- What is a personal loan for salaried employees?
- When do salaried individuals need a personal loan?
- How do salaried individuals apply for a personal loan?
- Eligibility criteria for availing a personal loan for salaried employees?
- What documents are required for a personal loan application?
- How to get personal loan approved quickly?
What is a personal loan for salaried individuals?
A personal loan is a loan that is unsecured and is usually provided by financial institutions for those individuals who need funds due to unprecedented circumstances. Unsecured loans are those loans that are granted without the need for any collateral. Since personal loans are granted without any collateral, the rate of interest is quite high.
- Personal loan for salaried individuals are granted without asking any questions about the reasons for the loan and are approved based on the credit history of an individual.
- Personal loan for salaried individuals is mostly provided for the tenure of 12 months to 60 months.
- In the case of personal loans for salaried individuals, the rate of interest is fixed. The “reducing rate method for calculation of interest” is followed for personal loans. It means with every installment that is paid, due to be re-paid keeps on decreasing. This is because the interest will be levied on the remaining principal and not on the original principal amount.
- For availing a personal loan, there is no need of much documentation. Only some mandatory documents are needed for the loans to be granted.
- Moreover, personal loans can be availed by a salaried employee or a self-employed individual.
When do salaried individuals need a personal loan ?
Employees at times might feel the pinch of cash crunch and personal loans turn out to be saviors in such times. Here are some scenarios where your employees might need the help of a loan
1. Medical emergency
Medical emergencies can come up unexpectedly and the cost of medical facilities is soaring high these days. In such a situation, if an individual does not be having a health insurance policy and also cannot afford to bear the medical expenses by his savings; a personal loan is a savior. A personal loan can help in meeting the unexpected medical expenses. Moreover, the turnaround time of personal loans are quick, which is required for medical emergencies.
2. Wedding expenses
India is famous for its big fat weddings where a lot of money is being spent. In many Indian communities, a big and luxurious wedding is a matter of pride and a status symbol as well. However, there is not always enough savings by salaried individuals to have a luxurious wedding. So, in such a case your employees might want to take a personal loan to meet the huge wedding expenses.
3. Improvements in home
A personal loan can help meet the expenses incurred in the remodeling, renovation or some other improvement work related to the home. An individual can check out the rate of interest and depend upon it can avail of the personal loan.
4. Higher education
Educational loans are available for helping individuals with higher education but they have a very high interest. Moreover, banks usually provide education loans for higher education in prestigious institutions. However, sometimes the education loans are not enough to support the tuition fees, living expenditure, etc. and there will be a need for an additional corpus. This is feasible by a personal loan. A personal loan for salaried individuals will help in meeting the additional expenses associated with higher education like the living costs, the cost involved in relocation, etc.
5. Clearance of a loan with high interest
There might be some urgent situation in which a loan with a high rate of interest might have been taken by an individual. This loan with a high-interest rate can be settled down by taking a personal loan. However, the personal loan should have an interest rate which is less than the interest rate of the previous loan.
How can salaried employee apply for a personal loan?
To apply for a personal loan, a salaried individual has to meet certain eligibility criteria. On fulfilling the eligibility criterion, a salaried individual can easily apply for the loan online.
The most important step associated with applying a personal loan is to understand the requirements and amount of loan which needs to be applied for. You should have a proper understanding of your requirements and then apply for your loan. By this, you will be able to apply a loan for the exact amount as required by you. Also, you should perform very good research before you apply for the loan.
If you are applying for a personal loan online, you will have to fill the application form and follow a step-by-step procedure.
- In the first step, you need to specify your details along with your employment and financial details.
- You will obtain the approval online and hence, you need to provide your loan amount and the tenure for which you want to avail the loan.
- Then in the next step, the set of necessary documents needs to be submitted. This can be done either by a representative of the bank who will contact you or in many cases the KYC document submission part can be avoided by just providing the Aadhar number.
- With this, your procedure for applying for a personal loan is completed and the loan amount is received in your bank account.
However, if you are following the conventional method for applying for a personal loan you will have to visit the nearest branch of your bank. At the bank, you can obtain and duly fill the application form and submit it along with the necessary documents. Then your application would be processed and you can obtain the loan amount.
What are the eligibility criteria for availing a personal loan for salaried employees?
Let us have a look at the basic eligibility criteria which need to be fulfilled by a salaried employee to avail a personal loan. There are a few criteria that are common for all the lenders and there might be some minor differences associated with them.
The applicant of the personal loan must have a minimum salary of Rs. 10,000 for being eligible to avail a personal loan. However, this minimum amount for salary might be higher for those employees who are residing in metropolitan cities.
2. CIBIL score
It is very much necessary for a salaried employee who has applied for a personal loan to have a good CIBIL score. If the applicant does not have a good CIBIL score or has been a defaulter in case of credit payment then his application for a personal loan will be rejected.
