6 things salaried employees should know before applying for a loan against salary
6 things salaried employees should know before applying for a loan against salary: After getting settled with a well-paying job, everyone would look for things that would improve the quality of life. This might make him look for various financing opportunities that enable him meet his needs. Applying for a bank loan is one of the most sought after ways whether it is car loan or a housing loan and even a personal loan. So, before applying for a bank loan, one an employee must know few important things in connection with the bank loan and his employment.
loan against salary
1. Salary certificate/ Salary slip:
Banks would assess your repayment capacity by having a glance at your income level. For salaried employees, the best things that enable the banks to do this are following
It is a certificate where the payroll processing officer of the organization you work for would certify that your latest salary is so and so. It serves as an authenticated document for the banks/lenders to check your net monthly income (NMI).
Every month after your salary is disbursed; your employer would send you a salary slip that consists of the details various components of your total earnings and contributions made under the mandatory social security schemes such as (PF, ESI etc.). This is very important at the time of applying for a loan or a credit card.
2. Net monthly income:
In the context of salaried individuals, net monthly income is the amount of salary that is left for one’s personal consumption after deducting the taxes and statutory contributions such as PF and PT tec. Banks consider this as the actual income that is in the hands of the borrower.
3. Check off facility:
While availing a loan against salary, few banks such as SBI offer loan with check off facility and without check off facility. Check off facility means an arrangement where the employer of the borrower would agree to deduct the loan installment directly from the borrower’s salary and remit the same to bank/lending institution. As a part of this a tri-party agreement is signed between bank, employer and the borrower.
4. Credit score:
It is a numerical expression of a customer’s creditworthiness. After reviewing the credit history, a statistical number is assigned by credit rating agencies that represents how responsible the individual is in discharging his liabilities. A credit score more than 750 is considered as good by most of the banks and lending agencies. A good credit score is must for getting a bank loan as the primary criteria any bank would look for is how good you are in honoring your debts.
5. Processing fee:
Banks charge certain amount of fees to process your loan application. Usually this would be certain percentage of the loan amount.
6. Pre-payment charges / Foreclosure fees:
In case you want to repay a part or full amount of the outstanding loan even before the actual installment due date, the banks/lenders charge fees for pre-paying the loan. Usually this would be a percentage of pre-payment amounts.