In today’s world, personal loans are one of the most significant catalysts for fulfilling the many needs of day to day life. The reason for taking the loan can vary from meeting household purchases to other needs such as a medical emergency or marriage. Personal loans can be utilised for such purposes without disturbing your savings and investments. A prudent person will reflect on the needs, work out the approximate funds required and find out the lowest cost of obtaining the personal loan.

Today, due to widespread internet penetration, the procedures for taking out a personal loan are very easy and simple as there are innumerable websites catering to prospective customers for such purposes. An individual who is not web friendly may also approach the banks directly for such a purpose. The banks too have special units within their branches, dealing with individuals seeking a personal loan.

A personal loan is nothing but a loan which is not secured by any asset belonging to an individual. Popularly, known as an “Unsecured Loan”, the personal loan usually comes with interest rates that are higher in comparison to that of the car or home loan. The period of loan repayment for personal loans too is much shorter than secured loans such as the car or the home loans.

In the majority of cases, personal loans are usually utilised for purchases of electronic goods, furniture, vacations, repair works, home renovations, marriage expenses, etc.  After the sanction of such a loan by the bank, the borrower is free to utilise it at their own free will. There is no interference from the bank in any manner.

The condition to obtain such a personal loan may vary from bank to bank. However, the following conditions are usually looked into before sanctioning of any personal loan which is common to all nationalised and private banks in India.

1. Age of the borrower
2. Occupation of the borrower
3. Income of the borrower

These inputs assist the bank to assess the capability of the borrower to be able to repay the borrowed amount in the form of an unsecured personal loan along with interest. These inputs also determine the approximate funds that the bank is likely to sanction to the borrower.

A salaried individual may be able to procure a personal loan in a far easier process than individuals who are self-employed or run businesses. A salaried individual has a fixed monthly income which usually acts as a guarantee for the financial institution. Along with that, taking into account the three predefined parameters of age, occupation and income of the borrower, the banks are able to easily determine the repayment capacity of the borrower. Once that factor is stable, it takes no time for them to arrive at the number of funds which can be disbursed to the borrower. Most of these personal loans generally have a repayment period of 3 to 60 months in duration.

Different banks may have some specific eligibility criteria, but generally, the conditions that are adhered to are:

1. The minimum age of the borrower has to be 21 and a maximum of 60 years of age.
2. The borrower should be employed for at least one year in their current organisation before making an application of personal loan.
3. The minimum salary income eligible for a personal loan may vary from bank to bank, but generally, the range is from Rs. 13,000/- to Rs. 20,000/- depending on the respective financial institution.
4. The personal loan eligible to the borrower is designed on the basis of the EMI calculated which can be repayable by the borrower. This ratio usually does not exceed 40% to 50% of the monthly income of the borrower.

For a salaried individual, in order to obtain a personal loan, the banks will insist on some sort of an identity and income verification process which will involve furnishing of certain documents such as income proof, identity proof and address proof of the borrower. Usually, the following documents are submitted in compliance with such verification processes.

1. Identity Proof: PAN / Voter ID / Passport / Driving License
2. Address Proof: Passport / Voter ID / Utility Bill / Rental Agreement
3. Income Proof: Pay Slips / Salary Certificate / Form 16 / Income Tax Return / Bank Statements for 4 to 6 months / Bank Pass Book

If all the documentation of the borrower are readily available for the verification procedure by the bank and the financial institution is satisfied with the same, then at present it does not take more than a day to obtain a personal loan for a salaried individual. The bank either issues a cheque or credits the approved personal loan amount into the designated bank account of the borrower electronically.

Before taking out a personal loan, it is recommended that salaried individuals should speak to several banks, compare interest rates, processing fees, ask about any hidden costs, penalties for early loan closure, etc. before settling on a financial institution.

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