Simple Guide to Applying for a Personal Loan: Documents and Tips on Obtaining Easy Approvals with Interest Payment Reduction

Personal loans can save a soul in the face of medical bills, home improvement, or a long-overdue holiday.
However, a prerequisite for this is to know what documents are required, how to get it approved easily, and how to save on interest by making part payments or closing the loan early (pre-closure).

All this will be explained in simple language through this blog.

Documents You Will Need to Provide for a Personal Loan

When you apply for a personal loan, you may need to provide some standard documents. You do this to prove to the lender-such as a bank or finance company that you will indeed repay the loan.

1. Identification Proof: Any valid government-issued ID, such as a passport, Aadhaar card, voter ID, or driver’s license, as ID proof.
2. Residence Proof: Utility bills such as electricity, gas, water, Aadhaar card, or rental agreement to prove that you reside there
3. Income Proof: To see whether you can repay the loan; you must provide salary slips if employed in some organization, or income tax returns, if self-employed. The lenders generally ask for bank statements for the last three to six months.
4. Employment Proof: A letter of employment is necessary for those who are employed under any organization and GST Numbers, or business registration numbers are required for the one’s who are self-employed.
5. Photos: Passport-size photos should be attached along with the application form.
6. Credit Score: The lender will ask for your credit score. Generally, the more impressive your credit score, the easier it will be to get a loan.

How to Easily Acquire a Personal Loan

Here are some tips to ensure that the loan application goes on smoothly and gets approved in no time:

1. Maintain a good credit score: This is a measure of how you have handled debt in the past. The higher your score, the better. The most ideal is above 750. Pay your bills on time, and do not borrow more than you can afford.
2. Show Stable Income: Lenders want to see that you have a consistent income. For an employee, it is acceptable if he or she has been with the same company for at least six months. The self-employed person would like to show consistent income.
3. Choose the best lender for your loans: A person must try and compare several banks or finance companies to avail of the best available deals offered by lenders
4. See to it that your documents are orderly: Ensure all your documents are in order when applying. One document might make your application take longer, or in extreme cases, get rejected.
5. Seek a Loan Amount Reasonably and the one which would likely be granted: Your lenders will only approve the loan amount equivalent to your repayment capabilities based on your income and your credit scores.

Saving Interest Cost: Part Pay and Pre-Close

After you receive the loan amount, it starts clocking interest concerning the loan you borrowed. You might be interested to know that you can also reduce your interest cost. Here’s how you can do it:

 Part Payment

The extra amount that one pays against the loan above his usual monthly payments, called EMIs, is part payment. This reduces the total interest payable as it reduces the outstanding balance.

Why is it helpful?

1. Do the payment to such an extent that interest is reduced: Once in the part payment, you have paid more amount than what should be paid monthly because of that the interest is then charged less which further helps in reducing the principal amount as well.
   2. Additional payments can be made upon request: If you have received any bonus amounts or have an extra amount in your hands you can also opt to make additional loan payments
2. Best for Long-Term Loans: For lengthy loan terms one can surely make early advance payments that could help in saving more money in interest rates.

Pre-Closure

Pre-closure or loan foreclosure is a full payment to your loan provider before the loan tenure is over. Pre-closure will save you a lot of money by saving interest, but your lender might have a small fee to be paid for the pre-closure of the loan.

1. Repay No Interest: Once the pre-closure is done then you are not supposed to pay any interest or EMIs.
   2. Pre-Closure Charges: As a pre-closure charge, the lender will be allowed to keep between 2 to 5 % of the remaining principal on the loan balance.
2. How Early to Pre-Close: It does not make sense to pre-close a loan too close to the end of the loan term-for example, in the last half of the loan term by then you’re paying more of the principal than interest.

Additional Interest-Saving Techniques

– Bargain over the Interest Rate: If your credit score is good, try to work out the negotiation between you and your lender to lower your interest rate.

– Choose a Shorter Term of the Loan: The longer the loan duration, the lesser the EMI and the greater the total interest. If possible, select a shorter term of loan to minimize the total interest to be paid.

– Refinance the Loan: With every decrease in interest rate or improvement in credit, refinance the loan to get a better rate.

Obtaining a personal loan is one of the simplest processes when all the necessary paperwork is in order and preparation is made in advance. Those loan applications would be easily accepted if you just make sure that your credit score is high, and that all your paperwork is submitted, Still to get it approved do not forget to choose the best and the correct lender Once the loan has been secured, you can pay off part of it or close it early to avoid paying interest.