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People often wonder if they had some extra cash or budget with which they could meet any big-ticket spending need conveniently and in time. However, cash flows are limited and depend on business profits or salaries. It often calls for the need to borrow whenever a critical or an impending expenditure is at hand. If this is the case with you too, then congratulations! You have landed the right place.
Here, we will discuss how you can expand your budget with the necessary financial availability to meet your high-value expenditures. When one is out of cash, the easiest way is to ask for loans. Conventionally, asking for loans from friends, relatives or locally recognized money lenders has been the norm. However, lately, with reputed financial institutions introducing personal loans, one can easily avail funding simply by meeting a handful of eligibility requirements.
It may sound difficult at first, but the process of how to apply for a personal loan in 2021 is easier than expected. Herein, we will discuss the following important details about availing of the loan and related requirements.
- How to apply for a personal loan?
- What are the required documents?
- What are the eligibility criteria to avail financing?
Steps To Apply For A Personal Loan
Once you have selected your lending institution, you can proceed to apply for a personal loan in the following few steps.
- Visit the lender’s official website.
- Navigate to digital portal for your personal application form.
- Fill it up with required personal, employment and financial details.
- Submit the duly filled-up form with necessary documents.
Documents Required For Personal Loan Application
The following documents are required when applying for a personal loan.
- PAN card
- Aadhaar card
- ITR (Income Tax Return) filed for the last 2 years
- Passport size photographs
- A savings account for loan disbursement
- Salary slips of the last 3 months for salaried individuals.
- For self employed individuals, ITR will suffice. Additional documents lender may ask for include bank account statements and the business’s audited financial statements.
Now that you have your list of required documents, you may proceed to the next step.
Eligibility Criteria For Personal Loan Application
Check your loan eligibility before applying for a loan to avoid any hassle. Your loan eligibility depends on various factors, including your age, monthly income, and type of employment, to name a few.
Some of the norms to be eligible for personal loans are mentioned below:
- Minimum age limit: 18 years.
- Employment status: Employed or in business for at least 2-5 years.
- Type of employment: Salaried, business owner, self-employed professional (doctor, engineer, CA, professor, etc.).
- Work experience: 1-3 years or above.
- Minimum net monthly income: Depends on your city of residence.
- Credit score: CIBIL score of 750 or more.
However, Before Applying For A Personal Loan, A Few Points Should Be Kept In Mind. They Are Listed As Under.
Loan Amount Needed
The first step in choosing a personal loan is to know the financing value you need. The highest personal loan ticket sizes with some of the best lenders embark at around Rs.25 Lakh, depending on the financier selected. You can use the loan amount so availed to fulfill a range of personal and/or professional financing needs without any lender-based limitation.
Tenure For Loan Repayment
Reputed lenders provide repayment tenures between 12 months and 5 years, and allow borrowers to choose as per their affordability. Both your interest rate and the monthly payment will be impacted by the length of the loan tenure you choose. Therefore, it is ideal to choose a shorter tenure to save more on interests.
Interest Payable
The interest rate applied to your personal loan depends on several factors, including your credit score, financial stability, existing borrowings, and the likes. Typically, you can secure the lowest interest rate when you hold a good or excellent credit score and choose tenure shorter than your maximum eligibility for loan repayment. Make sure to compare lenders to find the most competitive rate before you proceed on knowing how to apply for a personal loan.
Processing Fee
Loan providers levy a one-time charge known as the processing fee, which can increase the cost of the loan. Even if you are charged a low-interest rate, it is important to check and compare the processing fee charged by different lenders to ensure affordability.
Pre-Closure Charges
Certain lenders may charge you a pre-closure fee if you prepay the outstanding loan balance before the repayment tenure ends. Make sure to check if the financial institution that you are applying to levies a pre-closure charge and the rate of levy.
With this, we complete the process of how to apply for a personal loan. If all the above-mentioned requirements are fulfilled, a lending institution will be more than happy to offer you a personal loan. Keep all the required documents handy before applying to improve your chances of hassle-free approval.