life, purchase the much-needed required items, meet unavoidable financial needs, and many other responsibilities encourage people to take loans from all possible sources. Today’s financial market in India is occupied with many loan products offered by different banks. Personal loans are one of the most popular monetary help for many individuals. Lenders allow you to take online personal loans to meet almost all essential needs. It wouldn’t be wrong to say that the swift availability of personal loans makes your life comfortable. But the ground reality is that only 77 people out of a hundred can take personal loan products. First-time applicants find it highly challenging to submit their application for the loan correctly and get approved for it. How to apply for a personal loan so that a bank gives you an immediate response to your request? Here are some valuable tips for everyone.

Knowledge Is Power: Get More Information About Personal Loan Products.

knowledge is power

In India, the overwhelming majority of individuals don’t understand the importance of financial literacy even today. But the fact is that only educated and well-informed people can make an intelligent decision about borrowing a personal loan. So try to increase your knowledge about this financial product as far as possible from different sources. You can contact the bank executive regarding this or visit their websites. Contacting independent financial experts allows you to get unbiased information about personal loans. In India, different banks offer such finances. The loan amount, eligibility criteria, terms and conditions, interest rates, repayment tenure, the requirement for credit scores, salary criteria, processing fees, late fines, legal repercussions, and other factors change from one bank to another. But, you need to have a basic understanding of personal Loans.

Details of Personal Loans Brief Explanation
Loan Amount Rs 50000 to Rs 50,00000 (gross figure). It depends on borrowers’ overall income, creditworthiness, requested amount, repayment potential, and various other factors.
Purpose of taking personal loans The bank doesn’t ask for the motive of taking personal loans. So, you can use the received money to cover education bills, repair homes, tour foreign countries, finance medical treatment and marriages, pay different utility bills, etc. You must take a loan only during unavoidable financial emergencies. Experts recommend that you shouldn’t use personal loans for luxury expenses. The careless use of acquired money leads to total economic collapse, family splits, legal action from law enforcement agencies, low credit scores, etc.
Collateral Requirement No
Interest Rates Personal loans are available on a fixed interest rate which may range from 10.50% to 24% p.a. Different banks offer loans with different interest rates.
Processing fees It differs from one bank to another. On average, it ranges between 0.5% and 2.50%
Late fines and additional interest fees. Yes, when you make mistakes in loan repayment, skip its EMIs or ignore the lender’s call regarding it.

Also Read : Simple Ways to Pay Off Your Personal Loan Quickly

  • Your Responsibility As a Borrower: Think Twice Before Taking A Personal Loan

In the modern world, people’s requirements have increased significantly. Sometimes we find that our salary and savings are insufficient to finance the much-awaited and essential purchases. So, many Indians take different loans to meet various financial obligations. You need to abide by some terms and conditions while taking a loan. When a financial problem pops up (which demands quick cash injections), first explore possibilities from where you can arrange funds.

If no one is ready to offer you a helping hand, taking a loan is a prudent decision. Ensure that you can fully abide by the terms and conditions of the loan. Don’t even dream of skipping the loan EMIs, fleeing away after taking personal loans, etc. Be honest during loan application, documentation, processing, background checks, interviews, verification, repayment, etc. Never tell a lie to the banker in any circumstances to get a loan and not repay it by making irritating pretexts.

  • Personal Loan Eligibility Criteria: Examine Your Profile As A Credit Borrower

personal loan eligibility criteria

Both salaried and self-employed people can take personal loans to meet multiple financial needs. They are supposed to meet the following terms and conditions:

Salaried Individuals Self-employed Individuals
●       Minimum Age (from 21 years onwards). This criterion may change from one bank to another,

●       Maximum Age (60),

●       Permanent employment with central or state government, a registered firm or company. Those who change their jobs at regular intervals are considered unfit for personal loans,

●       Minimum monthly salary (Rs 20,000-Rs30,000). Different banks have different criteria regarding the minimum monthly wage.

●       An active bank account against the applicant’s name.

●       The latest three months’ account statement and

●       The Latest three months’ salary slips.

●       Minimum (22 years), and maximum age (65 years) in general,

●       You should run your business continuously for two years,

●       Minimum business volume every year. Talk to the banker regarding this as different banks have different sets of criteria.

●       Details of the current bank account of your company and

●       ITR details and audit records.

 

  • Get All Documents Ready

Loan Documents

To apply for personal loans; you should arrange multiple documents in advance.

The bank may reject applications for loans if the borrower has used fake documents or any paper is missing. The required set of documents is-

Employed People Self-employed People
●       Personal identity documents,

●       Address proof,

●       Date of Birth proof,

●       Employment contract papers,

●       No objection certificate from a relevant government agency if there are FIRs against you,

●       Credit score reports,

●       Bank account details.

●       Personal identity proof,

●       Business registration documents,

●       GST number,

●       Business continuity proof,

●       Physically variable address paper of your company,

●       ITR papers.

Also Read : A Comprehensive Guide to SBI Personal Loan Online

  • Your Credit Score

Borrowers’ credit score holds tremendous importance for banks and other credit lending agencies. However, many individuals in India don’t understand its significance even today. In simple words, a credit score is a three-digit number that displays the financial condition & transactions of a person in a particular period. It demonstrates all loans a borrower took in previous years, their repayment status, pending EMIs, actions taken by the bank in case of non-repayment of the borrowed money, etc. The better your credit score is, the more trustworthy you are in the eyes of banks and financial organizations. Having a poor credit score means you have defaulted on the loan repayment in the past, and your financial condition has not been satisfactory in recent years. To get a personal loan, maintain a minimum credit score of 700 or more. This criterion changes from one bank to another. Keeping a good credit score is your responsibility, and it requires effort. You can check your credit score online or seek a report from any authorized credit rating agency in India. Banks and financial organizations will not approve applications made by poor credit borrowers. They don’t trust the financial status of such people and are skeptical about their ability to repay the borrowed money at the right time.

