According to sectoral credit data released by the Reserve Bank of India, unsecured personal loans processed by banks increased by 13.5 per cent in December 2016, as compared to an increase of 18.5 per cent in December 2015. Personal loans have become a hot favourite when one is in a financial fix. The loan amount can fulfill all your immediate needs, including family vacation, medical emergency, house renovation and more. When compared to a secured loan, there is less paperwork, since the bank does not have to spend time verifying any asset. However, you do need to qualify an income criterion and minimum CIBIL score to qualify for personal loans.
ICICI Bank (11.29% – 17.50%), HDFC Bank (11.29% – 19.50%), SBI (11.95% – 16.55%), Kotak Mahindra (11.50% – 19.65%), Axis Bank (15.00% – 20.00%), Bajaj Finserv (11.99% onwards), Standard Chartered (11.99%% – 13.49%), Fullerton India (16.00% – 32.00%) and IndusInd Bank (14% – 16.5%) are the banks offering personal loan with the best interest rates as of February 2017.
Also read: Best personal loan rates in India
Steps to Apply for a Personal Loan in India
Step 1: Plan a Budget
It is easy to consider applying for a personal loan during times of financial need. However, meticulous planning on how much money is required and how you intend to repay it should first be done at your end. Moreover, you need to assure the requisite resources to pay the interest regularly.
Step 2: Check for Eligibility
To check for eligibility, visit different bank websites or visit their branches to speak with executives who can give you a fair idea about eligibility. To calculate your monthly payments for the tenure and amount of loan you wish to take, use the online EMI calculator from banks like HDFC and others. Knowing your EMIs beforehand will keep you in sync with what you have to budget for. It lets you adjust your loan amount or tenure if it is more than what you can afford to repay every month.
Step 2: Self Review your CIBIL Score
As mentioned, other than your income, your CIBIL score plays an important role in loan approval. It also gives you an idea of the loan amount and the interest rate, since a higher CIBIL score means a higher loan amount with lower interest rates and vice versa. To know your CIBIL score, visit the CIBIL website, fill in the form and pay Rs. 470 online for one report. The CIBIL score will be delivered at the given email address. You should know that the minimum CIBIL score for a personal loan is generally 750.
Step 3: Compare Different Bank Offers
Most websites allow you to compare various offers from different banks. Using their comparison tool, you can ensure that you are picking a lender offering good terms.
Step 4: Submit the Documents
After finalizing the lender, a bank’s executive will come and collect documents supporting proof of identity, income and residence proof, along with 2 passport size photographs. You are also required to produce copies of your IT returns and salary slips for the last 3 months, along with the last 3 months’ bank statements, ration card, passport, driving license, and other relevant documents. Self-employed individuals will need to present audited financials for the last two years, Bank statement for the last 6 months, office address proof, proof of continuity of business, etc., are also needed.
Step 5: Loan Approval
Bank will now send a senior bank executive for the verification of the address and double check the facts given in the documents. Your presence at your residence is highly essential at that point of time, otherwise the investigator could report that the facts you provided do not actually add up. This might force the lender to reject your loan application.
Also, the bank will check your CIBIL score and credit report, while verifying details like your PAN, income and others important information, mentioned in the application form. If everything goes well, your loan will be approved and subsequently disbursed. However, most applications are rejected because people do not have the minimum requisite CIBIL score.
When planning to get a personal loan, start restoring your CIBIL scores a few months before applying with these tips:
- Do not delay or miss any credit card payments.
- Limit your utilization of the credit limit.
- Avoid multiple loan/credit card applications in a short span of time.
- Pay regular EMIs for any pending loan.
So, there you have it. Now that you know how to apply for a personal loan online, read about the tips and tricks to getting a cheap personal loan online.