If you’re looking to apply for a personal loan, your lender or bank will require you to submit some important documents to build up your case and prove eligibility for the loan. This is a mandatory process known as KYC or Know Your Customer. And this verification process is important to prevent fraud and illegal activities.
In India, you may require submitting various documents to get a personal loan. What are these documents? Let’s understand.
Mandatory Documents for Personal Loan
Here are some mandatory documents that all lenders or banks require:
- ID Card
Your company ID card is proof that you are with the organisation that you have mentioned.
- Salary Slip
Your salary slip shows the salary credited to you every month as well as the break-up of it.
- Bank Statement
The bank statement is proof of how much is credited to your bank account every month. You may require submitting the last three months of bank statements to prove that the salary has been regularly credited.
The bank statement is also used for the purpose of checking your liabilities. Moreover, they also check your financial responsibility by looking at how much amount you maintain every month.
- Income Tax Return
In income tax returns, people disclose all their sources of income even if some incomes are exempt from tax. Banks require and give priority to IT assessees since filing returns, even if it is just INR 100, gives weightage to your profile. Based on the number of years you have been filing income tax returns, you can be eligible for a higher personal loan amount.
Common Documents for Personal Loan
Here are some common documents that your bank may ask for when you’re looking to get a personal loan:
You may require one passport-sized photograph and one selfie to prove your identity.
- Address Proof
Proof of your physical address is often required so that the bank can locate you in case of missed or delayed payments. Here are some important KYC documents that you can provide as address proof:
(i) Aadhar Card: The aadhaar card is the most preferred and commonly used document when looking to provide address proof. However, a personal loan on aadhaar may be concerning for some people because of the fear of it being misused. So, you can download your masked aadhaar card as proof of identity.
You can follow these steps to download a masked aadhaar in the case of aadhaar loan:
1. Visit UIDAIs official website: uidai.gov.in
2. Click on ‘My Aadhaar’
3. Click on ‘Download Aadhaar’ card
4. Type your 12-digit Aadhaar card number or UID (unique identification number)
5. Select ‘I want a masked Aadhaar’
6. Enter the captcha code
7. Select ‘Send OTP’
8. Type the OTP and download your e-Aadhaar card i.e., masked Aadhaar
(ii) Passport: The passport is also a valid proof of identity and you can submit this if you’re not comfortable sharing aadhaar details.
(iii) Electricity Bill: The electricity bill is valid if you own the property. However, if the property is rented, you can show the rent agreement.
(iv) Ration Card: Though the ration card isn’t widely used anymore, it is still a valid proof of address.
- Photo Identity Proof
Here are the photo identity proof documents that may be required:
(i) Passport: Passport is accepted as both address and identity proof.
(ii) PAN Card: PAN is a person’s basic identity from a financial institution’s point of view. Your CIBIL, which verifies your credit history, is also linked with PAN. The higher the score, the more eligible you are for a personal or instant loan.
(iii) Aadhar Card: Just like your passport, the aadhaar is also used as both address and identity proof.
(iv) Driver’s License: A copy of the driver’s license works as photo identity proof.
(v) Voter ID Card: A voter ID card is a commonly used alternative for other photo ID proofs discussed above.
(vi) Note: You only need to provide one of your photo ID proofs to apply for a personal loan.
- Salary Proof
Here are the primary documents that can be submitted as proof of salary:
(i) Last 3-6 Months’ Bank Statements: Bank statements are solid proof of your financial stability. The Bank verifies factors like existing loans and payments, regular salary credits, recurring deposits, cheque return/bounce, and recurring savings like interest income, LIC premiums, fixed deposits, etc.
In small companies, where the salaries are not directly credited to the bank, you can either show the cheques or deposit the cash amount in the bank and then use it from there.
(ii) Salary Slips: Usually, the last 3 months’ salary slips are required in order to verify the job status and continuation. Make sure to avoid any deductions in the salary to avoid any misapprehensions.
(iii) Form 16: Form 16 is a TDS certificate that employers give to their employees even if the TDS is deducted or not. It provides financial details as per the income tax format. Banks generally calculate your eligibility based on your IT returns instead of your salary.
- Job Continuity Proof
Your job offer letter, joining letter, or an official letter to prove employment on the company’s letterhead can be used as job continuity proof.
Though the process of putting together all the documents is simple, you can always ask your lender or the bank to suggest alternatives if you do not have one or more documents. Just make sure that the eligibility criteria are met so you can get a loan without any hiccups.
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at email@example.com.