What is a personal loan?
A personal loan is a multi-purpose loan that does not require any collateral. One can use a personal loan to meet personal expenses and business expenses.
Features of personal loan:
1. Simple documentation process.
A personal loan requires minimum documentation. Your loan can be approved within 48 hours after applying.
2. Flexible tenure.
In a personal loan, the borrower gets flexible tenure of up to 5 years to repay the loan amount, which is preferable than a credit card loan or gold loans.
3. No collateral required
A personal loan is an unsecured loan, which means one can get a loan without keeping any asset as collateral. Mainly these loans are given on the credit history of a person.
4. Flexible quantum of loan.
One can opt for a personal loan as per their requirements as low as Rs.10000 to as high as Rs.40 lakhs based on borrowers repayment history, monthly income, age, profession, and other such factors.
Personal loan eligibility criteria
The person who is applying for a personal loan should be a citizen of India. He should be a salaried person or a self-employed person. Since the loan is unsecured, the risk factor is more and hence, there are a few eligibility criteria that are set, such as:
- Income: The applicant should have stipulated monthly repaying capacity or minimum salary.
- Age: Applicant must qualify the age criteria only then the loan would be granted.
- Repayment ability: The applicant should be working for an organization or have been working in a business for several years.
- Credit score: Applicant must have a good credit history; only then he is eligible for a personal loan.
Particular Self - employed Salaried
Age 21- 68 years 21 - 60 years
Credit Score Above 750 Above 750
Loan Amount Rs. 75000- Rs. 3500000 Rs. 25000- Rs 2000000
Income ->Minimum turnover of Rs. 15 lakhs for professionals
->Minimum turnover of Rs. 30 lakh for non-professionals.
Rs. 15000 (Minimum).
Do’s and Don’ts for a personal loan:
- Pay your instalments every regularly.
- One should know the credit score before applying.
- Borrow only when you are financially stable enough to repay the borrowed amount on time.
- One should search for the best offers and then opt for a personal loan.
- Partially paying the loan amount.
- Being irregular and not paying on due dates.
- Signing a loan document without understanding terms and conditions.
- Accepting the loan which comes first on your way, rather than choosing which suits you.
Personal loan interest rate and other charges:
|Particular||Interest rate and other extra charges|
|Interest Rate||10.65% to 21% per annum|
|Long Time Duration||1 to 5 years|
|Loan Amount||Minimum Rs. 1 lakh|
|Pre-closure fee||NIL to 4% of the principal amount.|
|Processing fee||0 to 5% of the loan amount|
|Type of interest rate||Floating or fixed|
One should opt for a personal loan only when all means of availing funds have been exhausted. A personal loan is, by nature, an unsecured credit that is provided to an individual based on his capability of repayment. The process is fast and straightforward. A personal loan is famous because they are easy means to raise funds in the case of urgency. However, there are also few inherent disadvantages of personal loans which could have negative financial implications if you are not repaying the EMI. Therefore, it’s wise to think and plan before you engage yourself with Personal Loans.