This article is related to an affiliate advertising program and The New Indian Express's journalists were not involved in production of this article.
People are now looking for personal loans in more significant numbers to cover their increased bills. The fact why personal loans are becoming increasingly popular is due in part to the fact that they are simple to execute and do not demand any security because they are unsecured loans.
A personal loan may be simply obtained from any bank or non-banking financial institution of your choosing. You can acquire the money within 48 hours, thanks to the development of financial institutions' online services. Our specialists will define what is a personal loan and will outline the personal loan calculator and the types of personal loans through this post. Continue reading!
A personal loan is one of the market's most often used unsecured borrowing options. It is simple to use since you don't have to give up any assets as security or collateral. A personal loan can be used for anything, unlike product-specific loans like those for a home or a car.
Any stage of your life might lead to the requirement for your first personal loan. You might require a personal loan to complete a home improvement or pay for an unexpected medical bill. In times of financial hardship, it might be your best friend when it comes to money.
You should make a few crucial considerations if you're looking to apply for your first personal loan. To help you receive the most excellent bargain, this article covers the essential topics related to what is a personal loan.
If you are looking for an instant loan, you should consider the following:
What is a Personal Loan?
To cover their requirements, people would get unsecured loans from banks or non-banking financial institutions (NBFCs). It is given based on essential factors, including income level, credit history, work history, payback ability, etc.
Unlike a mortgage or auto loan, a personal loan is not backed by any asset. The lender cannot sell your possessions at auction if you default on the loan since it is unsecured and the borrower did not put up security like gold or property to get it. Due to the increased perceived risk involved in approving them, personal loans have higher interest rates than loans for homes, cars, or gold.
But just like with any other loan, defaulting on a personal loan has consequences that might hurt you later on when you apply for credit cards or other loans since they will appear on your credit record.
What Are The Types Of Personal Loans Available In India?
Different types of personal loans are available in India, as mentioned below:
India is renowned for its opulent wedding traditions. The wedding day is unquestionably one of the most critical days in the lives of the bride and groom, their parents, and other family members. Therefore, everyone wants to make this day unique and unforgettable. This may entail lavish expenditure, and some people may not have the cash on hand to do this. Many families request wedding loans as a result.
It can be expensive to take a vacation, especially abroad. Consider asking for a travel loan to lessen your financial load if you arrange a vacation for your loved ones at a luxurious location. A travel loan is a personal loan you may get to pay for your vacation costs. With travel loans, you frequently also receive free travel insurance.
Home Renovation Loan
You may obtain a home loan to purchase a new home, but what if your current home needs immediate renovations and repairs? A home improvement loan can help in this situation. A personal loan given by a bank or NBFC to cover the expense of renovating your beloved old house is known as a home renovation loan. Not only do you receive a nicer place to live when you repair your old home, but its financial worth also rises dramatically.
Many lenders provide unsecured personal loans in addition to secured education loans that are given in exchange for collateral like your graduate degree or real estate property, such a piece of property, to aid in your funding for school. This education loan can be used to cover any additional academic obligations, tuition, and housing costs.
It may occasionally be tough to balance your budget if you are retired, especially if you have medical expenses to pay. Some banks provide pension loans to such people. A particular kind of personal loan designed just for retirees. The standard qualifying requirements for other personal loans do not apply to pension loans because they are exclusively available to retired people.
Festival festivities can sometimes result in costs you may not have anticipated while budgeting. To cover the additional costs associated with holiday festivities, certain banks and NBFCs provide personal loans. Most banks will only give you festival loans up to 50,000.
Consumer Durables Loan
It's a different kind of personal loan. As the name implies, banks and NBFCs offer consumer durables loans to give borrowers the money they need to buy items like air conditioners, refrigerators, TVs, washing machines, etc. To purchase such white goods, you may easily obtain a consumer durables loan from banks and NBFCs for up to 5 lakhs.
Personal Computer/Mobile Phone Loan
Computers and mobile phones have become essential components of our life in this technologically advanced day. As a result, several banks and NBFCs provide small-dollar personal loans exclusively to meet the borrowers' needs in this area. In many circumstances, the loan comes with a free insurance policy for the item you bought.
Medical Emergency Loan
Medical emergencies seldom arrive with a warning. With the escalating hospital stays and medical care costs, the likelihood that you will not have enough liquid cash on hand during an emergency is quite high. An immediate medical emergency loan might save your life in this circumstance. You may simply obtain a medical emergency loan for a sum up to Rs. 25 lakhs for a term of up to 5 to 6 years, depending on your eligibility and trustworthiness.
A personal loan given to farmers to help them in their farming and agricultural endeavours is known as an agriculture loan. Agriculture loans often have flexible payback terms and are given at reduced interest rates.
What Is A Personal Loan Interest Rate?
Personal loans have some of the highest interest rates among the other loan types. Personal loans are currently granted at a rate of 10% to 15% annually. Interest rates differ from bank to bank. Additionally, it depends on the applicant's income level, credit history, current loans and EMIs, loan term, credit score, and other factors.
You should be aware that personal loans also come with processing fees and other costs in addition to the interest rate. The variety of personal loan interest rates that certain loan providers provide is listed below:
Benefits Of A Personal Loan
A few advantages of a personal loan are as follows:
No security or collateral is required
Since this loan is unsecured, no asset security is needed. It is given based on your credit history and ability to repay the loan.
Due to the extensive documentation requirements, many people detest applying for personal loans. Personal loans, however, require less paperwork to get accepted.
