A personal loan is an unsecured loan that is given to you based on your credit history and ability to repay it with your personal income. It’s also known as a consumer loan. It’s a cross loan that you can use to cover a variety of expenses.
Do you want to implement adjustments to your home? Or then you need money to restore your car or pay for a trip or your wedding? Then a Personal Loan would be a safe bet for getting funds.
Personal loans have higher interest rates than home or car loans since they are unsecured loans. As a nutshell, before you choose one, you should first determine your financial situation.
When Should I Take Out A Personal Loan?
There is no set time for applying for a Personal Loan because it is a multi-purpose loan. Instead, you can use a personal loan to meet practically any need.
The following are some of the reasons why you might want to apply for a personal loan:
- Finance for vacations and vacations
- To Pay for Special Occasions or Needs
- Finance Weddings
- Construction/renovation of a home Emergency Medical Refinancing of a Home Loan To Repair A Car Financing Expansion of the Education Market
- Consolidation for Debts and some other similar sites
As a result, personal loans are the right alternative for financing your immediate demands. Obtaining a loan is straightforward and quick. Additionally, the documentation requirements are minimal.
Personal Loan Advantages
Here are a few advantages of taking out a personal loan:
There are no deposit or collateral requirements
Because this is an unsecured loan, no asset is required as collateral. It is granted based on your credit history and ability to repay.
There is less documentation
Because of the lengthy documentation process, many people avoid applying for personal loans. Personal loans, on the other hand, are granted with minimal proof.
Loans are disbursed quickly
Paying down a loan these days only takes a few hours. If the bank feels you have the ability to repay the loan within the allotted time frame and need the income for a legitimate purpose, acquiring a personal loan is simple.
Over the course of the loan, the interest rate is fixed
The interest rate on a personal loan is set at the start of the contract and stays the same throughout. As a result, it is simple for personal loans to begin planning for their future EMIs.
A loan with a flexible repayment period of 1 to 5 years is available
Personal loans with maturities ranging from one to five years are available. As a result, you have the freedom to determine your loan term based on the repayment plan. The best option is to take out a relatively short loan to save money on interest.
There is an EMI option available
Equated Monthly Installments reduce the idea of a loan. Personal loans, like other types of loans, have simple EMIs and enable you to repay the principal amount over time.
It’s a loan that can be used for a variety of things
Personal loans, unlike home or auto loans, can be used to fund practically any goal.
There are major benefits to taking out a personal loan, but be sure you meet the qualifying requirements in the next chapter.
Personal Loan Eligibility Criteria
Because a personal loan is an “unsecured loan,” banks perform extensive due diligence. They check your financial stability first and foremost.
Your loan eligibility is determined by a number of factors, including your credit score, monthly income, and other pending EMIs. These restrictions differ from one lender to the next.
The following are the eligibility requirements:
Age Restriction
If you work as a salaried employee, you should be between the age of 21 and 58. A self-employed businessman or woman, and a professional, should be between the ages of 25 and 65.
Monthly Earnings
The amount of your net monthly wage is critical in determining whether or not your loan will be approved. Some lending companies have a monthly income minimum requirement. While some banks pay a monthly income of Rs 25, 000 to be eligible.
Employment Situation
Salaried employees, specialists, self-employed individuals, and professionals are some of the most common job kinds.
Term of Employment
An approval may be harder to get if you have just changed jobs.
Many lending institutions, for example, can approve loans for individuals having at least two years of work experience or at least one year with their present employer.
Self-employed professionals, on the other hand, must have a minimum of three years of experience. Some employers look at your entire employment history.
Credit Rating
This is a credit score given to you by a credit reporting agency (for example companies such as CIBIL, Equifax, High Mark). It provides a prospective lending institution with information about your borrowing history.
A good credit score also gives you more bargaining power when it comes to loan terms. Some banks need a baseline CIBIL Score of 700, whereas others require 750. It is preferable to get a score between 700 and 900.
Personal Loan Documents Required
The following are some of the fundamental required documentation for a Personal Loan:
- Income statement statement
- Form 16 bank statements and pay stubs
- Income-Tax Returns from the Most Recent Years
- Report on credit
- Age-defying (birth certificate, passport, Aadhaar card, voter id, PAN card etc.)
- Proof of address (Aadhaar card, passport, electricity bill, telephone bill, ration card, etc.)
- Photo identification is required (Aadhaar card, voter id, PAN card, passport, driving license, etc.)
Your lender will need these documents, as well as the Personal Loan application form and a few photos.
Many banks and commercial lending institutions just provide online loan application services. You must examine these or select the finest solution for you.
A copy of the legally signed loan agreement will be supplied once Personal Loan has been approved. You must also submit a standing instructions request / ECS mandate form, as well as security deposit checks.
Personal Loan Interest Rates
Personal loans have some of the highest interest rates of all the loan types.
- Personal loans are currently being given at a rate of roughly 10% to 15% per year.
- The interest rate differs from one bank to the next. It also depends here on applicant’s income, credit history, previous EMIs and loans, loan tenure, credit score, or other factors.
- There will be a processing fee and other charges in addition to the interest cost on a personal loan that you should be aware of.
