Document Required for Personal Loan

Personal loans can be taken to meet any kind of expense. It could be a large expenditure, a family vacation, home renovation, medical expenses, business investment, and so on. There are no specific reasons defined for which Personal Loans are given.

Anyone who is either self-employed or a salaried individual is eligible for a Personal Loan. However, factors such as the person's salary, credit history, residential location, age, and so on, do tend to govern the criteria to judge the borrower and the amount of loan a person will get thereafter.

Personal Loan tenure refers to the time under which the borrower has to repay the obtained loan amount. Commonly Personal Loan tenures are from 1 - 5 years. It is very rare to find shorter or longer tenures for Personal Loans. The duration varies from amount to amount and case to case.

Yes, different lenders have different specifications as to how much minimum amount a borrower can borrow under a Personal Loan.

The maximum Personal Loan amount differs for salaried and self-employed individuals.

For the salaried, the maximum Personal Loan amount must be fixed in a way that their EMI never exceeds 30%-40% of their take-home salary. In this calculation, existing loans taken by the borrower are also considered before the Personal Loan amount is calculated.

In the case of self-employed individuals, the profit earned by them helps determine the loan value. For this, their recent Profit/Loss statement is considered. Also, their existing liabilities such as current business loans are considered.

Yes, you may apply for a Personal Loan jointly, with a co-applicant. However, your co-applicant must be your family member - parents, siblings, or spouse. Jointly applied Personal Loans are processed in an income bracket higher than single-applicant loans; thus, allowing you to secure a bigger loan as the risk is divided. However, a poor credit score of your co-applicant can reduce your chances of getting the loan as well.

Any lender offering a lower EMI is obviously either charging a low interest rate or has offered a long repayment term. It can also be a combination of both of these factors. Therefore, it is important to consider the loan period as well as the rate of interest before deciding which lender to go with. Longer loan periods would also mean an expensive loan where you end up paying a lot of interest to the lender in the long run.

Yes, some lenders do offer a relationship discount. It is an extra benefit offered by some banks to prospective borrowers with whom they have shared a good, pre-existing, relationship. This means that the borrower might have a savings account, fixed deposit, or Credit Cards with the bank. Based on this relationship the bank may offer some discounts to the client such as waiving off the processing fees offering a lower interest rate or floating any other investment scheme in offer.

There are settlement and recovery agents who are employed by lenders to help recover their loan amount. However, failing to repay the loan account gets marked as a defaulter and the same is reflected in the individual's credit report as a default. Such an indication adversely affects one's credit score and makes it extremely difficult to get loans or credit cards in the future.

There are no tax benefits associated with Personal Loans. However, when a Personal Loan is taken for home renovation a down payment of a house/flat, or for business expenses, one gets an income tax deduction on the loan. You must furnish relevant receipts confirming the usage of the loan to claim the tax deduction

If you want to make a pre-payment to your loan and clear it off before the tenure ends you are charged a nominal fee, known as the pre-payment/foreclosure charge/penalty. It ranges from 1-2% of the outstanding principal.

When you have a higher credit score, it vouches for your good track record in paying off loans. For instance, if your CIBIL score is higher than 700 you have a better chance of getting a bigger loan as compared to when you have a lower score. A higher credit score also helps you to leverage a better deal in terms of getting the processing charges waived off or getting a lower interest rate.

Many credit cards offer loans on the card. They are similar to Personal Loans with respect to loan terms and interest rates. However, you can take the loan on a credit card only from your card issuer and not others. In the case of personal loans, you may take a loan from any lender whether or not you have an account with the institution or not. Credit Card loans are simpler to take as no additional documentation is required as is the case in personal loan applications