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Personal Loan

A personal loan is a great credit instrument that helps one meet up money requirements for various purposes. Money required to meet requirements like wedding, medical expenses, home renovation, business requirements on cash among others. At times it is also taken to consolidate one's outstanding debt into one single loan.

Advantages of Personal Loan

Flexibility of use - The money can be used for a variety of purposes as against most of the other loans where the funding is extended for a specific purpose. This gives personal loan an edge over other credit instruments

Easy availability - Personal loan applications get processed very fast. Generally it does not rude harsh take more than a week-s time for the process to get completed and funds getting credited into account.

Less documentation - Unlike other loans, personal loan requires minimal documentation. One only needs to submit the income documents and KYC (photo identity proof and address proof) for getting the request processed. Ease of documentation is another factor that makes this loan highly popular to raise funds

No requirement of collateral - Personal loan is extended taking into account the overall profile of the borrower and there is no requirement of collateral being extended by the borrower.

Credit Score and Personal Loan

Since the personal loan is extended primarily considering the profile of customers, credit scores and credit bureau report play a critical role in underwriting decisions. A small error or impairment on a credit report can result in the decline of the loan application.

A low score can also result in getting a far higher rate of interest getting charged that can lead to a very high EMI

Eligibility Criteria

The eligibility criteria while may vary from one lender to another, but for a salaried person lenders may look at a minimum of Rs 15,000 as net take home salary to consider an application for review. Other criteria like age, number of years in current job or a number of years at current residence among others also get considered differently by different lending institutions.

For self-employed applicants an income tax return of Rs 200,000 or above may be required. Again the requirement of income varies from one lender to another. Other criteria like turnover, number of years in business, age of the applicant, any existing relationship with bank arts play an important role in the underwriting process.

Documents required

The documentation is simple in the case of personal loans. In case of a salaried applicant the income proof and regular KYC (photo id and address proof) documents are required to be furnished.

In case of a self-employed applicant, income tax returns, balance sheets, profit and loss accounts apart from the regular KYC (photo id and address proof) documents need to be submitted for evaluation.

Types of Personal Loans

Different types of loan offers are extended based on the customer segment. The rate of interest being charged to different segment also varies.

There are separate loans for the self-employed professionals under this category.

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