When an unexpected financial requirement comes, you are left with few choices to manage your finances. You can either use your savings or apply for a loan. But, even your savings are not enough sometimes to meet an immediate requirement, such as financing an urgent medical treatment. In such cases, you can apply for a loan.
In times of financial crisis wherein, you need funds on an urgent basis, a personal loan can help you manage your finances without putting any burden on your pocket. A personal loan serves multi-purposes, which means that you can use the sanctioned loan amount for whatever reason you want. Also, you do not even have to pledge your assets as security to obtain a loan.
Whether you need to finance a medical emergency, wedding, your children’s higher education, international travel, or home renovation, a personal loan can help you meet all your expenses. Some lenders offer up to Rs. 25 lakhs as a loan for a period of up to 60 months.
What are the questions a lender will ask before approving your loan application?
Before approving your loan application, the lender will ask certain questions to determine whether or not you will be able to repay the loan amount without default.
Do you have a stable job or income?
The first thing a lender will try to find out is to know if you can repay the loan amount with interest and without any delays or defaults. To ensure you have the requisite repayment capacity, your lender may ask you questions about your employer, work experience at your current company, current salary, current position, and if you are expecting a promotion.
As a salaried employee of a private or public company, you will need to submit documents supporting your income. For instance, you will have to submit your past salary slips, salary account statement, form 16, income tax returns, etc. If you are a self-employed person, you will need to show documents proving a minimum turnover determined based on profession or industry.
How much money do you need?
When you apply for a personal loan, you may not be explicitly asked to answer this question, but you will have to assess your needs and apply for a loan amount that you need. Some lenders may have a maximum limit that a borrower opts for. For instance, some lenders offer up to Rs. 25 lakhs as a loan, and if you have requirements above this amount, you will not be able to secure a loan.
Although lenders do not care about the end-use of the sanctioned loan amount, you will need to establish the loan amount you need. It helps the lenders in determining personal loan rates. To understand how much you need to take as a loan, use an online personal loan EMI calculator that helps you to figure out your affordability.
Have you maintained a good credit score?
Your credit score is one of the crucial parameters in your loan application. It enables you to not only secure a personal loan but also avail of affordable personal loan rates. It is a three-digit number given by the Credit Bureau that indicates your creditworthiness. Since a personal loan is an unsecured loan, your lender will check your CIBIL score before approving your application.
A minimum CIBIL score of 750 is mandatory to apply for a personal loan. However, if you score above the required range, you can expect approval of the loan amount you need with a lower personal loan rate.
Do you meet the eligibility criteria?
Before approving your loan application, your lender will check whether or not you meet their personal loan requirements. The requirements to apply for a personal loan are:
- You must be an Indian currently working as an employee of an organization or a self-employed professional.
- You must be 21 years at the time of application and 65 years during loan maturity.
- You must earn a minimum net monthly income or yearly profit based on current policy.
- A minimum of one year of work experience with six months experience in the current company.
- A minimum CIBIL score of 750.
Do you have current financial obligations?
Depending on the loan amount you need, some lenders may also need to show your current financial obligations. For instance, you will need to show your current credit card accounts and their limits and balances. Have you taken a loan? If yes, how many payments have you made so far? Do you have other expenses like child support or alimony? What is your debt-to-income ratio with your current loan?
It is worth noting that your lender will reject your loan application if you have too much debt to pay off. Your lender must understand how much you spend every month to pay off your debts.