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How to Apply for a Personal Loan: Step-by-Step Guide | Fi Money

Personal Loan Documents Required in India: Eligibility & Process

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Boost your chances of personal loan approval! Learn about eligibility criteria, CIBIL score requirements, documents needed, and how to find low-interest loans.

How to Get Approved for a Personal Loan?

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"How to Get Approved for a Personal Loan?"

Pranav Karnad

Get your loan basics covered: Think interest rates, clearing debt, etc.

<p>Personal loans are great way to get your hands on some emergency cash.</p><p>The thing about personal loans is that they’re unsecured. Meaning that the lenders don’t ask you for a collateral against the loan amount you’re taking. This makes them somewhat easier to get, provided you have a credit score above 750, but also make them high interest loans.</p><p>In this article, we look at the criteria required to qualify for a personal loan.</p><h2 style="background-color:transparent;color:rgb(14, 16, 26);font-weight:normal;margin-bottom:0pt;margin-top:0pt;"><span style="background-color:transparent;color:rgb(14,16,26);"><span style="margin-bottom:0pt;margin-top:0pt;" data-preserver-spaces="true"><strong>Personal Loan Eligibility: Key Factors Lenders Consider</strong></span></span></h2><p>Think about it - how likely are you to lend money to a stranger? Not likely at all, right?</p><p>When you establish credibility as a borrower, banks and other financial institutions are happier to loosen the purse strings for you. After all, your proven track record in the market is a sign that you are the perfect candidate to be eligible for a loan.</p><p>But with all the talk about credibility, how do loan providers know how to trust you? Surely, they must have access to some publicly-available metrics that represent your behaviour in the financial space.</p><p>Let's take a closer look at what makes or breaks your loan application:</p><h3 style="background-color:transparent;color:rgb(14, 16, 26);margin-bottom:0pt;margin-top:0pt;"><span style="background-color:transparent;color:rgb(14,16,26);"><span style="margin-bottom:0pt;margin-top:0pt;" data-preserver-spaces="true">Credit Score (CIBIL Score)</span></span></h3><p>Your CIBIL score is the single most influential factor in your loan application. This three-digit number (ranging from 300 to 900) is your financial report card, revealing your credit history and repayment behaviour to potential lenders.</p><p>Most Indian banks and NBFCs prefer a CIBIL score of 750 or higher for personal loans. With such a score, you're more likely to get approved and stand a better chance of securing favourable interest rates and terms.</p><p>But what if your score isn't ideal? While "personal loan for low CIBIL" or "personal loan without CIBIL" searches are common, the reality is more nuanced. Some lenders offer options for those with lower scores but expect higher interest rates to compensate for the increased risk. NBFCs are more flexible than traditional banks in this regard.</p><p>To improve your CIBIL score:</p><ul><li>Pay all credit card bills and loan EMIs on time every time</li><li>Keep your credit utilisation ratio below 30%</li><li>Avoid applying for multiple loans simultaneously</li><li>Regularly check your credit report for errors and get them rectified</li><li>Maintain a healthy mix of secured and unsecured loans</li></ul><p>You can also <a target="_blank" rel="noopener noreferrer" href="https://www.quickloancalculator.in/">calculate your EMIs for personal loan</a>.&nbsp;</p><h2>Income and Employment Stability</h2><p>Lenders need assurance that you have regular income to service your loan. This is why income requirements and employment stability are crucial eligibility factors.<br>Most lenders require a minimum monthly income between ₹15,000 and ₹25,000 for salaried individuals, though this varies based on your city of residence and the lender's policies. Metros like Mumbai or Delhi typically have higher income requirements than smaller cities.</p><p>Self-employed professionals face a different evaluation process. Without regular salary slips, lenders assess your income through:</p><ul><li>Income Tax Returns (ITRs) for the past 2-3 years</li><li>Bank statements showing regular business transactions</li><li>Profit and loss statements</li><li>Business vintage (usually 2+ years in the same business)</li></ul><p>While searches for "loan without income proof" or "loan without salary slip" are common, the truth is that all legitimate lenders require some form of income verification. Alternative documentation like bank statements showing regular deposits or GST returns might be accepted, but proof of income remains non-negotiable.