A personal loan is an unsecured loan. There is no requirement that you pledge any asset as collateral or security. When you take a home loan, you purchase a new home. Similarly, a car loan helps you buy a new car. However, a personal loan differs from other types of loans. There are no restrictions on its end-use. It can be availed to meet any personal financial requirements, such as hosting a wedding, reconstructing or renovating your home, or paying off medical emergency bills.
Getting a personal loan is easy with a simple application process. There is no security or collateral, and therefore, the bank does not need to verify details. Moreover, many banks and financial institutions allow you to apply online for a personal loan with minimum documentation, making the process quick and hassle-free. Before sanctioning the loan, the bank verifies the individual’s eligibility and creditworthiness.
Before you initiate applying for a personal loan, you need to determine your requirement. What is the purpose of the loan, and how much do you need? For instance, if you want to use the loan to renovate your home, your requirement can be much bigger than planning a family vacation. Knowing your loan requirement can help calculate your monthly installment and assess your capability to repay the same.
There are eligibility criteria for every type of loan. In the case of a personal loan, the applicant must not be below 22 years of age. Moreover, at the time of loan closure, the individual’s age should not be more than 58 years. The applicant must be an Indian citizen and currently reside in India.
The amount of loan you are eligible for will depend on your salary. You must have a monthly salary of at least Rs. 20,000. Moreover, the applicant must have a full-time job at an LLP or a public/private company with work experience of at least one year. The employee must have stable employment at the current job for at least two months.
Visit the lender’s website to understand their eligibility criteria for personal loan and the documents you require to proceed with the loan application.
The interest rate offered by a bank depends on your credit score, employer, age, work experience, etc. A higher credit score guarantees a lower interest rate. Similarly, if you work with a company that has a good reputation, you can expect to get a better loan amount, interest rate, and loan tenure.
An attractive interest rate starts at 9.99%. Apart from the interest rate, lenders charge a processing fee, ranging between 0% and 2% plus taxes. Inquire about the same because the processing fee is an extra burden on loan applicants.
Using an online EMI calculator, you can estimate the monthly installment you need to pay. You need to know the total loan amount, interest rate, and tenure for the calculation. You can alter the interest rate and tenure to match your monthly income.
Every lender provides a list of documents they need to process your loan application. If you apply online for a personal loan, you require soft copies of these documents. Visit the lender’s official website and the relevant page for the loan you require to get a list of the required documents. Generally, you will need the following:
Most reputed lenders provide online and offline application processes. Visit the nearest branch for consultation and fill out the application form. You will need to carry photocopies of the required documents to submit along with the application form. Or you can choose to fill out the form online on the lender’s official website. Make sure you have soft copies of all the required documents ready for uploading after submitting the application form.
Every financial product has eligibility criteria and an approval process. It is a good idea to check the procedures, features, and criteria before proceeding with a loan. You must also compare the loan offerings from different lenders. Here are the factors you need to consider for your comparison:
1. Interest rate
The loan interest rate varies from one bank to another. Select a bank with the lowest interest rate. A lower interest rate reduces the amount of interest you need to pay, thereby reducing the amount of your monthly installment. You can negotiate with banks as they are flexible with the interest rate for customers with a good credit score and decent credit history
2. Processing fees
Banks charge an internal fee for assessing your candidature for loan approval. Most banks do not refund this processing fee if your loan is rejected. Thus, please submit all documents carefully to avoid rejection. Some banks do not charge a processing fee to attract customers. Make sure you read the product information before proceeding. You can also negotiate with the loan agent to waive the processing charges.
3. Approval time
A personal loan has fewer eligibility criteria. Therefore, the approval time is less than five working days. Some banks take only 24 hours to approve and disburse the loan. The online application process is fast and gives lenders all the information they require instantly.
4. Loan tenure
A longer tenure looks attractive, but it isn’t since it makes the borrower pay more interest. So, use different metrics for interest rates, EMIs, etc., to arrive at an ideal loan tenure.
It is easy to get a personal loan with minimum documents. But, in certain cases, reputed lenders may demand you to submit more documents. Make sure you check with the lender beforehand to avoid any surprises. Besides, remember to read loan offers, loan eligibility, and the repayment schedule. There is no value of verbal assurance in monetary transactions. Therefore, always believe in written documents. The approval of a personal loan does not require much time. Your bank can approve the loan within 24 hours.
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