personal loan terms & conditions

All About Personal Loan Terms and Conditions

A Personal Loan is an attractive choice for anyone who needs to meet urgent or unforeseen expenses. A Personal Loan can be used for multiple purposes including a wedding, renovation, repairing a house, or even paying for a medical emergency. 
Nowadays, it is quite easy and seamless to avail of a Personal Loan. The process of loan application can be done entirely online from your home or office. In most cases, the loan is disbursed within a few minutes of being approved. 
You can repay a Personal Loan through easy monthly instalments (EMIs) and avail flexible loan tenures. This means that repaying the loan has been made as convenient as possible keeping the needs of the borrower in mind.

Important Terms and Conditions  

Here are some of the Personal Loan terms and conditions that you’ll need to know about.   

Relaxed Eligibility Criteria  

The eligibility criteria for a Personal Loan determine who can avail of such a loan. These criteria have been put in place since lenders need to ensure that the borrower can service the loan. 

  • Age - A borrower needs to be at least 22 years of age at the time of borrowing the loan and not more than 58 years of age at the time when the loan matures. The minimum age has been put in place to ensure that the borrower is an adult and can enter into contracts. The maximum age has been put in place to ensure that the borrower is not retired and has a regular source of income through which they can service the loan. 
  • Citizenship - The borrower needs to be a citizen of India to comply with regulatory guidelines. 
  • Employment - The borrower needs to have a full-time job with a private or public company or LLP. If the borrower is self-employed, they need to provide proof of a regular source of income (this can be done through bank statements). 
  • Monthly Income - The monthly income of the borrower needs to be at least ?20,000. This is to ensure that the borrower can service the loan.
  • Work Experience - The borrower needs to have work experience of at least 1 year. Further, they should be in their current employment for at least two months. This criterion has been put in place to ensure that the borrower is financially stable.   

Minimal Documentation

Lenders ask for certain documents to comply with regulatory guidelines and also to ascertain the financial suitability of the borrower for a Personal Loan.  A lender will usually ask for KYC documents such as a PAN card and Aadhar card. This is to confirm the borrower’s identity. Further, they will ask for address proof which can be shown through a rent agreement, utility bills, or passport. This requirement is to ascertain how to contact the borrower. The borrower will need to submit income proof which can be done through salary slips. A few financial documents may be required such as bank account statements for the last three months. Lastly, the borrower may need to show their employment through an employment certificate or a degree certificate.  

No Collateral  

Personal Loans can be availed without providing any collateral. This means that you don’t need to provide your assets such as your property or jewellery as security when you take out the loan. Thus, you can avail a Personal Loan with the knowledge that your assets have not been mortgaged. 
This is because Personal Loan terms are based on the income or salary level of the borrower. The lender will check your monthly income to determine if you’re eligible for a Personal Loan. So, you can keep full ownership and possession of all your assets while availing of such a loan. 

Flexible Repayment Tenure  

You can choose a flexible repayment tenure. The repayment tenure is the time in which you will repay the entire loan along with interest. This repayment tenure can range anywhere between one year to five years. 
The advantage of a longer repayment tenure is that you have to pay a lower amount every month. In contrast, the advantage of a shorter repayment tenure is that you will need to pay a lesser amount in interest. 

Competitive Interest Rates  

Personal Loans can be availed at very attractive interest rates even though you do not have to provide collateral. This is because Personal Loans are based on the income level of the borrower and lenders are confident that a borrower will be able to repay the loan on time. 
The interest rate can range anywhere between 10.99% and 18%. The exact interest rate which will be levied will be determined based on a variety of factors once you apply for a Personal Loan. As a rule of thumb, if you have a higher income level, then the interest rate offered will be lower. 

No Pre-Payment Charges  

A pre-payment charge is a fee that is levied if the borrower repays the loan amount (along with interest) before the maturity of the tenure of the loan. 
Suppose a borrower takes out a loan with a tenure of five years, but he repays the loan in three years. In such a case, the borrower won’t have to pay the interest for the last two years. Additionally, the borrower will not be charged any pre-payment penalty. 

No Hidden Charges  

There are no hidden charges when it comes to Personal Loans. All the charges will be relayed to you before the loan is sanctioned. The applicable charges are interest on the loan amount, loan processing fees, and a late payment penalty. 
The loan processing fee can be anywhere between 0% to 2% of your loan amount. Further, the late payment penalty is only applicable in case you miss a repayment deadline. 

Wrapping Up  

The Personal Loan terms and conditions are quite relaxed. You can avail of Personal Loan for anywhere between ?1 lakh to ?30 lakhs through a very hassle-free process. Before availing of a loan, be sure to carefully read all the related documents and provided information. 

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