Thinking of applying for a personal loan? However, before you do so, you must take stock of the documents that the lenders will require for the purpose. Take the time to go through the personal loan eligibility criteria and see if you qualify.
A methodical approach before rushing in to submit your loan application can help streamline the process, and even fetch you lower personal loan interest rates. Here are a few loan requirements that you should be aware of:
- Credit history: A credit score above 750 signifies that your credit repayment record is good and you have little or no outstanding debt. This is an important criterion for evaluating personal loan applications by most lenders so remember to pay your dues on time and decrease credit card usage to avoid getting rejected.
- Income: Each lending institution might have its minimum income requirement for loan applicants to make sure they can repay the loan successfully. You might need to show documents such as your previous salary slips, monthly bank statements, or letter of appointment as proof of being employed. If you are self-employed, proof of tax returns, bank deposits, or other financial documents might be required.
- The ratio of debt-to-income: This ratio is a predictor of whether a borrower can repay his or her current or new debt. It is equal to the percentage of your total income that goes towards debt repayment every month. Ideally, a financial institution will approve your personal loan if your debt-to-income ratio is less than 36%. However, in some cases, those with a value of 50% also fulfill personal loan eligibility criteria of the lender depending on other qualifications.
- Security: Typically personal loans do not require collateral, however, if you are applying for a secure personal loan, you might be required to pledge a valuable asset (real estate, cash, investment) according to the purpose for which the loan was taken. In the event of failure to make payment or loan default, the lender can recover the loan balance by repossessing your collateral.
- Origination charges: You might end up paying an additional 1% to 8% of your loan amount as an origination fee depending on your credit score. This is used by lenders to cover the costs of processing personal loan applications, checking credit records, and final loan approval. You might either need to pay in cash or it can be deducted from the final loan amount upon disbursal. Some lenders may also be ready to finance the charges upon approval.
Knowledge of these requirements beforehand can help you secure low personal loan interest rates if you tick all the boxes. You can also check your personal loan eligibility for loans of up to Rs 25 Lakhs available on Finserv MARKETS with flexible tenures ranging from 1 to 5 years. Minimal foreclosure charges, attractive personal loan interest rates, and no collateral along with value-added services are sure to enrich your loan experience and help you achieve your financial goals.