Personal loans are the funds that help you in meeting your shortfall of finances when you are in need of a large amount.
There are many factors that affect your application of personal loan. These factors include your company, your place of working, your place of residence, the salary you are getting, your credit history, your credit score and many more. Not only your good credit score and credit history make you eligible for getting a personal loan. There are many other factors that need to take into consideration while making you eligible for a personal loan.
One of these factors after employment is your place of residence. Yes, you are right your home whether rented, own or shared creates a difference between the approval and rejection of your loan application.
A residence is a place where you live and it is an important determinant when it comes to loan approval. If you own a house, then it makes you more eligible for the loan. On the other hand, if you are staying in a shared accommodation or as a paying guest and you are in your first job after graduation, then it will affect your eligibility negatively. Since the lenders may find a risk in granting you loan as you are already having a burden of paying rent, then in that managing loan installment would be difficult. Also, in the first job, the salary is also not much. So, it also poses a threat that if you are not earning much and already have a responsibility of paying rent, so there are chances that loan repayment will be difficult for you.
A personal loan is an unsecured loan and is based on the assurance that you will pay it back in monthly installments. So, if you are staying as a paying guest or in shared accommodation, then there are chances that you will change your place of residence due to a job change or you have to stay back at your own residence. So, it poses a threat that you might not be able to pay the loan or run away without paying the loan. On the other hand, if you have your own place of residence and earning, then it has a positive impact on the loan application. It also reduces the threat that you might run away without paying the loan amount since it’s your residence.
If your place of residence and the working place is the same in one city, then it will double your chances of getting a loan along with a good credit score and repayment history.
Another thing that also needs to be completed and in place is documentation. If your documentation is not proper, then also your loan application will be rejected straightaway. So, make sure to have proper documentation to enhance the chances of approval of the loan. For having proper documentation, you must be aware of what documents are required for the loan. Make a list of what documents and prepare as that list.
Here Are Some Documents that you Will Need with your Loan Application
Proof of Identity
Your identity is verified so as to ascertain whether you are eligible for a personal loan or not. In many cases, you must be an NRI or the citizen of any other country who is living in India. You must be of 18 years of age and must have a verifiable bank account.
Here are some types of documents that a lender would accept for proving your personal identity:
- Driver’s license
- Social Security card
- State ID
- Military ID
- Certificate of citizenship
- Government-issued photo ID
Proof of Address
Your place of residence is also verified for making you eligible for a personal loan. Sometimes it is possible that you must be a resident of one state and applying for a loan in another state. Also, the lender wants to know that whether you own a house or staying in a rented accommodation. If you own a house, then from how much time you are living at the current residence. For loan approval, you must be staying at a place for last one year. Living in one place for three years will be a green signal that will show your stability and make you eligible for a loan.
Here are some types of documents that will be accepted by the lender to prove your address:
- Utility bill (such as power, water, or cable)
- Lease agreement
- Voter registration
- KYC documents such as Aadhaar or PAN card
- Insurance for your vehicle, rental, or home
While granting you a loan, the lender will surely check your income amount and income source. If you are working for a big company and earning a handsome amount, then you will have bright chances of getting a loan. But if you are earning a good income but your source is not fixed such as rent, you will be in danger as it might pose a threat on your loan application. Lenders will evaluate your income that will access your paying capacity.
Here are some types of documents a personal loan lender may accept to prove your income when you’re an employee:
- Bank statements
- Pay stubs
- W-2 tax forms
- Copies of income tax returns
- Verification from your employer
So, before applying for a loan, take these things into consideration and make your loan application successful.