Personal loans can be the best option for individuals in financial exigencies. Personal loans can be used to meet the unique challenges of various individuals. Salaried employees and self-employed individuals can get a personal loan to fulfil their unexpected financial problems like a medical emergency, wedding expense, home repair and many other financial requirements.
Benefits of a personal loan for salaried employees
A personal loan is an unsecured loan and offered on the basis of income and credit history or borrowers. Salaried employees can get a personal loan from any lender likeKotak Mahindra Bank personal loan, ICICI Bank personal loan, HDFC Bank personal loan, etc. A personal loan can be availed for a host of financial requirements such as:
- Medical bill payment
- Home repair
- Daughter’s wedding
- Big-ticket purchase
- Credit card bill payment
- Tuition fees
Minimal documentation: A personal loan is an unsecured loan and offered based on the income of the applicant. Hence, it needs fewer documentation formalities as compared to other types of loans. The entire loan application process is digital. Eligible borrowers can get the loan disbursed in a couple of hours.
Flexible repayment tenure: Repayment tenure for a personal loan generally ranges from 12 months to 60 months. Borrowers can choose the loan tenure as per their convenience.
Competitive interest rates: Dozens of lenders including banks, NBFCs and lending apps offer a personal loan in India. In order to increase their customer base, lenders offer a personal loan at competitive interest rates for eligible customers. Moreover, the interest is applied on a reducing balance i.e. lenders calculate the interest on the outstanding loan balance every month.
Multipurpose loan: A personal loan can be used for any legal purpose. Whether he wants to use the funds for holidays or for the purchase of the latest electronic gadgets, a borrower has the freedom to use the loan amount as per his personal requirements.
Unsecured loan: Unlike other loans like home loans, car loans and business loans which are issued based on the value of the asset, a personal loan is offered based on the applicant’s repayment capacity and credit score. Borrowers don’t need to submit collateral or security to get the loan.
Salaried employees working for 1–2 years with a good income flow can easily get a personal loan from multiple lenders. Eligibility criteria vary from lender to lender like Kotak Mahindra Bank Personal Loan Eligibility criteria vary from HDFC and ICICI personal loan criteria. Here are the common eligibility criteria borrowers need to meet to get a personal loan from banks.
Age: The minimum age of the applicant for a personal loan should be at least 21 years at the time of loan application and should not be more than 60 years before the termination of the loan.
Salary: You need to meet the minimum salary parameter set by the lender. Lenders set a minimum monthly salary parameter to offer a personal loan for salaried professionals. For example, your salary should be Rs. 20,000 per month to get the Kotak Mahindra Bank personal loan.
CIBIL Score: CIBIL score is one of the most important factors considered for the eligibility of a personal loan. A credit score explains the credit history and credit behaviour of an applicant. Individuals with a good credit score, typically 750 or above are considered ideal for a personal loan. Individuals who have a good track record of paying back credit on time have a good credit score.
Debt to income ratio: Debt to income ratio tells how much personal loan an applicant can get based on his monthly income and expenditures (financial liabilities or obligation). It is the percentage of the gross monthly income of the applicant that is used to pay his monthly debts including the loan amount you are applying for. Generally, debt to income ratio of 50% or less is considered suitable for getting a personal loan.
Documents required to get a personal loan
Here is a checklist of basic documents salaried individuals need to get a personal loan:
- Loan application form along with self-attested passport size photographs
- Identity proof: Passport / Driving license / Voters ID / PAN card /Aadhaar card
- Address proof: Leave & License Agreement/ Ration card /Utility bill (for the latest 3 months) / Bank statement/ Passport — provided the document has the same address on in the loan application form
- Age proof: Birth certificate/ PAN card/ Passport
- Income proof: Salary slips for the previous 3 months
- Bank statement: Bank statement showing salary credit, latest Form 16
Salaried employees can obtain a personal loan from Rs. 50,000 up to Rs. 25 lakh based on their requirement. Personal loan interest rate ranges from 10.50% to 26% per annum based on the applicant’s eligibility. If you fulfil Kotak Mahindra bank personal loan eligibility criteria, you can get a personal loan in the range of 10.50% to 16.99% per annum.
Salaried employees can get a personal loan from banks or NBFCs in India. However, interest rates, repayment tenure and eligibility criteria vary from lender to lender, depending on a host of factors like job profile, company type, age, monthly salary and credit score of the borrower.
Originally published at https://medium.com on October 9, 2020.