Personal loans are unsecured loans extended by the banks to individuals who are met by unforeseen expenses or are in need of some funds in order to meet such unplanned expenditures. These loans are issued without collateral and hence, are also known as unsecured loans. A personal loan for salaried or self-employed can be provided for meeting various expenses such as:
- Medical expenses of self or loved ones
- Wedding expenses
- Funding down payment of a new house
- Purchase of home appliances
- Debt consolidation
Features and Benefits of Personal Loan:
- These are multipurpose loans. These loans can be taken by an individual for purpose ranging from wedding and medical expenses to vacations and various other expenses. Read more.
- The rate of interest on such loans is generally fixed. However, the thing to be kept in mind is that, the due is reduced with every installment paid. This is because interest is levied not on the original principal but on the principal outstanding. This method is known as the reducing rate method of interest calculation.
- These loans are generally extended for a period of 12 months to 60 months.
- These loans are issued without any security. It means that the applicant need not keep any of his/her loved possessions as collateral with the bank in order to avail a personal loan.
- The applicant need not submit too many documents in order to get a personal loan from banks. The processing fee as well as other charges too is usually lower as compared to many other types of loans.
- The reason behind availing this loan may be kept personal by the applicant. The bank does not usually ask details of why the loan is being availed.
- Personal loans can be applied by any person irrespective of him/her being salaried, a self-employed businessman or a self-employed professional.
Personal Loan for Salaried: An Overview
Salaried individuals are people with relatively fixed income. Many a times they come across situations which require them to spend some extra cash, which might be difficult unless such expense has been planned in advance. This is of course because the salary that they get every month is more or less fixed and windfalls such as bonuses are few and far between in most cases. They need a suitable way to get bailed out of the situation and this is where personal loan for salaried individuals can help out significantly.
Personal loans are extended to the salaried individuals to help them sail through difficult times and various other expenses including vacations, down payments, debt consolidation, etc. The amount of personal loan sanctioned, tenure of the loan, the rate of interest to be levied on the loan and other related factors are dependent upon the applicant’s salary, job profile, work experience as well as the credit score and the current debt load that the applicant is servicing.
The applicant who wish to apply for a loan with banks must satisfy the below mentioned criterion. This criterion may vary a little from one lender to other, but remains more or less the same for a wide range of lending institutions.
- Salary: The applicant must have a minimum monthly salary of Rs. 10,000 in order to avail a personal loan from any of the designated lending institutions. This amount might be higher for residents of metro cities.
- Age: The applicant must be minimum 21 years of age and should not be more than 60 years of age at the time of completion of the personal loan tenure.
- CIBIL Score: The applicant must have a good CIBIL score in order to avail a loan with any banks. If he has been a defaulter in the past or does not have a good credit report then he might not be considered eligible for a loan. In such cases, NBFCs and peer to peer lending might be alternatives that the applicant can consider, but these tend to have higher interest rate than personal loans provided by banks.
- Repayment Capability: The repayment capability i.e. ability of the borrower to pay back the borrowed amount plays a major role in deciding the eligibility of the applicant. Repayment capacity depends upon the applicant’s earnings, existing financial liabilities as well as the nature of his/her job (contractual/permanent/seasonal, etc.).
Applicants also need to submit some key documents in order to apply for a personal loan. These documents may again vary depending upon one institution to other, but are mostly the same for all lenders.
- Identification Proof – Photocopy of the applicant’s passport, Voter ID card, Aaadhaar or a copy of his/her Driving License. Any of the above mentioned documents may be submitted by the applicant as a legal Government-issued id proof.
- Residential Proof – Xerox copy of Ration Card, copy of recent utility bills such as electricity or telephone bills, his Rental Agreement or a copy of his Passport. The documents being submitted by the applicant must contain address of his residence where he has been residing for the past 1- 2 years. In most cases this document is not required if the borrower has an existing banking relationship with the lender.
- Last 3 months’ bank statement or last 6 months’ bank passbook. These documents depict the income status of the applicant and can prove handy in establishing the financial credentials of the applicant.
- Latest Salary Slip or current dated Salary Certificate with latest Form 16: These documents contain details about the applicant’s income status and helps the lending institutions get a clear picture as to whether the applicant is eligible for the loan or not.
- Application Form: The applicant has to submit an application form duly filled and signed to the bank in order to apply for a loan.
- Passport sized photographs: The application submitted by the applicant must contain a self-attested passport sized photographs of the applicant.
Personal Loan for Low Salary Individuals
Low salary may be a concern for many of us. Individuals with low salary might feel that they will not be eligible for a personal loan with any bank. But, this is not true. Certain financial institutions and banks provide personal loans to individuals with salary as low as Rs. 10,000 per month. However, the amount of loan to be sanctioned, the interest rate and the tenure will be in line the salary of such individuals. Additionally, loan features will also vary from one person to other depending upon the applicant’s job profile as well as his/her income and the funding institution with which the applicant wishes to apply for a loan with.
Some of the organizations that provide personal loan for salaried employees are:
Muthoot Fincorp: Muthoot Fincorp provides personal loans to salaried individuals aged between 22 years and 60 years with a minimum take home salary of Rs. 25,000 per month. The applicant must have a minimum work experience of 2 years in his/her current organization to qualify for a Muthoot Fincorp personal loan for salaried. EMI payment of this personal loan can be done online by visiting the official website of Muthoot e-pay web portal or in-personal at a Muthoot Finance outlet. Various number of loan schemes are available with this organization and an applicant can choose a loan scheme as per his/her unique requirement.
Indiabulls Finance: Indiabulls also issues personal loans to salaried individuals depending upon their monthly income as well as the organization with which they are working. The interest rate of the Indiabulls personal loan depends upon the earning of the individual. The status of the loan as well as the applicable interest rate, the amount of the loan and the tenure of the loan can all be tracked by logging onto the official website of the organization. The company also offers the facility of an EMI calculator which enables the applicants to calculate the amount of EMI that they may have to shell out per month if they opt for a personal loan with Indiabulls.
The Final Word Regarding Personal Loan for Salaried
Opting for a personal loan may seen to be an easy option for most of the loan seekers and it indeed isn’t very difficult to find multiple options. But, one of the most important things to be remembered is that an individual must opt for a personal loan if and only if he/she feels that he/she will be able to repay the loan amount in time or as per the required norms. Doing so will save the borrower from paying extra interest as well as late payment charges. The penal interest rates and late fees in such cases may add to the overall cost of the loan and this might prove to be costly for the borrower in the long term. Hence, the applicant must consider all available options including his/her personal loan repayment capacity before they apply for a loan with any lending institution.