A Brief Look At Personal Loans
What are personal loans? How can you get one in India? What do you need to know about banks that offer them? These and other factors are detailed below for your knowledge so you can make smarter decisions, especially long-term ones, where personal loans are concerned.
- Essentially a lump sum amount, it can be offered to you by a building society or bank; perhaps even other lenders.
- Personal loans are designed to help you resolve immediate and personal financial issues.
- When it comes to borrowing money, it is also one of the speediest means. You need not worry about questions concerning the loan’s end use either.
- Where personal loans are concerned, the amount can be anywhere from INR 50,000 to INR 20, 00,000.
One of the first things you can expect is the lender requesting or insisting they perform a credit worthiness check on you. You can certainly apply for loans but you will not get them if you fail the check.
- Once approved, a loan tenure can stretch anywhere from one to five years.
- Almost all personal loans will have opportunities for repayment using the equal monthly installment (EMI) system.
- Your take-home salary is considered before providing you with an estimate of how much money you can have by way of a personal loan.
- Not only is your eligibility factored into the decision process but also punctual repayment capability, location of residence, credit rating, and job security.
There is also the chance to apply along with a co-applicant, most often your spouse. Imagine this: both your incomes are added into the eligibility pool, veritably increasing your chance of getting the loan.
Factors To Remember When Applying For Personal Loans
Personal loans carry risk and are given without security. When you compare them with other loan-types, the interest rate is often higher for personal loans; 12-24% range. You will in all probability be charged an interest processing fee as well, which you need pay only when the loan application is being processed.
- Additionally, if you wish to pre-close your personal account, you can expect a pre-payment fee; 2-3% range.
- Benefits include simple documentation, priority processing, and preferred interest rates. You must be eligible for each of these if you want them.
Suppose you are taking the personal loan from your own bank. You will, once found eligible, have it sanctioned in 72 hours.
How Is Eligibility Ranked For Personal Loans?
The following are standard rules in India’s personal loan system. They can vary based on bank and market conditions.
1. Salaried Individuals
- Minimum Employment Period – 2 years total and 1 year in current organization
- Minimum Applicant Age – 21 years
- Maximum Applicant Age at Loan Maturity – 58 years
- Minimum Take-Home Income – Rs. 8, 000 per month
2. Self-Employed Businesspeople & Professionals
- Minimum Business Period – 5 years total and 3 years minimum in current business
- Minimum Applicant Age – 25 years
- Maximum Applicant Age at Loan Maturity – 65 years
- Minimum Take-Home Income – Rs. 60, 000 per month
What Are The Different Types Of Personal Loans?
This comprises two broad categories…
1. Unsecured Loans
You will find no security in these for the amount of money borrowed. The lender is free to charge higher interest rates than normal. This is directly because of the increased risk present when lending the money. If you, the borrower, cannot pay back the loan for some reason, the lender can go through legal channels to compensate for their loss.
2. Secured Loans
A guarantee is compulsory when taking out these loans. Whether it is a movable/fixed income or your property, the guarantee will be appended to the amount of money borrowed. If you, the borrower, fail to repay this type of personal loan there is the risk of the bank involved taking over your asset(s), namely the one(s) in the guarantee.
What Documents Are Needed To Avail Personal Loans?
Again, the following is standard and may vary based on bank and market conditions.
- 2 passport-size photographs, most recently taken
- Bank statement of last 3 months (with salary/income credited)
- Salary slips of last 3 months (if you work on a salary basis) or ITR of the last 2 years (if you are self-employed)
- For Professionals: proof of qualification (diploma, degree, etc.), professional council registrations, and so on
- Proof of Qualification: Highest Degree (for Government employees and/or Professionals)
- Proof of Identity: Employee ID Card / Passport (copy) / Photo Credit Card / Driving License / PAN Card / Voters ID
- Proof of Continuity in present job: Company Appointment Letter (if you get a salary) / Form 16
- Proof of Residence: LIC Policy Receipt / Utility Bill / Copy Of Ration Card
There are varied uses you can put personal loans to: funding marriage ceremonies, going on holiday, renovating or remodeling your home, consumer durables, paying for medical incidents, pursuing education opportunities, and so on. If you wish to apply for a personal loan, you can begin here.