Essential Guidelines for Securing a Personal Loan: How to Avoid Rejection

A Personal loan is characterised as quick funding for personal and emergency needs. Individuals apply for a personal loan, assuming the loan amount they apply for will be available as required. This is not always the case, as Banks have their norms and guidelines to follow and will process the request accordingly. 

Choose your lender wisely and apply for a personal loan to the most suitable lender who will fulfil your requirements. Although primary Banks issuing personal loans, such as HDFC Bank, ICICI Bank, YES Bank and AXIS Bank, have their own policies, the basic criteria remain similar. Taking note of the following will help you expedite the processing of your personal loan and avoid undue delays or a decline.

A successful relationship with the Lender 

Banks value the relationship and will process a personal loan as a priority. Applicants with an existing personal loan can apply for additional amounts, known as a Top Up. A pre-approved personal loan is also offered to eligible applicants. An association can be in the form of:

• A salary account with monthly salary credits.
• A savings account of a good vintage.
• Regular transactions and a healthy Balance.
• An existing loan or credit card account.

The Bank must approve the employer.

HDFC Bank processes personal loan applications from employees of companies included in the Approved Company Category List. Applicants employed by a non-listed company can apply for a personal loan with YES Bank or an NBFC such as Fullerton India and INCRED finance. Check the following employer details before applying:

• The company should appear in the Bank’s Company category list.
• The company must have a vintage of at least 5 years.
• The entity should be included in the MCA.
• Partnership and proprietorship companies are not eligible.

Documentation requirements

Documents form the basis for processing a personal loan issued without collateral. Applicants can submit documents online from their official email ID or provide self-attested hard copies. 

• KYC and income documents are required to process a personal loan.
• Clear and valid copies of documents are required.
• The original documents must be available for confirmation.
• One-time submission of all documents will expedite the process.

CIBIL Score and Credit history.

The CIBIL score is a rating issued by CIBIL (Credit Bureau of India Ltd.) based on an individual’s credit history and usage. Lenders view the CIBIL score and history before issuing further credit.

• The CBIL score required by Banks for issuing credit is 720+
• Banks processing loans with a CIBIL score of -1 or 0 are HDFC and ICICI Bank.
• The repayment history of all credit taken for the past 7 years is considered.
• Each credit inquiry reduces your score by 10 to 15 points.

Check your financial eligibility.

Further credit is issued in proportion to your regular income, expenditures, and the monthly EMI being paid. The loan amount is calculated based on the applicant’s income and company category.

• The applicant must have the financial bandwidth to afford the additional credit.
• The credit card debt must not exceed 3 times the monthly income.
• There must be no delays or defaults in repayments for the past three months.
• Apply for a Personal loan Top Up or Balance transfer if you are overleveraged.

What are the additional precautions an applicant can take when applying for a personal loan?

• Use the eligibility calculator before applying to confirm the loan amount you are eligible to get. The eligibility calculator will give you an estimate of the loan amount you may qualify for based on your current financial standing.
• Apply with enough time in hand. Although the ICICI Bank personal loan process is fully digitalised with Video KYC verification, any pending issues can delay it. Banks may request additional documentary proof if required.
• Have the originals of the submitted documents readily available. You will be asked to present the original KYC documents during the verification process, and your income documents will be verified for any discrepancies.
• Your Bank statement is the anatomy of your finances. Your Bank balance will be reviewed for any recent bounces, the average balance you maintain, and whether it is sufficient to cover the additional credit. 
• Do not apply to multiple lenders at the same time for your loan requirements; numerous inquiries will appear on your CIBIL report. Besides reducing the CIBIL SCORE, they will make the lender nervous that you intend to avail credit from multiple sources, which you may not be able to repay.