Personal loans are the loans that cater to various financial needs of different individuals and can be paid off in easy installments without stress. Known to be an ideal lifeline when a financial crisis hit you, a personal loan helps you to deal with situations like a medical emergency, home renovation, education, relocation and a lot more. The interest rate offered on a personal loan depends on your credit score and there are flexible tenure options offered by all the banks. Easy to apply, personal loans can be availed online if you meet the eligibility criteria and submit the necessary documents.
What is the Eligibility Criteria for a Personal Loan
The criteria to apply for a personal loan differs from bank to bank but the most common criteria are listed below:
- You should be 18 years and above
- You should be a resident of India
- You should be receiving a regular income
- You should have a good Credit Score
You can calculate your eligibility with a personal loan eligibility calculator before making the final choice.
What are the Documents Required for a Personal Loan
This might slightly vary from bank to bank but the list of most common documents; needed by the banks are:
- Proof of identity, passport, voter ID, driving license etc.
- Proof of permanent address
- Optional guarantor form, duly filled
- Income proof
- Bank account statements if required by the bank
- Salary slips of the applicant
What are the Benefits of Personal Loan
- Can consolidate other debts: If you have amassed a huge debt from your multiple credit card dues and other types of loans, you must take a personal loan to consolidate all the minor debts into a single one. This way, the combined rate of interest would be lower as compared to the rate of interest on separate loans or cards and you will be easily able to manage a single installment.
- Flexible tenure: If you do not want to handle a lot of stress and wish to keep the monthly payments as low as possible, you should go for a personal loan. A three- year loan plan will have 36 payments while a five- year loan plan will have 60 payments and the principle would be divided among all the installments, which means you will be paying the monthly installments as per your ability.
- Can borrow a large amount: Isn’t it better to borrow a large amount altogether to deal with all the expenses rather than borrowing various loans one after another or borrowing money from relatives? With a personal loan, you can borrow the required amount and can deal with situations like home renovation, medical bills, wedding, and other major life events.
- Choice of fixed and variable rates: If you apply for personal loan, your lender may offer you a choice between a fixed and a variable- rate loan. You can choose between the two as per your repayment ability as both of them have their own benefits. In some cases, the lender can allow you to choose a fixed rate at the beginning and change it to a variable rate later.
- Improves credit: Structurally and thoughtfully designed, a personal loan is planned properly and you get the opportunity to choose the desired tenure to meet your repayment ability. Therefore, you can easily manage to make regular payments without any delay or stress, which adds up to your credit history and improves your credit score.
- Prepayment and repayment options: Offering a number of repayment options, the EMIs of a personal loan can be paid through cash, ECS (Electronic Cancellation System), cheque or AD (Auto-Debit). This makes it easier for you to repay the loan. Also, many of the banks offer the option of prepaying the loan and you save a lot of interest money. Although, some of the banks charge some penalty on pre- payment but that is also less as compared to the actual rate of interest.
Questions to Ask Before Taking a Personal Loan
Ques: Can you afford it?
It is important to consider all the factors and figure out if you will be able to pay the monthly EMIs for the next 3 years or more. If yes, applying for a personal loan would be a good move to make.
Ques: What would be the interest rate?
Consider your personal loan interest rate while calculating the monthly payments. This way, you will have the exact idea of how much interest rate will you be paying for a fixed period of time.
Ques: Can you repay the loan early?
Repayment flexibility is a very important factor and should never be ignored. It is important to know if you can repay the full loan amount before the due date without any penalty.
Ques: Is your credit report in good condition?
Your credit history is thoroughly checked before offering you a personal loan and plays an important role in getting the lowest interest rate possible. In case, your credit history is not in a good shape, take your time and improve it before applying.