A personal loan is the most popular and simplest type of unsecured credit that meets all types of personal needs of an individual. One can consider personal loans during any type of financial crisis, whether it is a medical emergency or an expensive purchase.
The popularity of this loan is due to its easy availability. It is a suitable choice to obtain funds without much hassle. Borrowers with a salary account can consult the personal loan offers available to them via the bank’s mobile banking service.
Many people now take out personal loans not only for their major purchases, such as buying a house or a car, but also for children’s higher education, among others. These loans are generally hassle free and are pre-approved by banks with the least amount of paperwork required.
While taking out a personal loan, experts say, the first thing to check is how much is to be borrowed and when the loan will be needed. Then you have to check and compare the interest rates of different lenders. Loan rates vary from one lender to another even for the same profile.
Plus, experts say borrowers should check processing fees and pre-closing fees, before going ahead with the loan. Although the processing fees vary from bank to bank, some banks also charge a high amount in the event of a foreclosure.
That said, experts believe that, for people looking for emergency funds or payday advance, personal loans from banks might not be the place to be, with the longest processing time.
To be eligible for a personal loan, most lenders base it on the borrower’s income, repayment capacity, credit rating, and current monthly obligations. Note that a better score means better rates on loans.
In recent times, many lenders also rely on their internal rating systems, in which eligibility is based on alternative data such as bank statements, social media contact details, etc.
The maximum loan amount also depends on the risk appetite and internal policies of the lenders. For example, while banks can offer up to Rs 2 lakhs to 40 lakhs, fintech platforms can range from Rs 50,000 to Rs 5 lakhs.
As personal loans are generally unsecured loans unlike other types of loans, they require much less processing and documentation than other types of loans. Also, an advantage of the personal loan is that the use of the funds is not limited.
and can be used for any purpose such as medical expenses, vacations, weddings etc. While other specific loans clearly define the uses of money such as student loan, home loan, car loan, two-wheel loan, a gold loan cannot be used to buy or use for money. this particular product.