Personal loans in India have increased 2.3 times in value and 3.8 times in volume in FY21 from FY17. As these loans come with no end-use restriction, they help salaried employees meet their financial needs, whether it’s buying a house/car, medical treatment, or your child’s education.
An instant Loan for Salaried Employees lets households make big-ticket purchases without the risk of losing valuable assets. As these loans are unsecured, the borrowers do not need to put their property or gold ornaments on the line. However, these loans carry higher interest rates due to their increased risks.
When Should you Take a Personal Loan?
The following are some of the popular usages of personal loans-
- To pay off a higher-rate debt like credit card bills
- When there is a sudden medical emergency
- Sudden business-related needs, such as a bulk order or need to fill in inventory
- High wedding expenses
- Expenses for the higher education of one’s child
- An expensive family vacation
- Home renovation and repair expenses
Features of an instant personal loan for salaried employees
End-use purpose: Personal loans can be used for any individual need as financial institutions do not monitor their use.
Loan amount: Financial institutions consider factors, such as an applicant’s income, liabilities, and credit score, to decide the maximum sanctioned loan amount. Usually, they restrict the loan amount so that the EMI is not more than 40% to 50% of the applicant’s monthly salary.
Loan duration: The personal loan tenor can be between one and five years, depending on the financial institution. Some of them can also offer longer or flexible tenors.
Interest rates: As personal loans are unsecured, they carry higher interest rates than car loans or home loans. Moreover, the rates are dependent on essential factors, such as credit score, loan amount, income level, and the NBFC’s past relationship with the borrower.
Quick approval: Due to their basic eligibility criteria and documentation requirements, personal loans get approved quickly. Based on the financial institution, it can take anywhere from 24 hours to a week. Many of them even provide almost instant approval for small personal loans online.
With pre-approved loans, the approval time is even shorter, and no extra documents are needed. You can check your pre-approved offer in just three seconds for a variety of products like personal loans, business loans, and the like.
Eligibility criteria for a personal loan for salaried employees
Different financial institutions have different eligibility criteria for personal loans. Given are some of the standard parameters for most institutions:
- Age: Between 20 to 60 years
- Employment: Must be employed at a reputed private or public limited company or an MNC
- Salary: The minimum income is based on the city of residence
- Nationality: Indian residing in the country
- CIBIL score: Must have a minimum score of 750
- FOIR (fixed obligation to income ratio): 30% to 50%
Documents required for an instant personal loan for salaried employees
Given are some of the key documents that most financial institutions require for personal loans:
- Proof of identity (voter ID card, Aadhaar card, passport, driving license, etc.)
- Address proof (ration card, utility bills, rental agreement, passport, etc.)
- Employment ID
- Proof of income (salary slip, Form 16, bank account statements, etc.)
- Passport-sized photograph
How can salaried individuals improve their personal loan eligibility?
Here are a few tips to improve one’s eligible loan amount-
- Apply for a joint loan: You can apply for a joint personal loan with your family member (spouse or parents) to be eligible for a higher loan amount. However, this does not work if the co-applicant has a poor credit history.
- Reduce your debt to income ratio: Try to manage your debt so your total credit is not more than 30% – 40% of your monthly income. You can do this by paying off your existing dues and credit card bills on time.
- Improve your credit score: Try to get a credit score above 750 to be eligible for a larger loan amount.
- Do not apply for multiple loans: Each application with a financial institution counts as a hard inquiry, and too many hard inquiries can affect your credit score negatively. Hence, you should avoid making too many loan applications with different NBFCs.
An instant personal loan for salaried employees allows employees to meet out-of-pocket expenses. These loans effectively solve such monetary requirements, whether it’s the costs for a sudden medical emergency or fulfilling one’s life goals.