  • Choosing A Bank For Personal Loans

Fortunately, we have different banks in India that offer personal loans to credit borrowers. All banks try to attract many borrowers and sell their loan products as far as possible. Due to aggressive advertising and impressive presentations made by bank professionals, almost all personal loans look pretty beneficial. But it would help if you looked into the loan offers made by different banks, their terms and conditions, interest fees, processing charges, staff behavior, people’s opinion. Private banks in India are professional in their day-to-day activities. They will respond to your calls for personal loans much faster than a government sector bank.

Their staff is ready to offer you doorstep banking services if required. They will process your application quickly and let you know about the decision made by their team. If you need to take a loan in the shortest possible time, get along with any private sector bank such as HDFC, ICICI, Kotak Mahindra Bank, Axis Bank, Yes Bank. Keep in mind that private sector banks’ personal loans come at a high cost. But the quality of banking services, quick speed of loan processing, freedom from complicated formalities justifies their cost.

Many individuals in India have faith in government sector banks such as SBI, Punjab National Bank, Bank of Baroda, Bank of India, etc. Such banks are considered more reliable because of government involvement in their decision-making bodies and management team. They offer personal loans to all eligible candidates at reasonable interest fees and flexible terms and conditions. The problem is that government sector banks get many applications for personal loans.

So, their staff consumes considerable time to process people’s applications and announce their decisions. Applicants may need to visit the bank office several times to complete different formalities and hold multiple rounds of conversation with the decision-making team. You need to follow the bank executive and continuously get an update about the status of your application. There is a big difference in the modus operandi of the government and private sector banks when getting personal loans. You should analyze all these factors carefully and choose one bank you are comfortable with. Don’t make too many applications for personal loans in different banks.

  • An Analysis of Existing Expenses Plus New Debt Obligations

new debt applications

Taking a loan has become a new normal in India. Almost 70% of the working population live from one paycheck to another, and they don’t have additional sources of income. Moreover, observers argue that an average working professional in India fulfills the financial needs of 5 individuals. The bank will look at your current income, monthly expenses, savings, premium subscriptions, bills, loan EMIs, and other costs. There should be room for “new debt liability” in your income. Your creditworthiness and repayment capability play an essential role in approving or denying your application for the loan. Choose an appropriate amount under your budget and repayment potential. Remember that banks will not offer a considerable amount as a personal loan to first-time applicants.

  • Personal Loan Application Process: Exercise Precaution

After finalizing the initial details and choosing a bank, you must submit your application for the loan digitally or visit the nearest bank branch for the same. People living in urban India prefer applying for loans online. They can submit their application at any time and from any location using a digital application form provided by the chosen bank. Submit only correct data to the banker and attach all necessary documents along with your application. Examine the supplied information two times before handing over your application to the banker.

A team of experts starts analyzing your application once they get it. They will verify the supplied information, contact credit rating agencies to extract your previous records, and conduct background checks. These formalities take 8-10 days or more. You need to cooperate with the banker and wait for their Results. You should score minimum qualifying points to improve chances for loan approval. Bank executives detest applications with missing details, false data, and fake documents. They will reject such applications in a few seconds without much consideration. If you perform well in background checks, verification drives, and interviews, the bank considers your profile, creditworthiness, and repayment potential. You may get a positive result from the bank if everything is ok. First-time applicants and even seasoned borrowers make silly mistakes in the loan application.

  • Read Out The Loan Agreement

Loan Agreement

You must have proper knowledge about the loan agreement. Hidden fees, additional changes, and unfavorable norms can go against your interest. So, read the loan agreement carefully from A to Z before signing it. In India, most banks offer loan agreements in English. If you don’t know this language, ask the bank to provide the loan contract in Hindi or other regional languages. Understanding all terms and conditions of the loan agreement keeps you away from various problems. If you don’t comprehend the loan contract, ask an independent expert to explain it in simple language.

  • Releasing Loan Amount & Repayment

Once the bank approves your application for personal loans, you may get the approved loan amount via online transfer in the next three banking days. If there are issues with your bank account or technical problems with the bank server, further delays are possible. Usually, the bank may deduct the loan processing fee and credit the remaining amount in your bank account. You get SMS and Email notification for this transaction. Using the received loan amount is totally up to you. It can save you from total financial collapse, protect your reputation (when you organize a mass event or celebration), and save precious life (in case of medical emergencies).

These days, automated repayments are in fashion. Mostly, borrowers authorize a bank to deduct the repayment amount directly from a specified bank account. For this, they must keep a sufficient balance in the bank account. Non-repayment of the loan EMI can trigger the bank to impose additional charges, penalties, and sanctions on you. Sometimes, banks contact debt collection agencies to recover the unpaid loan amount. In worse case situations, they take legal action (breaking the loan agreement) and block your profile. So, timely repayment of the loan is essential & you can’t skip it.

Conclusion

Almost all individuals need to take loans to meet crucial financial obligations and expenses throughout their lifespan. To apply for a personal loan and get approved for it, you should do homework first & define your priorities. Rules regarding credit lending practises keep changing from time to time. Only a knowledgeable and well-informed borrower is likely to take the desired personal loan. First-time applicants must follow the recommendations mentioned above to get instant personal loans successfully. Quick loan approval comes after efforts, choosing the right personal loan, proper documentation, and completing all formalities.