How to avail a personal loan?
New Delhi [India]: Personal loan is one of the most popular financial offerings in the country. Be it a medical emergency or renovating your home, wedding or a vacation - personal loans can avail that amount to you without asking for any collateral.
So, how does one get a personal loan in India? In this blog, we'll walk you through the whole process in simplified terms so that anyone can understand.
Step 1: Understand What a Personal Loan Is
Basically, a personal loan is an unsecured loan for which you need not provide any security or collateral, such as your house or gold, for the disbursal of the loan. You can use a personal loan for almost any purpose, as is your wish.
Since personal loans are unsecured, they have a higher rate of interest generally compared to secured loans. So, borrow only the amount that you need and also ensure you can repay the loan amount with ease.
Step 2: Check Your Eligibility
The second step in the process of acquiring a personal loan is eligibility checking. All banks or financial institutions do not follow the same criteria for the approval of personal loans. Some of the common variables that most lenders take into consideration while evaluating loan applications include:
· Age: Most lenders require borrowers to fall within the age bracket of 21-60 years.
· Income: The level of income you earn is very important because it gives the lender insight into your ability to repay the loan.
· Credit Rating: Your credit rating will be the deciding factor in whether or not you get to enjoy the benefits that come with taking a personal loan.
· Employment Status: Lenders would instead lend to people who are in stable employment or with other sources of income.
To make this process easier, you can use a personal loan EMI calculator to estimate the amount of your monthly repayments for different loan amounts, interest rates, and tenures.
Step 3: Compare Loan Offers
Once you have checked your eligibility, the next step involves comparing bank loan offers with other financial institutions. You are required to shop around for the best deal by comparing interest rates, processing fees, and other charges.
Following is what you should consider when comparing the loan offers:
Interest Rates: These rates vary a great deal from one lender to another. Even a small variation in interest rates contributes significantly to the overall loan cost.
· Processing Fees: Many lenders levy some kind of processing charge on personal loans. This is normally as a certain percentage of the loan amount, which is deducted at the time the loan amount is disbursed.
Prepayment and Foreclosure Charges: A few lenders have charges for early repayments of the loan. Herein, one should assess these charges while choosing the lender, especially in case one perceives paying off the loan before time.
· Loan Tenure: The loan tenure is the period over which the loan repayment will be done. It may affect your EMI- Equated Monthly Installment.
Step 4: Prepare the Required Documents
Before you finally apply for a personal loan, ensure that all the necessary documents are ready with you. This will help speed up the processing and also enhance the chances of getting approval. Common documents required for personal loan application include:
Proof of Identity: Aadhar Card, PAN Card, Passport, or Voter ID.
Address Proof: Utility bills, rent agreement, or passport.
Income Proof: Salary slips, bank statements, or income tax returns.
Employment Proof: Employment Certificate or a letter from your employer.
· Photos: Recent passport-size photos.
Step 5: Apply for the Loan
Now that you have compared the loan offers and compiled your documents, you are ready to apply for the loan. You may apply for the personal loan either online or by visiting your bank branch of choice. Almost all banks and financial organisations have an online application platform that is easy and hassle-free.
Step 6: Use a Personal Loan EMI Calculator
It will be quite wise to use a personal loan EMI calculator before finally setting up your loan. This personal loan EMI calculator helps calculate how much your monthly EMIs will go by considering loan amount, interest rate, and tenure. The EMI calculator will give a perfect idea about how much you will have to pay every month and whether it fits your budget or not.
Step 7: Return Loan Amount on Time
Once the amount of loan is sanctioned and one has received it, being responsible for repayments should be at the back of one's mind. Pay off your EMIs month on month on time to avoid late fees and penalties. Timely repayments ensure a good credit score, which will most definitely help you in the long run if you need to apply for any other loan or even a credit card.
Conclusion
Getting a personal loan in India is quite an easy process, but it is one that really requires careful planning and consideration. Remember, the key to a successful loan experience is to borrow responsibly and ensure that you can comfortably manage your repayments.