</p><h2>Debt-to-Income Ratio (DTI)</h2><p>Your DTI ratio measures how much your monthly income goes toward debt payments. It's calculated using a simple formula:</p><p>DTI = (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100<br>Most Indian lenders prefer a DTI below 40-50%, meaning your existing loan EMIs and credit card payments shouldn't exceed half of your monthly income. The lower your DTI, the stronger your loan application.</p><p>To improve your DTI:</p><ul><li>Pay off smaller debts completely</li><li>Increase your income through side hustles or career advancement</li><li>Avoid taking on new debt before applying for a personal loan</li><li>Consider debt consolidation to reduce monthly payments</li></ul><h3>Age and Nationality</h3><p>Personal loans in India typically have age requirements. Applicants should be between 21 and 60 (though some lenders extend this to 65 for salaried individuals). You must also be an Indian citizen or resident with valid documentation.</p><h3>Existing Loan Obligations</h3><p>Your current loan portfolio significantly impacts your eligibility. Too many existing loans signal potential repayment challenges, even with a good income. Lenders closely examine your repayment history and outstanding balances before approving new credit.</p><h3>Lender-Specific Criteria</h3><p>Different financial institutions have their internal eligibility parameters. Public sector banks prioritize employment stability, while private banks may emphasize credit scores. NBFCs often have more flexible criteria but charge higher interest rates. Digital lenders might consider alternative data points like spending patterns and digital footprint.</p><h3>Collateral</h3><p>Unlike secured loans, standard personal loans don't require collateral – making them "unsecured" loans. This absence of security is precisely why lenders scrutinize your creditworthiness so thoroughly. However, suppose you're struggling to qualify for an unsecured personal loan. In that case, some lenders offer secured personal loan variants requiring collateral like fixed deposits, insurance policies, or gold to mitigate risk.</p><h2>Personal Loan Documents: What You'll Need</h2><p>Preparing your documentation beforehand can streamline the approval process. Here's what you'll typically need:</p><h3>Identity Proof:</h3><ul><li>PAN Card (mandatory)</li><li>Aadhaar Card</li><li>Passport</li><li>Voter ID Card</li><li>Driving License</li></ul><h3>Address Proof:</h3><ul><li>Aadhaar Card</li><li>Passport</li><li>Utility Bills (electricity, water, gas) not older than 3 months</li><li>Rent Agreement</li><li>Property Tax Receipt</li></ul><h3>Income Proof</h3><h4>For Salaried Individuals:</h4><ul><li>Last 3 months' salary slips</li><li>Bank statements showing salary credits for the past 6 months</li><li>Form 16 or IT Returns for the previous financial year</li></ul><h4>For Self-Employed Professionals:</h4><ul><li>Income Tax Returns for the past 2-3 years</li><li>Bank statements for the past 6-12 months</li><li>Profit and Loss Statement, Balance Sheet</li><li>Business existence proof (registration certificate, GST registration)</li></ul><h3>Additional Requirements</h3><ul><li>Recent passport-sized photographs</li><li>Completed loan application form</li><li>Details of existing loans (if any)</li></ul><p>Many lenders now accept digitally verified documents through DigiLocker or other secure platforms, making the application process faster and paperless.</p><h2>Tips to Get Your Personal Loan Approved</h2><p>Want to maximise your chances of loan approval? Follow these proven strategies:</p><ul><li>Check and improve your credit score before applying. Even a few months of financial discipline can make a difference.</li><li>Reduce your debt-to-income ratio by paying down existing debts or increasing your income.</li><li>Maintain employment stability. Lenders favour applicants who have worked with the same employer for at least 1-2 years.</li><li>Provide complete and accurate information. Discrepancies or missing details can lead to automatic rejection.</li><li>Consider applying with a co-applicant with strong creditworthiness to strengthen your application.</li><li>Explore secured loan options if you struggle to qualify for an unsecured personal loan.</li><li>Shop around for the best rates and terms. Different lenders have different risk appetites and offerings.</li><li>Be ready to explain your loan purpose clearly. Lenders prefer specific, legitimate reasons over vague explanations.</li><li>Avoid multiple loan applications in a short period. Each application generates a hard inquiry, temporarily lowering your credit score.</li><li>Review your credit report for errors and get them corrected before applying.