Personal Loan for Salaried Employees – Forbes Advisor INDIA

Most employees, if not all, rely on their monthly salary to meet their household expenses. The monthly salary happens to be the main and the only source of income for the average Indian salaried employee. In which case, the cash flow is almost fixed throughout the year for salaried employees except in the case of occasional incentives or a yearly bonus. 

But what happens when a financial emergency arises? This could be a planned expense like arranging finance for a dream wedding or a holiday to an international destination. Or at times it could even be an unplanned emergency like medical expenses.

As per the AON survey, there will be a 9.9% salary increase in India this year — touching a five-year high. Despite the projected increments in salary, the aspirations and personal needs of salaried employees are also on the rise, especially those of younger professionals — driving the need for additional sources of income.

We can never tell when we will be faced with financial exigencies. The good news is that these days the entire ordeal of availing a personal loan for salaried employees has been simplified by banks and financial institutions.

Personal Loans for Salaried Employees: What You Need to Know

When you’re living from paycheck to paycheck, there are a few things that get pushed aside. This is simply because all your financial goals cannot be met with the income earned from a single salary alone.

A tailor-made personal loan for salaried employees can be the perfect solution to meet the contingent or uncategorised expenses that arise from time to time. 

With the advancement of the FinTech sector, personal loans can now be availed with ease and you can also enjoy instant loan approvals.

This explains why today, we see more and more people resorting to taking personal loans to meet their emergent monetary requirements, be it long-term or short-term. In fact, a personal loan has come to be the one-size-fits-all solution that is helping salaried employees bridge financial gaps in their lives.

Benefits of a Personal Loan for Salaried Employees

Here are the top reasons why personal loan is the most preferred choice of loans among salaried employees:

  1. Collateral-free 

Personal loans are unsecured loans, which means there is no need to produce collateral to take a personal loan.

  1. Competitive interest rates

The interest on personal loans is lesser compared to the interest on credit cards. While the interest on credit cards could be as high as 24% to 36% per annum, the personal loan interest rates can be as low as 10.25%.

  1. Unrestricted end use

Personal loans can be utilized for any purpose that you want, such as — house renovation, education, or medical expenses and you need not take prior permission from the bank for the end-use.

  1. Flexible loan tenure

Personal loans offer flexible repayment options and a suitable tenure that helps you repay the loans conveniently. 

  1. Avoid the burden of heavy paperwork 

Salaried employees need not worry about the hassles of dealing with tedious paperwork. Today, the entire process has been digitized and you can get a personal loan with just a few clicks.

  1. High loan amount

Salaried employees can take personal loans up to INR 50 lakh provided that they qualify for such loans by meeting the eligibility criteria. 

  1. Speedy loan approval and disbursal of funds 

Most lending organizations have a fully digitized and instant loan approval process in place. If you are eligible for a loan and have a good credit score, you even have a pre-approved loan that is offered to you. Once the loan is approved, the transfer of the loan amount takes place in a matter of a few minutes.

  1. Easy-to-meet eligibility

To avail of a personal loan, you only need to meet the basic eligibility criteria. This ensures that the personal loan process for salaried employees is convenient and hassle-free.

Eligibility Criteria of Salaried Professionals for a Personal Loan

As mentioned earlier, in most cases, salaried professionals need not meet any extensive conditions to avail of a personal loan. The eligibility criteria could vary from one lending company to another. Most lenders follow the below eligibility criteria to help them better understand the borrower’s capabilities to repay the loan amount and determine the amount of loan that can be offered to the salaried professional. 

Here are a few of the basic requirements that salaried employees need to meet:

  1. You will have to be a residing citizen of India
  2. You must be anywhere between 18 and 60 years of age
  3. Your monthly salary should not be less than INR 15,000
  4. You should have a total work experience of 12 months or more

Documents Required to Apply for a Personal Loan

To apply for a personal loan, the salaried professional will need to have the below documents handy along with the application form:

  1. Proof of identity: This could be either of the following documents: PAN card, Aadhar card, Voter ID, passport, driving license, etc.
  2. Passport-size photographs
  3. Proof of residence: This could include a rental agreement, electricity bill, telephone bill, passport, etc.
  4. Salary slips: Salary slips of the past three months are required to ensure that the current salary that you are drawing is not less than the minimum salary that is required to take a personal loan
  5. Proof of income: Copy of the bank statements for the last three months will be required

Though the documents required to apply for a personal loan may vary slightly from one lender to another, more or less these documents are requested by most banks and lending companies.

Important Tips for Taking a Personal Loan

If you are looking to qualify for a personal loan, keeping these six key points in mind will help you make the right choice:

  1. Credit Score:

As personal loans are unsecured lending products, a good credit score plays an important role when it comes to sanctioning the loan. Lending companies consider the credit score in evaluating the borrower’s creditworthiness. Any score above 750 increases your chance of getting your personal loan approved.

  1. Beware of hidden costs in personal loans:

There may be a few hidden costs that are a part of the terms and conditions of the personal loan. This could be prepayment or foreclosure charges or at times it could be in the form of inflated processing fees. Before you apply for a personal loan, ensure that you read the terms and conditions carefully and are aware of all the charges that are levied as a part of the loan.

  1. Current employer and job profile: 

If your employer has a good reputation, then this could help in creating a positive impression on the lender. This is something that most borrowers are unaware of. Your employer’s reputation, along with your job profile and position in the company are all key factors that help in improving the chances of getting a personal loan application approved. 

  1. Avoid multiple applications: 

It’s best not to apply for multiple personal loans within a short time. What you need to understand here is that every loan application leads to a credit enquiry — these credit enquiries reduce your credit score and this ends up reflecting on your credit report.

  1. Be honest in your applications:

Ensure that you furnish correct information to the lenders. Before processing the loan, the lending company will verify the information provided. Any incorrect information could lead to your application getting rejected.

  1. Advantages of multiple income sources:

Having multiple sources of income is another factor that could up your chances of getting your loan application approved. Rental income and dividends count as additional sources of income and they help in improving the borrower’s creditworthiness.

How to get a personal loan?

Let’s take a quick look at three major avenues that you can approach to apply for a personal loan:

  • Commercial bank: One of the most common and popular methods to get a personal loan is to approach the bank in which you maintain an account. You could even consider other banks if the interest rates levied by them are more favorable to you.
  • Co-operative bank: Co-operative banks operate on a much smaller scale compared to commercial banks. Co-operative banks are now becoming a preferred option as they offer lesser rates of interest and have flexible repayment options.
  • Online lenders: A lot of non-banking financial companies (NBFCs) have introduced simplifying and speeding up the entire process of the loan application. Many salaried employees consider taking a loan from such NBFCs as they offer instant personal loans with quick disbursement and better repayment norms.

Bottom Line 

For salaried employees, getting a personal loan is no longer a tedious task. The process and eligibility criteria have been redefined to help employees meet unexpected emergencies with ease.

With NBFCs and digital lenders flooding the market and offering reasonable interest rates, employees need not be burdened with financial stress. While your salary can be your source of living, personal loans can be the emergency fund that you need from time to time. This comprehensive guide will steer you in the right direction when it comes to applying for a personal loan —  that said, pre-planning your finances can help a great deal in ensuring that you are able to save enough and not end up hitting a slump with your personal finances.

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