Personal loan is an unsecured amount of loan borrowed by an individual on the basis of various criteria. Personal loan depends on a level of income, CIBIL score, scope of repayment and history of employment. This loan serves the personal needs of an individual at the time of financial crunch. Upon the amount required by an individual, he/she can calculate the interest he has to pay monthly and estimate the installment he/she has to take out.
What is the need for a Personal loan?
Financial crises do not knock your door before coming, personal loans are a respite to such uninvited problems. This small financial assistance can help us cope with an unlikely situation without justifying the usage. Personal loans take the least time in getting approved with minimal documentation since a person is in urgent need.
Eligibility for Personal Loan
Eligibility criteria of personal loan for salaried and self-employed vary slightly. A slight difference might be because of different offers by different banks, however, salaried section gets more facilities provided they need it often.
Age: Must be above 21 years, for self-employed 25 years and above
Income: Minimum 20,000, for self-employed 15 lakh turnover
Minimum loan amount: 50,000 or more
Maximum loan amount: 20 lakh or less
Credit score: 750 and above is considered to be a good score
All the above mentioned numbers are subject to variation depending on the terms and conditions defined by different banks. It is always wise to investigate the market and seek an option that fits best to your needs.
Required documents for Personal Loan
Document requirements are slightly different in case of a salaried or a self-employed individual. Refer to the list below for the documents required to apply for a personal loan.
|Proof of identity- DL, PAN card, Passport||Ö||Ö|
|Proof of residence||Ö||Ö|
|Bank statement||Ö (3 months)||Ö (6 months)|
|Office address proof||x||Ö|
Most of the documents have been stated above still ensure you have the below mentioned documents before applying for a personal loan.
- Photo ID proof
- Address proof
- Ownership proof of residence
- Passport size photo
- Duration of job proof
- Income proof for self-employed
- 6 months bank statement
Personal loans are beneficial! Know how
Personal loan funds can be used anywhere without you justifying or clarifying your usage. It can be used to cope with any emergency situation or an urgent need that can be at the time of marriage, medical emergency or any other unavoidable need. Using it freely doesn’t mean the money is yours, you need to return within the mentioned period of time.
The amount taken on loan doesn’t take any asset or possession for your things, it is given on the basis of your employment history and monthly income.
The amount limit is variable depending on the needs of the borrower. It can vary from 10,000-2 lakh rupees. A friendly advice is to borrow as per your needs, not beyond your limits.
Duration of the amount is quite flexible and depends on the amount borrowed. More amount is subject to longer duration whereas a small amount can be repaid in a year.
How to make a Right choice for your Personal loan?
Investigate thoroughly to get the best of the rates and offers available in the market. Compare multiple options and choose wisely.
Read every detail
It is advisable to read even the minutest of detail of the loan document before submitting your application. There might be certain hidden clauses which you were not aware of.
Make a comfortable choice
Calculate your expenses before you choose a loan amount, its duration and monthly EMIs. The loan amount being the most important be chosen that suits your pocket.
Fixed or variable interest rate
Choosing fixed interest rate would give you a specific amount for a defined period of time that won’t change throughout the duration however variable rate keeps changing with respect to changing the interest rate, choice is yours!
Calculate the exact EMIs
The monthly installments should be well calculated so as to know how much the loan is going to cost you every month. Calculate the monthly installments multiply it with duration of the loan and know how much the loan amount is and what extra you are paying as an interest.
Choose the lowest interest amount
Compare the interest rate for various offers and choose the lowest available the higher interest means shedding extra money from your pocket.
Pay the minimum processing fee
A processing fee is variable and can be waived off on special request, therefore, you should look for an offer with minimum processing fee or get it waived off if possible.
Be aware of automatic deduction
If you choose for automatic monthly deductions, be vigilant of the amount deducted as you shouldn’t be charged extra in any case.
What are Chances for Rejection?
There are few strong points that you need to avoid to get your loan rejected. If you have a poor credit score, your personal loan application will surely be rejected as credit score plays an important role. If you have other loans already going then your application requested might not be accepted. Another case being the amount against which you seeking a loan for. If your loan amount is higher and does not cater to the defined limit. Your application is most likely to get rejected. Insufficient income is another reason that can result in rejection. Therefore, it is important to think before you act.
Taking a personal loan is no harm until and unless you are not crossing your limits. It is always wise to look at your needs, explore the best available options, fulfill the eligibility criteria, complete your documentation, know the lowest interest rate and apply for a loan that best fits you. Your expenses are yours, no one else will share it. Make a mindful decision.
Also Read : Tax Benefits on Personal Loans in India