Salaried Employees Should Know 6 Important Things Before Applying Bank Loan

After completing probation period, employee gets confirmation which will give pleasure and happiness to the life. The next step thinking to enhance life by adding facilities. It may be a new car or a new house or home appliances like home theater or something else. In normal case, most of the employees depend bank loan to meet their shortfalls of fund. Before going to bank for applying loan, following 6 important things to be checked whether you have met those points speeding up loan process:

1. Organization / Company

Every employee are not eligible to get bank loan. Nationalized banks and scheduled commercial banks will give bank loan to those who are working either of Govt. or Public Sector Undertakings (PSU) or a reputed Private organizations. Bank may not give loan if you are working with an establishment run by proprietorship or partnership firms.

2. Salary Certificate / Salary Slip / Form 16

Bank verify employee's earnings and repayment capacity through one or more of the three documents listed below:

    1. Salary certificate: It should be latest and original duly stamped and signed by Drawing & Disbursing Officer (DDO) / Employer.
    2. Salary Slip also known as Wage Slip: for latest last three months duly stamped and signed by Drawing & Disbursing Officer (DDO) / Employer.
    3. Form-16: 1 to 3 years depending upon bank and amount, duly stamped and signed by Drawing & Disbursing Officer (DDO) / Employer.

3. Genuineness of Signature of Drawing & Disbursing Officer (DDO) / Employer

If you are requested to produce more than one document listed above, make sure all the signatures are same. If there is any discrepancy or mismatch, documented justification to be produced.

4. Take Home Salary

Take home salary should be more or less 50% of gross salary and must be enough to live comfortably with out borrowing further. When your EMI set this criteria should be met.

5. Inflated Income

All income shown in the documents listed above (item 2) should be verifiable and can be recorded. You can't get loan based on unverifiable inflated income.

6. Check Off Facility

Check Off Facility means where the employer undertakes to deduct monthly installment from the employee's salary and remit the same amount directly to the Bank (lender) towards adjustment of the loan till its liquidation and also confirm / undertake attachment of terminal dues of the borrower employee. The genuineness / authenticity of the said confirmation / undertaking from the authorized salary disbursing official (DDO) of the employer organization must, however, be ensured for remittance of EMI and attachment of terminal dues of employee.

You have to provide Check Off Facility for repayment of loan. Facilitating salary transfer account to the bank and giving Standing Instructions (SI) may override Check Off Facility if bank accepts it. In case, Check Off Facility or SI is not available, Post Dated Cheques (PDC) should be considered for repayment.