Taking Personal Loan has become quite prevalent in India among the people who aim to fulfill their long and short-term financial needs with systematic repayment scheduling schemes. However, availing a personal loan is a major decision for which individuals should consider various factors. Before applying for the PL, it is important to consider few factors as a borrower, and double-check them with the banker advancing the loan amount.
These factors will help you understand the financial implications of your credit history. So find out some important factors that make a personal loan (PL) an attractive option for meeting financial goals.
What is a Personal Loan (PL)?
A personal loan is a type of unsecured loan for which you do not have to mortgage or keep any asset as collateral with the bank while borrowing it. The rate of interest and the repayment schedule varies from bank to bank. Generally, people access personal loans to meet demands such as house renovation, funding a wedding, going for an international holiday, repaying some previous debt, buying a white good item (refrigerator, AC, washing machine etc.).
So before you avail the PL from any banker, it is advisable to check for the terms and conditions provided below.
Eligibility to avail Personal Loan
The basic eligibility criteria to avail the personal loan is as under:-
Any Salaried and non-salaried Individuals can avail a personal loan.
An applicant must be at least 21 years old and not older than 60 years (for salaried individuals).
The upper age limit for self-employed individuals is 65 years in most banks.
Considering the monthly income, an applicant should earn a minimum monthly income of Rs.25,000/- to avail a personal loan.
Factors to Consider for Personal Loans
Here is a list of factors that an individual should consider before applying for a personal loan (PL):-
Maximum Amount to be Borrowed
An individual’s capacity to borrow a loan depends upon their monthly income. Generally, banks offer a minimum loan amount of Rs. 50,000/- to the PL seekers.
Processing and Disbursement Time
Personal loan’s processing time is very quick compared to other loans where there is a lot of verification involved. PL does not require a huge documentation process. Only a few documents, such as proof of address, proof of identification, and proof of income.
Check for Pre-Approved Loan
In some cases, if the credit history of the customer is good, then banks also offer pre-approved personal loans. In other words, the customer does not have to go through the process of getting the loan approved, the bank has already approved the loan and the amount will be transferred to the account of the applicant without the documentation process within 48 hours.
Loan Repayment Terms and Conditions
The repayment process for personal loans in the form of monthly EMIs is important to understand for the applicant. The monthly EMI is deducted on a specified date and customers can also choose to repay the amount borrowed before the end of the loan tenure. The PL loan amount can be repaid in a total of 12 months of EMI payments scheme for which banks usually charge a small fee as a foreclosure charge.
Know the Rate of Interest
The rate of interest for personal loans is a bit higher than other types of loans as it falls under the unsecured loan category. Generally the personal loan ROI range somewhere between 10.99% and 22% p.a.
In the case of Personal Loan, the repayment tenure range anywhere between 1 year to 5 years. The loan tenure can be chosen by the borrower as well.
*Disclaimer - The information provided above is only for information purposes to spread financial knowledge and enhance literacy among our readers. It shouldn’t be taken as financial advice by anyone.