Documents Required For a Personal Loan and Their Relevance
October 24, 2023

Personal Loans serve various purposes, including Debt Consolidation, home improvements and managing unforeseen expenses. A Personal Loan is unsecured, meaning it doesn’t require the provision of collateral like a house or car. Instead, eligibility is determined based on your creditworthiness and ability to repay based on specific documents.

The documents are the basis for sanctioning a Personal Loan, and the loan terms, including the amount, Interest Rate, and Tenure or Repayment period, depending on your profile, credit score, and income.

To initiate a Personal Loan process, the complete list of documents as required by the lender must be submitted. Though the documents needed for a Personal Loan are standard across most Banks such as ICICI Bank and HDFC Bank they can vary and additional documents can be requested depending on the policy of the individual financer.

Essential Documents for Personal Loans for Salaried Applicants

As a salaried employee, you must provide specific documents to support your application when Applying for a Personal Loan. These documents serve different purposes, and here’s an elaboration on the role of each document in the application process:

  • Personal Loan Document Checklist for Salaried Employees
  1. Photo Identity Proof
  • PAN Card

This is a mandatory document for identity verification and financial transactions.

  • Passport

A valid passport serves as a universally accepted proof of identity.

  • Driving License

It serves as a government-issued photo identity proof.

  • Voter’s ID

This is an official document that verifies your identity for voting purposes.

  • Aadhar Card

The Aadhar Card is a unique identification document issued by the Indian government.

Identity Proof check.

A photo identity proof gives a representation of the applicant’s persona. Checklist for documents includes the following:

  • The photograph should be clear and match the passport-size photographs submitted.
  • The date on the document should be valid.
  • The name of the applicant must match the other KYC documents exactly.
  1. Residence Proof
  • Aadhar Card

This document can serve as both identity and residence proof.

  • Utility Bill

A recent utility bill in your name and address confirms your residential address.

  • Passport

A valid passport can also be used as residence proof.

  • Ration Card

It is an official document indicating your residential address.

  • Driving License

It can also be used as residence proof.

Rent Agreement

Between the landlord and the applicant is an acceptable residence proof.

A copy of the landlord’s electricity bill is required to prove ownership.

Residence Proof Requirements.

  • The residence can be rented/self-owned/family-owned.
  • The residence proof should be of the applicant’s current premises.
  • It should exactly match the address given on the application form.
  • The document submitted as a residence proof must be valid.
  • A physical verification will be conducted at the given address by the lender.
  • Be sure to mention a prominent landmark to facilitate verification.
  1. Income Proof
  • Three Months’ Salary Slips.

The salary slips provide current income details.

  • Provide a Six-Month Bank Statement Showing Salary Credits

This shows your regular salary credits, confirming your income stability.

  • Form 16 

Form 16 is a vital income document for salaried individuals, which proves employment continuity and Tax deductions.

  1. Employment Proof
  • Certificate of Employment from Your Present Employer

This verifies your current employment status.

  • Experience Certificate (Previous Employer’s Relief or Appointment Letter and Job Certificate)
  • Current Employer’s Appointment Letter (For Employment Over Two Years)

This serves to demonstrate your work history.

Income Proof 

For Salaried applicants, the salary slip is the mandatory requirement for a Personal Loan and should reflect the following:

  • The name of the employer.
  • The applicant’s name matches the KYC documents submitted.
  • Designation of the applicant.
  • The date and month for which the salary slip is issued.
  • The Bank account name and number to which the salary is transferred.
  • The salary break-up with the:
  • Gross Amount.
  • Tax and other deductions.
  • The net amount transferred.

Bank Statement

The customer’s Bank statement confirms the financial status and dealings when Applying for a Personal Loan. The Bank statement for the last three months must include the following:

  • The customer’s name and account number.
  • A regular monthly salary credit on a designated date.
  • A healthy Bank balance to cover EMI.
  • No bounces or cheque returns.
  1. Photograph
  • One Color Passport Photo

A recent passport-sized photo is required for identification and documentation.

