In today’s date, it has become common for working professionals to opt for personal loans in order to meet their various needs. It is the unsecured way of borrowing money from the bank after the validation of documents such as income proof, credit and employment history, repayment capacity, etc.
Evidently, personal loans do not have the kind of security as that of home or car loans and the lender cannot even recover from the borrower in case of any mishap since there is no big amenity that is put up on hold. The loans on home or car are comparatively less unsecured than that of personal loans because of the risk it holds.
Personal loans can help to address issues related to the requirement of funds for marriage, education, renovation of the house, vacation, etc. It also comes in handy when you want to start your business or anything as such. The repayment tenure normally starts from 6 months and can go up to 5 years.
One can borrow personal loan depending on his/her salary and credit rating. The bank resists lending an amount, EMI for which is greater than 40-50% of your salary.
The personal loan documents required for verification are usually:
- Photo Identity Proof,
- Residence Address Proof,
- Income Proof,
- Job Continuity Proof,
- Financial Documents,
- 1 passport size color photograph,
- Personal Loan Application Form duly filled.
Three reasons why proof of income is required:
- To verify the borrower’s payback ability
Since the bank issues this loan without any security as discussed earlier, proof of income is the only way the bank can rely on the borrower for repayment. With the help of the proof of income, the bank tries to understand the structure of the borrower’s salary and get a thorough idea of it. We hear all these cases of defaulting of loan all over the world and therefore, before lending any money the bank prefers to know the borrower’s background.
- Best loan scheme as per the borrower’s income pattern
Another important point as to why the bank demands for the proof of income from the borrower is that after doing a thorough study of his income pattern, he can offer him the best loan offers that suit his situation. In this way, both the bank as well as the borrower can benefit from it.
- To gain trust
While showing your proof of income, you have to show the latest 3 months’ bank statement and the salary slips for the last 3 months. If you’re going to borrow money from the bank, it is your liability as well to display your source of income to the bank in return so that there is equal trust maintained between both the parties.
Of all the personal loan documents, the proof of income is indeed the most vital one and helps the lender to decide whether to disburse the loan or not. If you plan to initiate a personal loan, these personal loan documents will definitely be required for your personal loan approval.