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What do banks review in a Personal Loan Application?

By Finserv MARKETS - Mar 27,2019
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Things bank review in a Personal Loan Application

Day by day the personal loan market is getting bigger as more people are opting for it as an assistance for their big expenses when they face a cash crunch. It can aid any kind of expense ranging from your child’s school fee to medical expenses. With the easier availability and less scrutiny of personal loan by financial institution, it has become a safe and favourable option for a lot of people.

A personal loan can be acquired easily from a bank or a non-banking financial company (NBFC). The criteria to be eligible for these loans are your income, credit history and repayment capacity. Banks thoroughly check every aspect of a person’s financial past but NBFCs are relatively lenient and give loans even if you have a low credit score but charge high interest rate.

Let us discuss in detail what banks consider while sanctioning a personal loan application:

  • Age

A person has to be a minimum 18 years old to apply for a personal loan.

  • Income

You also have to earn a minimum of Rs 20,000 per month and should have worked for 12 months with constant income.

  • Residence

The person has to be a resident of the city for a year at least from where he applied.

  • Credit Score

The person should have a good credit score. Any defaults in the clearance of past loans which reflects in your credit score will lead to the rejection of your application. But in case of personal loans, if a bank rejects your application based on your credit report, you can always opt for small NBFCs.

  • Work History

Frequent job changes reflect badly on an individual’s application. A bank will be hesitant to give loan to a person who doesn’t have steady income and can cause loan repayment delays in the future.

After the aforementioned parameters are met the bank along with the applicant, decides the following:

  • Documents

After the bank has accepted the application, the borrower has to furnish the following documents:

  1. Income proof (salary slip for salaried/recent acknowledged ITR for self-employed)
  2. Address proof
  3. Identity proof
  4. Certified copies of degree/license (in case of self-employed individuals)
  • Loan Amount

The amount of loan that can be availed generally depends on the nature of employment of the borrower (salaried or self-employed). Any existing loan on the applicant also determines the current amount of loan. Ideally, banks decide a loan amount and EMI that doesn’t exceed 40-50% of the borrower’s income. Your credit score also comes into play when deciding the loan amount. Having a higher CIBIL score gets you a bigger loan amount and an average score gets you smaller loan amount. However, the minimum amount of loan has to be between Rs 20,000 – 30,000. Finserv MARKETS provide Bajaj Finserv Personal Loan up to Rs 25 Lakhs with approval time of 3 minutes and flexible repayment options.

  • Processing Fees

To process the application for the loan, the bank charges a nominal fee, which is between 1-2% of desired loan amount and this fee remains non-refundable.

  • Interest Rates

Given the nature of the loan, personal loans normally have higher interest rates. Usually, lowest interest rates that one can expect to pay is 11.49% based on which the applicant may decide if he/she wants fixed interest rate or floating. Fixed interest rates see no drop in the amount but there is probability that floating rates may drop as it is revised every 6 months.

  • Repayment

The loan can be cleared via post-dated cheques (PDC) drawn in the bank’s name or through Electronic Clearing Services (ECS), monthly.

These measures will help you avail a Personal Loan for low CIBIL score too.

With Finserv MARKETS, you can avail a Bajaj Finserv Personal Loan online in a quick, easy and hassle-free way. What’s more? The entire process is online and can be processed right from the comfort of your home! So why wait? Go ahead and apply for a personal loan from Finserv MARKETS, today!

“Finserv MARKETS, from the house of Bajaj Finserv is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!”

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522