Having these documents in order and readily available can streamline the Personal Loan Application process, making it more efficient for salaried individuals. Specific requirements may vary among lenders and Banks such as Axis Bank, so you should check with your chosen financial institution for additional or unique document requirements.

The Significance of Aadhar Card for a Personal Loan

In India, the Aadhar Card has emerged as a fundamental document with many applications in various aspects of life. Its importance is not limited to identity verification for government schemes and subsidies but extends to the financial sector. One significant role of the Aadhar Card is its relevance in the Personal Loan Application process.

The Aadhar Card, issued by the Unique Identification Authority of India (UIDAI), is a biometric and demographic identification document containing a unique 12-digit number for every Indian resident. This card has gained immense significance in the realm of Personal Loans, and here’s why:

Streamlined Verification

Aadhar Card simplifies the KYC (Know Your Customer) process for lenders. Its unique identification number allows for quick and accurate verification of an individual’s identity, reducing the chances of identity fraud in the Personal Loan Application process. It also eliminates the need for multiple identity and address proofs, making the process more convenient for applicants and lenders.

Digital Authentication

Aadhar Card offers the advantage of e-KYC, enabling the verification process to be completed electronically. This digital authentication eliminates the need for physical documentation and significantly expedites the loan approval process. Borrowers can provide their Aadhar number and lenders can access the necessary information online.

Paperless Application

Many financial institutions now offer paperless loan applications where the Aadhar Card is a primary document. This reduces the environmental impact and makes the loan application process more efficient. Borrowers can submit their Aadhar number and other required information electronically, saving time and effort.

Wider Accessibility

The Aadhar Card is widely accessible, as nearly every Indian resident is eligible to obtain one. This inclusivity ensures that a broader population can access personal loans, even if they do not possess traditional identity documents. This is particularly beneficial for individuals in rural areas who may not have access to other forms of identification.

Secured Lending

Lenders often consider personal loans against Aadhar-verified Individuals lower risk, given the robust authentication and reduced chances of identity fraud. This may translate into more favourable loan terms, including lower interest rates and loan amounts.

Remote Application

The Aadhar Card’s role in Personal Loans is especially relevant in the context of the ongoing digital transformation. Borrowers can apply for loans from the comfort of their homes, regardless of their geographical location, as long as they have a valid Aadhar Card and an internet connection.

The Aadhar Card is pivotal in streamlining and simplifying the Personal Loan Application. Its digital authentication, paperless applications and secure identification methods have transformed how personal loans are processed in India.

Importance of PAN Card for Personal Loan

A Personal Account Number (PAN) Card, issued by the Income Tax Department of India, is a crucial document that holds immense significance in personal loans. This 10-character alphanumeric identifier, unique to each Indian taxpayer, plays a vital role in applying for and approving personal loans. Here’s why the PAN Card is so important in this context:

Identity Verification

The PAN Card serves as a primary document for identity verification during the Personal Loan Application process. Lenders rely on it to confirm the applicant’s identity, reducing the risk of identity fraud. It offers a standardised and reliable way to establish the borrower’s identity.

Signature Verification

The PAN Card contains the authenticated signature of the applicant; thus, it is an essential document required for all financial transactions. The lender will match the signature on the PAN card with the Personal Loan Application form and self-attested documents to ensure that the signatures are genuine.

Financial Stability Assessment

Lenders assess loan applicants’ financial health and stability by examining their income and tax history. The PAN Card is closely linked to an individual’s tax records, including income details, tax payments, and financial transactions. This information provides a comprehensive view of the applicant’s financial situation, helping lenders make informed decisions about loan eligibility and terms.

Adequate Tax Compliance

The PAN Card is directly tied to the payment of income tax in India. To be eligible for a Personal Loan, applicants must demonstrate tax compliance. Lenders often require a PAN Card to ensure borrowers have filed their income tax returns and adhere to their tax obligations.

