Personal Loan Checklist: All About Personal Loan

Getting a personal loan might seem simple—you apply, get the money, and use it as needed. But before giving you the loan, banks or lenders need to make sure you can repay it. That is where income proof enters the picture. It is a way of proving that you have enough money coming in on a regular basis so that you can pay back the loan on time. You may be employed on a salary, self-employed, or even freelancing, but lenders will ask for documentation to prove your income before they lend you money.

What is a Personal Loan?

Personal loan is money that you borrow to fund your individual financial requirements, such as medical expenditure, repair of a home, holidays, or studies. You don’t have to give any security or asset to get this loan. Banks, NBFCs (non-banking finance companies), and online lenders provide personal loans. The borrowing limit and the repayment tenure will depend upon factors like your salary, credit profile, and capacity to pay the amount back.

Income proofs required for a Personal Loan

Income proof helps lenders understand how financially stable the borrower is. As personal loans do not require any security, the risk is greater for lenders. In order to minimize this risk, they verify whether the applicant has a regular income and can repay the loan in time. Individuals with greater income and stable employment typically receive better loan terms and lower interest rates.

How to apply for a personal loan?

• Research and compare: Look into different lenders and compare the terms of their loans, interest rates, fees, and who can apply.
• Verify eligibility: Use online calculators to determine whether you are eligible for the loan amount you want or not.
  
• Collect documents: Collect your documents, including proof of ID, proof of residence, and proof of income.
  
• Apply online or offline: Either apply online from the website of the lender or go to a bank office to complete the form.
  
• Submit: Finish your application by submitting the form and documents requested.

Documents needed for a personal loan

While applying for a personal loan, lenders request the following documents to verify the identity, address, and income of the borrower.

Identity Proof: Aadhaar card, PAN card, passport, voter ID, or driving license.

Address Proof: Aadhaar card, electricity/water/gas bill, rental agreement, or passport.

Income Proof:

For Salaried:

• 3 to 6 months of salary slips.
  
• 6 months of bank statements indicating salary credits.
  
• Form 16
  

For Self-Employed:

• 2–3 years Income Tax Returns
  
• Last 6–12 months bank statements
  
• Profit and loss statements
  
• Business registration certificate

Income Proof Requirements for Various Applicants

Various income proofs are needed by lenders based on the type of employment:

1. Salaried Individuals

• Minimum monthly salary (lender-specific, typically Rs.15,000 to Rs.30,000)
  
• Should be working for at least 6 months to 1 year
• Income Proof: Salary vouchers, bank accounts, Form 16

2. Self-Employed People

• Should possess a stable business with 2–3 years of regular income
  
• Should comply with the lender’s minimum yearly turnover requirement
  
• Income Proof: ITR, bank accounts, profit & loss account

3. Pensioners

• Must have steady pension income
  
• Income Proof: Pension document, bank statement of pension deposits

4. Freelancers and Gig Workers

• Must have provide steady income for the past 6–12 months
  
• Income Proof: Bank statements, ITR, payment invoices

What if you lack sufficient income proof?

If you lack regular income documents, you can still apply for a personal loan with other alternatives:

• Alternative income verification: A few lenders accept other forms of documents, including rent receipts, investment income, or statements of fixed deposits.
  
• Apply with a co-applicant: Applying with a co-applicant having a steady income may enhance your chances of getting approved.
  
• Go for a secured loan: You can provide something valuable such as gold, property, or a fixed deposit as security to obtain the loan.
  
• Keep a high credit score: A good credit history will enable you to get approved, even if your proof of income is poor.
  

Income proof is necessary for personal loans as it proves to the lenders that you are able to repay the loan. But if you lack the standard documentation, alternatives like a secured loan or co-applicant can assist. Compare lenders every time to get the best offer.