A Personal Loan can be utilized by you to meet your personal commitments. There might arise circumstances when you are in need of urgent cash. Either your savings are inadequate or you have locked them up in long-term investments. In such situations, an easy finance option would be to avail a Personal Loan.
Personal Loans can be either, secured or unsecured loans. Since the loan is availed against a security, the interest that you pay on the secured loan is low. However, if the loan is not backed by security, you end up paying a higher interest.
Uses of a Personal Loan
A Personal Loan can be used for just about anything. You can avail a Personal Loan for your wedding, to pay for your kid’s education, to enjoy a vacation, for a home renovation project, or to incur the expenses of a medical emergency. You can also take a Personal Loan to settle outstanding debts.
After assessing your needs, you approach a bank or NBFC to avail a Personal Loan. But, will the bank offer you the amount you have applied for? Banks and NBFCs review your credit score and evaluate other eligibility criteria listed below before approving your loan application.
A Personal Loan is approved based on your creditworthiness. If you do not have a decent credit score, chances are that you have to pay a higher interest, which in turn leads to higher EMI.
Your loan eligibility is dependent on your income, age, and any other outstanding loans. If you are a salaried person and your monthly pay is over Rs.20,000, then you are eligible to avail a loan which is 10 to 18 times your monthly income. Most banks and NBFCs make use of a loan eligibility calculator, after factoring your salary and credit score, to see just how much you are eligible to get. The resulting amount is what will be disbursed as a Personal Loan.
Once you have satisfied the eligibility criteria, you have to choose the tenure, which will quantify the EMI you have to repay on the Personal Loan.
It is true that availing a Personal Loan requires minimal documentation. In case you are a salaried person, you need to submit your identity proof (PAN Card, Passport), residence proof ( utility bills, voter’s card), salary slips, and bank statements for the last 6 months.
For those who are self-employed or are engaged in a business, annual financial statements along with Income tax returns serve as documentary proof to avail a Personal Loan.
Post verification of the documents, the loan is approved within a two-week timeframe. As a Personal Loan, you can borrow a minimum of Rs.50,000 and a maximum of Rs.30 lakh, with the repayment schedule spread between 6 months and 7 years.
Choosing the Best Personal Loan Offer
Just as interest on Fixed Deposits varies from institution to institution, so do banks and NBFCs in their loan rates. Choose the lender that offers you a competitive rate. Remember, processing charges is a component of the loan and can vary between 1.5% to 2% of the loan amount. The bank or NBFC that has the least turnaround time and charges low processing fees should ideally be your choice of lender.
Another important aspect that needs to be considered is prepayment of the loan. Suppose you have taken a Personal Loan for a 2-year tenure. At the end of 1.5 years, you receive a bonus and wish to make a prepayment and close the loan account. Most banks levy a charge for prepayment. Choose to take a Personal Loan from a bank or NBFC that does not levy a prepayment charge.
Online Personal Loan
Earlier, you had to visit the bank branch physically to open deposit accounts or avail a loan. Today, you have the power of internet banking. You can accomplish all your financial transactions like transferring funds through online banking.
Along the same lines, you can now avail a Personal Loan online. Availing an online Personal Loan is as simple as buying apparel online.
Once you access the bank’s webpage, you can navigate to loans and proceed to key in the loan amount, tenure, and interest. In a matter of minutes, your EMI will be calculated with the help of online personal loan EMI Calculator. Incase, you find that the EMI cannot be adjusted in your monthly outflows; you can increase the tenure or lower the loan amount.
Here are the advantages of availing a Personal Loan online
Online Personal Loans offer quick disbursal. The loan approval is done in just an hour. So, it is perfect when you incur emergency expenses
If you are looking to get a loan sitting at home, an online Personal Loan is your saviour. A great deal of convenience is offered; you fill in the online form from your home/workplace and your loan processing begins instantly
Applying for a Personal Loan online allows you to compare the interest rates of various banks. You can thus zero in on a bank that charges the lowest interest on their Personal Loan
Your biggest asset, time, is saved when you choose to avail a Personal Loan online
If you are in need of funds, a Personal Loan can be your savior. However, the easy availability should not induce you to apply for multiple loans. Defaulting in EMI payment can adversely affect your credit score, which may prove detrimental to your financial interests.