Limit Adherence

Personal Loans come with various regulatory limits, such as interest rate caps and loan amount restrictions. The PAN Card helps lenders verify whether the loan amount and terms align with these regulatory guidelines. This ensures that borrowers are provided loans within legal and permissible limits.

Reduced Tax Deduction at Source (TDS)

Regarding interest income from fixed deposits or other financial investments, the PAN Card must ensure that TDS (Tax Deduction at Source) is deducted at the correct rate. This ensures that borrowers do not face unexpected tax deductions that could impact their ability to meet loan repayment obligations.

Income Verification

Lenders often rely on the PAN Card to verify the applicant’s stated income against their tax returns. This cross-verification process helps ensure that the applicant’s income is accurately represented and can be used to determine the loan amount eligibility.

Legal Requirement

From a regulatory perspective, many lenders are legally obligated to collect and verify the PAN Card details of loan applicants. This is by anti-money laundering (AML) and know-your-customer (KYC) guidelines imposed by the Reserve Bank of India and other regulatory bodies.

The PAN Card is a cornerstone in India’s Personal Loan Application Process. It is a reliable means of identity verification, financial assessment, and tax compliance verification. The PAN Card ensures transparency and adherence to legal and economic standards for lenders and borrowers. Therefore, when Applying for a Personal Loan, having a valid PAN Card is essential and often mandatory to facilitate a smooth and successful loan application process.

Eligibility Criteria for Personal Loan

Age

Generally, applicants must be between 23 and 60 years old to be eligible for a personal loan. However, the age range can vary between lenders.

Employment

Lenders typically require applicants to be salaried or self-employed individuals with a steady source of income and a minimum work experience of 2 years.

Income

There is usually a minimum income requirement, which varies among lenders. ICICI Bank entertains applicants with a monthly income of 35k and above. In contrast, YES Bank allows applicants with a salary of 25k to apply. The income threshold ensures that applicants can repay the loan amount.

Credit Score

A good credit score, or CIBIL Score of 750 and above, is typically required for better loan terms. Some lenders may offer loans to individuals with lower credit scores but higher interest rates.

Employment Stability

Lenders may consider the applicant’s employment history. Salaried individuals might need a minimum number of years in their current job, while self-employed individuals might need to demonstrate their business’s stability.

Residential Stability

Lenders may verify the applicant’s residential stability, which can involve living in the same place for a specified period or residing in a self-owned or family-owned residence.

Repayment Capacity

Lenders assess the applicant’s ability to repay the loan based on their income and existing financial obligations.

Credit History

A clean credit history is usually preferred without a record of defaults or late payments.

Loan Amount

The loan amount you’re eligible for depends on your income, credit score, and other factors. Higher income and better credit can lead to more significant loan amounts.

Existing Loans

Lenders consider the applicant’s existing loans, as having too much debt can affect your eligibility for additional loans.

KYC Documents

Applicants must provide proper identification and address proof documents as part of the KYC (Know Your Customer) process.

Employer Category

Some lenders have specific eligibility criteria based on the employer or company an applicant works for. Prominent Banks such as HDFC Bank Publishes a Company Category List of approved companies fulfilling the eligibility criteria for sourcing. Public sector employees and certain reputed private companies may have more favourable terms.

It’s worth mentioning that eligibility criteria may differ from one lender to another. Hence, verifying your chosen lender’s specific prerequisites and confirming your eligibility is recommended before initiating a Personal Loan application.

Conclusion

The applicant needs to complete the application form to apply for an Online Personal Loan or physically provide self-attested documents that are crucial in expediting the approval process. Any discrepancies in the documentation should be rectified to ensure a smooth application experience. Documents provided must be legible to avoid any miscommunication.

Additionally, it’s essential to remember that banks meticulously review the submitted documents. Therefore, having a complete and accurate set of documents can expedite your loan approval, while a single incorrect document could lead to the rejection of your loan application.


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