(ThyBlackMan.com) Income and employment verification are critical steps in the personal loan disbursement process, protecting both the lender and the borrower. Ensuring that the necessary documentation is accurate and complete can also help streamline the loan approval process.
How do income and employment verification protect you?
Income and employment verification serve a dual purpose: safeguarding both the bank and the borrower. Lenders evaluate your income level and employment status to ensure the loan is within a reasonable threshold, reducing the likelihood of a default. By confirming these details, lenders can ensure that the loan aligns with your repayment capacity.
Additionally, these verifications help establish your credibility, increasing the likelihood of loan approval. To perform these checks, lenders typically require supporting documents to validate your income, employment, identity, and address.
Key documents required for verification
Proof of identification: Lenders need documents to confirm your identity, such as your Full Name, age, and Passport photograph.
- Aadhaar Card
- PAN Card
- Passport
- Driver’s License
Proof of address: Address verification documents help confirm your place of residence.
- Utility bills (electricity, water, gas)
- Ration Card
- Bank account statement
- Rental agreement or sale deed
Proof of income: For income verification, lenders require documents that confirm your earnings. The specific documents needed vary depending on whether you are self-employed or an employee:
Salaried individuals: Documents such as salary slips from the past three months, three to six months’ worth of bank statements, and an employment form 16 can also provide a preview of the borrower’s income.
Self-employed individuals: Generally, two years of the ITR with bank statements and profit and loss statements would be necessary.
Employment proof: Employment verification assists lenders in establishing job tenure. In some cases, salaried applicants may have to present a cover letter from their employer or an appointment letter. In other cases, self-employed applicants may need to submit documents related to the business, such as ownership or registration certificates.
Significance of credit score during the verification process
A good credit score is a key factor in determining whether your loan application will be approved. It reflects your financial behaviour and repayment history. Most lenders require a minimum credit score of 750 to qualify for a personal loan, although specific thresholds may vary.
A higher credit score not only improves your chances of approval but also helps you secure better terms, such as lower interest rates. Using a Personal Loan EMI Calculator before applying can ensure that the loan amount and repayment terms fit within your financial capacity.
The Personal Loan Verification Process
- Submitting the Application and Documents:
Once you submit your loan application, the lender will verify the details using the documentation provided. This includes proof of identity, address, income, and employment.
Lenders may also contact you directly or visit your home or workplace to confirm the details submitted in your application.
- Decision and Loan Approval:
The lender evaluates your credit score, monthly income, and employment status to decide your eligibility. If your application meets the lender’s criteria, the loan is approved. - Disbursement of Funds:Once approved, the loan amount is sanctioned and transferred to your bank account.
Conclusion
Personal Loan applicants must be verified alongside the documents that provide evidence of their income and employment status. Apart from these, complementing all documents and fulfilling the requirement of a good credit rating increases the likelihood of the application being accepted.
Similarly, one can use the Personal Loan EMI Calculator to avoid applying for a loan larger than their capacity to repay. This seems an effective way for young people with simple documents and information who are ready to provide such details.
Staff Writer; Latasha Short