</li></ul><p><br>By understanding what lenders look for and preparing accordingly, you can transform yourself from a questionable applicant to a preferred borrower. Remember, when used responsibly, personal loans are financial tools that can help you achieve important life goals or confidently navigate challenging situations.<br>&nbsp;</p><h2>Read Up More About Personal Loan Approvals</h2><ul role="list"><li><a target="_blank" rel="noopener noreferrer" href="https://fi.money/blog/posts/here-is-the-list-of-documents-required-for-personal-loan">List of Documents Required for the Application of a Personal Loan&nbsp;</a></li><li>Everything You Need To <a target="_blank" rel="noopener noreferrer" href="https://fi.money/blog/posts/what-is-a-personal-installment-loan-how-does-it-work">Know About a Personal Loan Instalment</a>&nbsp;</li></ul><h2>Hassle-free Personal Loans on Fi Money</h2><p>A respectable record of clearing dues in the market is the number one way to <strong>get approved for a personal loan </strong>. But did you know that getting a personal loan is not as difficult as earlier?</p><p>You can get <a target="_blank" rel="noopener noreferrer" href="https://fi.money/features/instant-loans">instant loans</a> through Fi Money that arrive directly in your savings account. These are pre-approved personal loans made available to select users with good credit scores. But that’s not all! You can avail of the loans at competitive interest rates and tick some important things off your wishlist.</p><h2>Frequently Asked Questions</h2><h3>1. Will I be eligible for a personal loan even if I have bad credit?</h3><p>The good news is, yes - you can apply for a personal loan with a bad or low credit score. The only criterion is that either a guarantor has to tag along and vouch on your behalf, or you use collateral or security to assure the provider that you will pay back the loan.</p><h3>2. What are the factors that affect my eligibility for a personal loan?</h3><p>In the end, your eligibility to get a personal loan boils down to these factors:</p><ul role="list"><li>Your credit score</li><li>Your income</li><li>Your debt-to-income ratio</li><li>Age</li><li>Liabilities</li></ul><h3>3. How does my credit score influence the likelihood of a personal loan approval?</h3><p>Your credit score significantly influences the likelihood of a personal loan approval. A higher credit score generally increases your chances of approval, as it indicates a lower credit risk to lenders. Conversely, a lower credit score may lead to loan denials or higher interest rates, as it suggests a higher credit risk to lenders.</p><h3>4. What documents are typically needed during the personal loan application process?</h3><ol role="list"><li><strong>Identification: </strong>Aadhaar card, passport, voter ID, or driver's license for identity verification.</li><li><strong>Proof of Income: </strong>Salary slips, income tax returns, or bank statements to demonstrate your income and repayment capacity.</li><li><strong>Employment Verification: </strong>Employment certificate from your current employer or an appointment letter if you've recently changed jobs.</li><li><strong>Address Verification: </strong>Utility bills, rental agreement, or a residence certificate to confirm your address.</li><li><strong>Credit Report: </strong>Lenders often access your credit report from credit bureaus like CIBIL, Experian, or Equifax to assess your creditworthiness.</li><li><strong>Bank Statements: </strong>Statements from your bank account for the past few months to evaluate your financial stability.</li><li><strong>Loan Application: </strong>The lender's application form, which includes personal and financial details.</li></ol><p>Keep in mind that specific document requirements may vary among lenders and can depend on the loan amount, your credit history, and other factors. Always check with the lender for their exact documentation needs.</p><h3>5. Can having a co-signer improve my chances of getting approved?</h3><p>Yes, having a co-signer can significantly improve your chances of getting approved for a loan, especially if you have a limited credit history, low credit score, or unstable income. A co-signer is someone with a good credit history and stable financial situation who agrees to share responsibility for the loan.</p><h3>6. What role does the debt-to-income ratio play in the approval process?</h3><p>The debt-to-income ratio (DTI) plays a critical role in the personal loan approval process. It's a measure of your financial health that compares your monthly debt obligations to your monthly income. Lenders use DTI to assess your ability to manage additional debt responsibly.</p>

How to Get Approved for a Personal Loan? | Fi Money

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