CIBIL stands for Credit Information Bureau India Limited and it is the premier agency of India which provides credit scores and credit reports of individuals. CIBIL collects the information of individuals relating to loans and credit cards from various banks and financial institutions. With the help of this information, a CIBIL credit report is being prepared known as CIR i.e. Credit Information Report. The CIBIL Score offered by CIBIL consists of 3 digits and usually lies between 300 and 900. A CIBIL score of 750 and above is considered to be ideal for obtaining a personal loan or a credit card. It is quite necessary to keep your CIBIL Score healthy to get a personal loan approved easily.
You need to be quite disciplined and pay your credit card dues, loan repayments on time. This is the major factor that will have an impact on your CIBIL score. Moreover, you can maintain your credit utilization ratio at a lower value of around 30% to have a good CIBIL score. Also, for a good CIBIL score you can have a combination of a secured and an unsecured debt together. You should keep on monitoring your CIBIL score from time to time and review it regularly. Furthermore, it is suggested to increase your credit limit and review your credit report regularly to have a good CIBIL score.
The age of the employee is another important criterion that should be fulfilled for approval of a personal loan. You must be a minimum of 21 years of age and a maximum of 60 years of age by the time of completion of the tenure of your loan.
4. Loan repayment capability
The loan repayment capability of the employee is the most important criterion which needs to be fulfilled for availing a personal loan. The Loan repayment capability can be defined as your earning, the type of work you are doing, your financial liabilities if any, etc. These aspects determine the capability of loan repayment which is necessary to be fulfilled for a personal loan.
Read more on complete employee loan guide
What documents are required for a personal loan application?
There are some major documents for a personal loan to be approved easily. However, the list of necessary documents for a personal loan might vary from one financial institution to another but for the majority of the institutions, they are the same.
1. Residential proof
Photocopy of ration card, electricity bill, telephone bill or a photocopy of the passport will work as an ideal residential proof. It should be kept in mind that the document which is shared must contain the address of the residence where you have been staying since the last 1year-2 years.
2. An identification proof
Photocopy of your passport, Voter ID card, Aadhar card or your valid driving license can be used as an identification proof.
3. Bank statement of the last three months or bank passbook of the last six months
This document is required as proof of your income status and is necessary for validating your financial credentials.
4. Latest salary slip or Form 16 along with current dated salary certificate
These documents help in giving information about your income status. It also helps the financial institution to decide on your financial health and eligibility to obtain a personal loan.
5. Application form for the loan
The application form has to be filled and submitted in the financial institution for the loan in case of applying for the loan in an offline manner. If you are applying for the loan by online means, you can fill in the form on the website of the financial institution.
6. Your photographs
Your self-attested passport-sized photographs are required in the application form for the loan.
Hence, by submitting these necessary documents for personal loan application approval you can avail of a personal loan in minimal time.
How to get personal loan approved quickly?
If you are a salaried employee and have applied for a personal loan, it can get approved quickly without much hassle if some of the conditions are met. Let us have a look at the factors which tell about how to approve personal loan quickly.
1. Eligibility criteria to be met
You should meet all the necessary eligibility criteria to get your loan application approved easily. If you are not aware of the basic eligibility criteria and tend to apply for personal loans, it is quite natural that your application would be rejected. Your loan application would be rejected by the financial institutions due to the non-fulfillment of the necessary criteria. Most importantly, the age limit is the major factor that the financial institutions give utmost importance while approving personal loan applications.
2. Good credit score
Your credit score is another major factor that determines the status of your loan request. If you have a good credit score i.e. around 750 which means you have been quite punctual in re-payment of your old loans and credit card bills, your loan application would be approved soon. However, if you do not have a good credit score you must make efforts on increasing your credit score and then send your loan application form.
Here are a few tips on how you can improve your CIBIL score.
3. Avoid new loan while the re-payment of an old one
It is always advisable not to apply for a new personal loan when you are having one in your name. Moreover, it is considered ideal if you leave a gap of 6 months between a new loan and an older one. If you already have a personal loan on your name, your application for another personal loan would be rejected by the financial institution.
4. Avoid sending multiple loan applications
You should not send multiple applications for personal loans at a single point of time. This does not increase your probabilities of obtaining a personal loan but rather it will decrease your possibilities as financial institutions can think that your chance of taking a personal loan from them might be less. So, it is advisable to keep your applications for personal loans limited.
5. Decide your loan amount carefully
You should be quite careful while you are selecting your loan amount. Mostly, the financial institutions consider your income before they grant you a personal loan. If your loan amount is too high, financial institutions might find it difficult for you to re-pay the amount within a specified time limit. As a result, your loan application might get rejected by the financial institution.
When these basic conditions are kept in mind while applying for a personal loan, your loan request would be approved easily.
Hence, salaried employees usually have a fixed income and there can be situations in which the need for an additional expenditure might arise. Scenarios like debt payments, down payments, medical and personal emergencies can arise and the need for extra cash also arises. So, personal loans are the best method by which a salaried employee can face such unexpected situations in life. They are quite helpful and can be availed easily in a hassle-free manner. The only necessary things which should be kept in mind are the eligibility criteria and the credit score for availing a personal loan easily.