If you’re new to the world of personal loans, the process of getting your loan approved
Is a little more than filling out the application form and getting the money in your bank account. There are several steps involved from both the borrower and lender that will determine whether your loan gets approved or not.
As a first-time borrower, this procedure may seem overwhelming and complicated. In reality, it’s not as complex it may appear. Read on to find out all you need to know about the journey of getting your personal loan approved!
Personal Loan Eligibility Criteria and Documents Required
In the personal loan application process, one must first match the eligibility criteria set by the lender. This is a basic set of qualifying parameters that include income, CIBIL score, age, location, and employment type.
As part of the personal loan process, lenders have eligibility criteria that a potential borrower must meet in entirety. This criterion includes age, income, CIBIL score, location, and other parameters. All lenders have a different set of eligibility criteria, depending on the type of borrower they cater to. For example, some lenders will accept borrowers with a minimum monthly salary of Rs. 15,000 while others require a minimum income of Rs. 20,000 or more.
If you apply for a loan to any lender without first checking their eligibility criteria, your application has a higher chance of getting rejected because you may have not matched all of their parameters. Therefore, while you’re looking for lenders to apply to, take a careful look at the eligibility criteria on their website or app, to ensure you meet each one.
Another thing to keep in mind is to have all the required documents for KYC verification purposes. Online lenders require only a few basic documents for applying for a loan; however, as with the eligibility criteria, the type of documents required will again differ from lender to lender. Using a personal loan eligibility calculator will help you to know more about whether you qualify for a loan from the lender.
To ensure your loan application has the strongest chance of getting approved, you would want to make sure you have the required documents available to submit. Below are some of the common documents that lenders require when applying for a personal loan:
Identification Verification Documents
- PAN card
- Aadhar card
- Voter’s ID
- Driving License
- Ration card
- Ration card
- Electricity or LPG bill
- Rent Agreement
- Salary Slips (last three months)
- Bank statements (last three months)
Personal Loan Interest Rates and EMI
This is another factor that will depend on the lender. Interest rates for unsecured loans (which don’t require the borrower to pledge their assets as collateral against the loan) usually range between 18-32%. The final interest rate levied will depend on the borrower’s financial stability and CIBIL score. Knowing the expected interest rate will help you to find out how much your personal loan EMI would amount to.
Personal loan EMI is determined on a few key factors including the principal amount borrowed, interest rate, and the loan repayment tenure. Although one can manually calculate their EMI, it’s far more convenient to use a personal loan EMI calculator for speed and accuracy. To calculate your loan EMI, you’ll need the following parameters:
- Principal loan amount (how much money you want to borrow)
- Interest rate
- Loan tenure in months (the duration for which the loan is sanctioned)
Simply enter these details in the personal loan EMI calculator, and in only a few seconds, it will display your monthly EMI amount. When you use the EMI calculator, it is important to make sure that both the interest rate and loan tenure has been converted into months in order to obtain the correct EMI amount.
Below is the step-by-step process of how to apply for your personal loan:
- Know your requirements: Although this seems like an obvious thing, many borrowers actually overestimate the actual amount they really need for their requirements. Even if you end up being eligible to receive a higher amount than what you’ve applied for, apply for only what you need and can realistically afford.
- Look for lenders: Make a list of all the lenders that provide loans based on your age, income, location, salary, CIBIL score, and employment type. Also take note of important fees such as interest rates, processing fees, late payment fees, prepayment charges and foreclosure fees.
- Apply to only a few: Once you’ve narrowed down on the lenders whose criteria you meet, only apply to a few of them (no more than 2-3). This is because every loan application you make is considered a serious enquiry. It can negatively affect your CIBIL score if you make more than 3 loan applications at a time, since lenders will perceive you as a credit-hungry individual.
- Keep your documents ready: Ensure that you have all the correct documents that are required for the application form. If you submit any incorrect or false documents, your loan application will be rejected immediately.
- Fill the application form carefully: When you fill out the application form, ensure you don’t make silly mistakes! Even unintentional errors will be noted as an inconsistency in your details, which will result in rejection. It’s worth reading the application very carefully before submitting it.
After you’ve sent your application, you will receive an approval or rejection from the lender. In the event that your loan has been rejected, work on improving your credit score and finances. You can re-apply again after 90 days. If your loan does get approved, then congrats! The lender will update you on the next steps for receiving the funds to your bank account. Be sure to use a personal loan eligibility calculator to improve your chances of getting your personal loan approved!