What does the Bank Check before Giving you a Personal Loan

A personal loan is a widely sold financial product nowadays. In case of financial crises people like borrow money from the banks or non-banking financial organizations at some rate of interest.  When you are borrowing this money for your personal use then this is known as a personal loan. In personal loan bank does not ask you the reason to borrow the money, you can use it wherever you want to. One more feature of a personal loan is that it is an unsecured loan. They don’t require any collateral. Basically collateral is something that you pledge to the bank as a security while getting a personal loan.A collateral must require in case of a home loan, car loan or any other kind of loan. But before providing you a personal loan bank put some checks on your financial life. Let us discuss them

  • Credit History

As the personal loans are an unsecured loan so the bank needs to know about two things.

  • Your personal credit history.
  • Your commercial credit history.

Because there is no collateral in a personal loan, so the bank needs to check your personal credit history and business credit history as well. Your personal credit history shows the record of your personal financial life. It shows that how you deal with your personal debts and your commercial credit history tells about the record of your business debts. If you have dealt with them properly then it will be good and you CIBIL score will be good and you will get a personal loan easily, otherwise, you will have a problem in getting a personal loan. Because a bad CIBIL score represents that you are not punctual with your debts whether they are personal purposes or for business purposes.

  • Income

After your credit history bank also checks the income/salary of the applicant. This assures the bank that the applicant has some source of income and he/she would be able to return the loan.  But the income should be more than Rs. 20000 at least. In case the applicant is a self-employed he/she should be paying the ITR of 2.5 Lakhs per annum for the last three years at least.

These are some things that bank checks before giving you a personal loan.