Applying for loan? Keep these 6 documents ready or risk rejection, says expert

It has become extremely common to avail a loan while making a big ticket purchase like a car or a home, or while going to study abroad or on a holiday. And the borrowing journey begins with the loan application process — which can be smooth sailing if the applicant has all the documents in place before applying. Also, one of the factors that can significantly influence the success of the loan application process is the provision of complete and accurate documentation. 

Accurate documentation not only expedites the evaluation of the application but also establishes the applicant's credibility and financial stability, says Vikas Singh, co-founder of Sugmya Finance Private Limited — a 100% cashless NBFC licensed by the Reserve Bank of India (RBI). “In the lending landscape, documentation acts as the foundation upon which the entire loan assessment is built. It reflects the applicant's financial health, repayment capacity, and reliability,” he adds.

He explains that comprehensive documentation offers lenders a holistic view of the applicant's financial profile, enabling them to make well-informed decisions. Singh says that this transparency "cultivates trust between the borrower and the lender, ultimately fostering a successful partnership."

Loan application: What all documents are required?

Lenders typically require an array of documents to accurately evaluate an applicant’s creditworthiness. These provide insights into various facets of an applicant’s financial life and the ability to repay the loan.

As per the co-founder of Sugmya Finance Private Limited, the important documents required for loan approval are — 

1) Proof of Identity: This includes documents such as a valid passport, driver’s license, Aadhaar card, or PAN card. These documents verify the applicant’s identity and help prevent identity fraud.

2) Proof of Address: Documents like utility bills, rent agreements, or official government letters validate the applicant’s residential address and stability.

3) Income Proof: Lenders often request income tax returns, salary slips, or business profit and loss statements to assess the applicant’s income and repayment capacity.

4) Bank Statements: Bank statements provide a clear view of the applicant’s financial transactions, cash flow, and spending patterns. This information helps lenders gauge the applicant’s financial stability.

5) Business Plan: For business loans, a well-structured business plan outlines the purpose of the loan, future projections, and the applicant’s repayment strategy. This demonstrates the applicant’s commitment and vision.

6) Credit History: A credit report from credit bureaus reflects the applicant’s credit history, including credit score, past loans, and repayment behaviour. This is a critical factor in determining creditworthiness.