Quick loan disbursement
These days, loan payout takes a few hours. Receiving a personal loan disbursement is simple if banks believe you have the ability to repay the loan within the allotted period and have a real need for the money.
Fixed interest rate over the tenure
Personal loan interest rates are set at the beginning of the term and remain the same throughout. Therefore, it becomes simple for loan applicants to make long-term plans for their EMIs.
Flexible loan tenure of around 1-5 years
Loan terms for personal loans can range from one year to five years. Therefore, you are free to select your tenure by your re-payment plan. Getting a loan with a shorter term is best to reduce your interest costs.
Easy EMI facility is available
Equated Monthly Instalments simplify the loan concept. Personal loans also allow for simple EMI payments and assist you in repaying the principle throughout the loan.
It is a multipurpose loan
Personal loans, as opposed to house loans or auto loans, can be used to finance practically any goal.
Eligibility Criteria For Personal Loan
As an "unsecured loan," personal loans are subject to extensive due diligence by banks. Most significantly, they examine your capacity to make ends meet. Your credit score, monthly income, other continuing EMIs, and other criteria all play a role in determining whether you qualify for a loan. These conditions change depending on the lender. The following are the eligibility requirements:
If you are a paid employee, your age range is between 21 and 58. A self-employed professional or businessperson must be between the ages of 25 and 65.
Your monthly net income is essential to the approval of your loan. Some lending institutions may set a minimum monthly income requirement. In contrast, some banks have a monthly income requirement of Rs. 25,000.
Nature of Employment
Basic employment categories include professionals, self-employed people, and paid workers.
An approval could be challenging if you recently changed jobs several times. As an illustration, many financial institutions grant loans to workers with at least two years of professional experience and at least one year in their present workplace. Professionals who work for themselves must have at least three years of experience. Some take into account your whole employment history.
This is the rating that a credit reporting agency has given you. It provides perspective on your borrowing history to a potential lending institution. You may also use a good credit score to your advantage when negotiating better loan conditions for yourself. Some banks need a CIBIL Score minimum of 700, while others want a minimum of 750. A rating between 700 to 900 is ideal.
Documents Required For A Personal Loan
Some of the essential documents required for a Personal Loan are as below:
- Income statements
- Salary slips and Form 16
- Bank statements
- Latest Income-Tax Returns
- Credit report
- Age proof (birth certificate, passport, Aadhaar card, voter id, PAN card etc.)
- Address proof (Aadhaar card, passport, electricity bill, telephone bill, ration card, etc.)
- Photo identification proof (Aadhaar card, voter id, PAN card, passport, driving license, etc.)
You must send these records to your lender along with the Personal Loan application form and a few photos.
Nowadays, a lot of banks and financial lending organisations now provide an online loan application option. You must go through these and apply to the best choice.
A fully signed loan agreement copy will be delivered once the personal loan has been approved. A standing instruction request form and an ECS mandate are also required, as well as security deposit checks.
How To Choose the Best Personal Loan?
Compare Interest Rates
Personal loan interest rates impact the entire cost of your loan. Unquestionably, personal loans with affordable interest rates are the finest. On their websites, you may compare the interest rates given by different lenders and pick the one with the lowest rate.
Personal loans have adjustable terms; you may pay them back in equal monthly instalments (EMIs). The loan tenure affects how many EMIs you must make and how much each one costs. Typically, a shorter payback period results in a larger EMI payment. Your EMI amount and payback terms should be harmonised for the best personal loan.
Check the Fees & Charges
Be on the lookout for loans with cheaper processing costs. Some lenders may assess a small fee if you repay the loan early. The finest personal loans in India may be categorised as those with reduced fees.
Check the Required Credit Score
Collateral is not requested by lenders for personal loans. However, they demand that borrowers have a strong credit history and score. Look for lenders who don't demand credit ratings that are too high.
Check for Documentation Requirements
The finest personal loans available online need the least amount of paperwork to process. Select a financial institution that will approve your Loan application without needing physical copies of your identification, residence, or income verification.
Consider Loan Disbursal Timeframes
Pre-approved loans are available to loyal bank clients; this means that the loan amount is virtually immediately deposited into your checking or savings account. To find out if you qualify for pre-approved, instant personal loans, contact your bank.
Check the Cancellation Policy
Few banks allow you to cancel your loan after it has been paid into your bank account during a 48-hour freelook period. As a result, choosing a loan that permits you to alter your mind might be a wise decision.
Frequently Asked Questions
1. What are the features and benefits of a personal loan?
Features and advantages of a personal loan include
- Instant personal loan approval and two-day loan disbursement.
- Up to Rs. 3 lakh in loans.
- Flexible documentation that is hassle-free.
- A three-year maximum loan term is available.
2. What is the disadvantage of a personal loan?
There may be fees and penalties associated with personal loans, which might raise the cost of borrowing. An origination fee of 1% to 6% of the loan amount may be charged for some loans. The processing costs, which go toward the loan, can either be added to the loan or deducted from the amount given to the borrower.
3. Can personal loans be used for anything?
As long as it's legal, anything may be paid for with a personal loan. Some lenders could inquire as to how the money will be used, while others may only check your capacity to pay back the loan. Even while personal loans aren't cheap, they might be a practical choice in several situations.
There are many lenders eager to approve your loan application, and personal loans are a great choice if you need money right away. We hope now our readers are aware of what is a personal loan and the examples of personal loans. Make sure to investigate and evaluate the top personal loans available online.
To contact the Express Deals team, please drop an email to - email@example.com
We will reach out to you in the next 48 business hours.