A personal loan is an unsecured loan which means that no collateral is required to avail of this loan. This is what makes it so popular among the younger generation as they do not have sufficient assets to pledge at the start of their career.

What are the purposes for which a personal loan is taken?

A personal loan may be taken for any purpose where quick access to funds is needed. Personal loans may be taken for the following reasons. This is not an exhaustive list since you need not define the purpose of a personal loan.

  • Home Renovation
  • Rental Deposit
  • Dream Vacation
  • Wedding
  • Dream gadget
  • Electric Vehicle
  • Hair Transplant
  • Education loan
  • Medical emergency
  • Investment
  • Down payment on house
  • Home gym
  • Anything else on your wishlist

Who is eligible to apply for a personal loan?

There are a few minimum requirements to be fulfilled before you can apply for a personal loan in India.

  • You need to be a citizen or resident of India
  • You need to be over the age of 21 years and under 60 years
  • You need to earn a net monthly income over Rs 30,000.

If you meet these requirements, you are eligible to apply for a personal loan.

How does one apply for a personal loan?

You will need to go to the Loan Tap website or app and fill in your requirements. The documents needed for personal loan are –

  • PAN Card for proof of identity
  • Aadhaar Card/ Driving Licence/ Passport /Gas or electricity bill/ Rental Agreement/Voter ID/ Ration Card/ Bank Statement for proof of address
  • PAN Card or passport for signature proof
  • Salary slips for the last three months
  • Bank statements of the salary account 

You may also need to submit Income Tax Returns if asked for.

In the case of self-employed individuals, in addition to the above, you will need to provide –

Balance Sheet, Profit and Loss Account and Income statements for the last two years

Income Tax Returns for the last two years

Income Tax Challans or TDS certificates

IT clearance certificate

The actual documents that are requested may vary from lender to lender.

Why are these documents needed for a personal loan?

As you are aware, a personal loan is a collateral-free loan which means the lender has no security to fall back on in case the borrower defaults. The lender needs to be doubly sure about the repayment capability of the borrower. Moreover, since the personal loan is a quick procedure the lender needs access to these documents to run background checks related to the credit score and employment history of the borrower.

Here is a list of Personal Loan Documents 

Salaried BorrowerSelf employed Borrower
PAN CardPAN Card
Aadhaar CardAadhaar Card
Driving LicenceDriving Licence
PassportPassport
Gas/Electricity BillGas/Electricity Bill
Rental agreementRental agreement of business premises
Property Tax ReceiptProperty Tax Receipt of business premises
Voter IDVoter ID
Salary Slips of last three monthsBank Statements of last six months
Bank Statements of last six monthsIncome Tax Statements of last 2 years
Profit and Loss Statement of last 2 years
Balance Sheet of last 2 years

Getting a personal loan is easy in India if you have the necessary documents. With an online portal the mess of making endless photocopies of supporting documents is eliminated. All you need to do is scan and upload the relevant documents.

LoanTap offers a seamless procedure to apply for personal loans. After you submit the online application and upload the documents, you can sit back and relax while the team evaluates your personal loan application. 

If your CIBIL score is good and you have submitted all the documents required for a personal loan application, your loan has a high likelihood of being approved. Once your personal loan is approved, it won’t take long for the cash to be disbursed to your mandated account.

What are the advantages of a personal loan?

  • Personal loans are unsecured loans. Personal loans do not require collateral which makes it easy for a lot of young borrowers.
  • Personal loans are quite easy to avail of.
  • The process of applying for personal loans online is very simple and can be comprehended by all.
  • The number of documents needed for a personal loan is minimum.
  • There is no paperwork involved in a  personal loan application. All you need to do is upload the documents required for a personal loan.
  • The entire personal loan process from start to finish may take 24-36 hours.
  • A personal loan is in fact cheaper than a credit card. Credit cards charge 24-30% on outstanding balances while personal loans are much cheaper.

Why are personal loan documents required?

The personal loan process is completely seamless and digital. There is no paperwork involved. Since personal loans are unsecured loans, lenders need to be extra cautious about the ability of personal loan borrowers to repay the loan on time. To ensure this, they have kept a minimum threshold of income below which people cannot apply. For those above the threshold, the lenders obtain the basic documents and run a background check. The CIBIL score reflects the credit history of the borrower. The bank statement indicates the monthly inflows and outflows. The salary slip confirms the name of the employer, the designation of the borrower, number of years in service, salary details etc. Based on these, the lender is able to make an assessment of the repayment capacity of the borrower. In case of secured loans, the borrower has to pledge assets that provide a security net to the lender in case of default. In case of personal loans, the lender has no such protection. So he has to be extremely careful in collecting the documents and using APIs to run the authentication checks to confirm the credibility and creditworthiness of the borrower.

What care should borrowers take while uploading personal loan documents?

Borrowers should ensure that all documents uploaded by them provide correct information. In case there are errors, they should be fixed by getting in touch with the respective authorities. An incorrect piece of information could lead to the rejection of the personal loan application. 

Why should borrowers check the CIBIL score before applying for a personal loan?

It makes sense for borrowers to check their CIBIL score online before applying for a personal loan. If there are any errors in the Credit Score Report, they can take it up and get the issues resolved before applying for a personal loan. Else the personal loan application can get rejected and it would be difficult to make a fresh application before six months.

Can a personal loan be taken for debt consolidation?

Some individuals get caught in a vicious debt cycle. Before they realise, they have multiple debts which they are repaying simultaneously. This leads to a heavy burden on their monthly budget. They end up taking more loans to repay earlier ones and the cycle continues. In such circumstances, it would make sense to take one personal loan and pay off all the other debts. If these are credit card debts, they would be charging interest at exorbitant rates. Closing the existing expensive debts and taking a cheaper personal laon instead would lead to savings in interest outgo. Once the debt consolidation personal loan is taken, some financial discipline practices should be instilled and strictly followed to avoid a similar situation in future. Sticking to a monthly budget and eliminating discretionary spending will release some funds which can be used to service the personal loan EMI. Over a period of 6 months to a year, if the personal loan is paid off without any default, the credit score will progressively improve and the line of credit will be open again.

Has digitisation made personal loans more popular?

Yes. Digital transformation of banking and finance has led to several innovative products and services being introduced. Personal loans have become very popular because of the ease of availing them via online portals or smartphone apps. This has led to the penetration of these products to underserved segments of the population. Today anyone with a smartphone and having the basic documents and eligibility can apply for a personal loan from anywhere and the cash will be disbursed within 24-36 hours. This is a boon for those in small towns and villages  who had to depend on the unorganised sector for their funding.

LoanTap understands the needs of borrowers and that is why they have designed tailored personal loans to meet specific needs. They also provide a slew of repayment options that make it convenient for borrowers to repay their loans. LoanTap offers loans from Rs 50,000- Rs 10,00,000 for tenures ranging from 6 months to 5 years at interest rates starting from 18%. If you wish to know more, you can visit our website https://loantap.in/ and we can assist you to select the right loan.