Do you need funds for a major purchase or financial goal? With all the paperwork and processes involved, taking a personal loan can seem daunting. However, understanding the key steps in the personal loan application process can be quite straightforward and give you quick access to funding when required. Here is an easy, 5-step guide to help you navigate the personal loan application journey in India.
5 Key Steps for Applying for a Personal Loan
Understanding the process of personal loan application can help you get an approval faster. The following is the step-by-step guide for a personal loan application:
Step 1: Verify Eligibility Requirements
Eligibility criteria include:
- Minimum credit score, usually 650-700*
- Income within set limits, like Rs.15,000 to Rs.1,50,000* monthly
- Minimum age, often 18 or 21* years
- Steady employment history, 2+ years (in most cases)
- Existing loans: Too many outstanding loans can signal a high debt burden and impact your loan eligibility.
Check if you pre-qualify before formally applying. This ensures you meet basic requirements and avoids wasted time. Note that the eligibility criteria can change with the bank or NBFC you apply with.
Step 2: Choose a Loan Provider and Compare Loan Offers
Once you have determined your eligibility, the next step is to research loan providers and compare their loan offers. Consider these factors when choosing between banks, NBFCS, and other financial institutions:
- Interest rates: Compare the interest rates offered by shortlisted loan providers. Choose a financial institution offering the lowest interest rate.
- Processing fees: Some lending companies charge processing fees, while some don't. Go for a lending institution that charges the lowest fees.
- Prepayment charges: Check if the loan provider charges a penalty for foreclosing the loan before the tenure.
- Flexibility: See if the financial institution allows flexibility in loan amount, tenure, EMIs, etc.
Step 3: Prepare Documents Required for Personal Loan Application
You'll need to submit valid documents verifying your identity, income, employment, and financial details, including:
- Identity proof - Aadhaar card, PAN card, Voter ID, Passport etc.
- Address proof - Aadhaar, Passport, Ration card, Utility bills etc.
- Bank statements - Last 3-6 months' statement of salary account.
- Salary slips - Last 3 months; or ITR and financial statements if self-employed.
- Existing loan statements - Home loan, car loan, etc., if any.
- Credit report - From CIBIL to assess creditworthiness.
- Proof of work experience - Appointment letter, contract, business registration, etc.
- Others - Passport-size photos.
Having paperwork ready smoothens the personal loan application process. Some allow online document uploads.
Step 4: Complete the Loan Application
The application provides critical information the financial institution requires to evaluate your request. Be ready with:
- Personal details like name, DOB, address, contact info
- Employment status and income amount
- Budget details and expenses
- Assets and liabilities
- Loan amount needed and repayment term
Provide complete and accurate details to avoid delays. Many applications can be completed online.
Step 5: Loan Appraisal and Disbursal
Once you have submitted the personal loan application, the financial institution will verify the information provided along with your documents. Here is the further process:
- Lender appraisal: The loan provider will evaluate your profile as per their eligibility criteria and credit policies. This may involve contacting your employer for verification too.
- Personal discussion: You may need to meet the loan company’s representative in person for verification, clarifications, or to provide additional documents. Answer their queries transparently.
- Loan sanction: If your loan application is approved after appraisal, the financial institution issues a sanction letter specifying the loan amount, interest rate and other terms and conditions.
- Technical evaluation: The lending company’s technical team re-evaluates the application before loan disbursal.
- Documentation: You will need to submit a signed loan agreement along with other documents as the loan company requires.
- Loan disbursal: Once documentation formalities are completed, the loan amount gets credited to your bank account.
Conclusion
The personal loan application process should be thoroughly understood first for a smooth application procedure. Prepare your documents, provide accurate information, and submit a robust application showcasing your qualifications. With diligence and the right financial institution, you can get approved for financing to support your financial needs and goals.
FAQs
1. What credit score is usually required for approval?
Financial institutions often need a minimum credit score between 650-700* to approve a personal loan. The higher your score, the better.
2. How long does it take to get a personal loan approved?
With an online financial institution, personal loan application approval may be instant or within 1-2 days. Traditional Financial institutions take 1-2 weeks to process applications. However, the timelines may differ according to the financial institution’s policies.
3. Can I get a personal loan approved with a low income?
Meeting minimum income thresholds and providing proof of consistent income sources can help you qualify for approval with a lower income.
4. What are some tips for easy personal loan approval?
Good credit, steady employment, submitting organised documents, and borrowing only what you need can help simplify approval.
5. What if my personal loan application is denied?
If denied, work on improving your credit, reducing debts, increasing income, and fixing errors before reapplying. Also, you can re-apply with a different lending company.
