Personal loan is a type of unsecured loan, which can be availed to help meet financial needs. Generally no collateral or security is needed to avail a personal loan. Personal loans are availed to meet financial expenses during an emergency or to pursue personal goals.
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Top 10 Tips For Personal Loan
Personal Loan Eligibility Criteria:
To avail a personal loan, the borrower must meet the following eligibility criteria:
- The borrower must have a stable source of income.
- He must earn Rs 20,000 a month or above. (Take home salary).
- The borrower must be 21 to 60 years.
- The applicant must have a good credit history. (Credit score of 700 or above).
Personal Loan Documents Required:
The banks require the following documents to process and sanction personal loan:
- ID proof
- Address proof
- Bank statement
- Income proof
Personal loan interest rate:
The interest rate of personal loans in India can range from as low as 10.65% to as high as 24% per year. The interest depends on multiple factors. Other than the interest rate, there are other fees associated with personal loans like processing fees, pre-closure charges, and late payment charges.
Banks offering personal loan:
In the list below you will find a few banks that offer personal loans for both salaried and self employed professionals:
- ICICI bank personal loan
- SBI personal loan
- HDFC personal loan
- AXIS bank personal loan.
- Citibank personal loan
SEE ALSO: How To Apply For An Instant Personal Loan Online?
Top 10 tips for taking personal loan:
Personal loans are the most popular type of loan that can be availed. Banks sanction these loans to borrowers with no collateral. The borrowers do not need to state the reasons for availing personal loans, which is why these loans have become so popular these days. Before availing personal loans, there are a few things that you must consider. Below listed are a few tips that you must keep in mind, before applying for a personal loan:
- Make sure to get the best deal: there are many banks that offer personal loans at competitive rates of interest. But, there are hidden charges that require a close look. Make a list of the banks that provide personal loans and compare and select the one that suits your needs. Carefully go through the other charges like processing fees, late payment penalties and pre-payment charges before finalizing the loan.
- Make sure to choose the right lender: each lender offers loans at a competitive rate. But, make sure the lender has a good reputation in the market. Do not take loans from financers who might harass you later on hidden charges and fees.
- Go through the terms and conditions: be sure to ask for a full disclosure on loan terms and conditions. The lender is looking to generate a steady interest payment from you over the term of the loan. While finalizing the loan always ask for pre payment options. This will help you save immensely on high interest rates that you would otherwise have to pay.
- Make sure you have a good credit score: there are certain parameters on which the bank considers an individual to be suitable to avail a loan. Credit score is one of them. The applicants, who have higher credit score, indicate a better repayment capacity. So, before applying for a personal loan, check your credit score. If you have a good credit score, you are likely to get loans at a lower interest rate.
- Do not borrow more than you can repay: Borrowing more than your repaying capacity, can lead to debt. Always choose your loan carefully by evaluating current finances. Always check the amount to be repaid before finalizing the loan. Applying for a loan higher than your paying capacity increases the chances of getting your loan plea rejected. Before applying for a load, always determine the loan amount that you will be able to pay in the future.
- Check your eligibility: before applying for personal loan, check the eligibility criteria and find out if you are eligible for the loan. Income is one of the most important criteria lenders look for before sanctioning a loan, as it is an important factor in the repayment of the loan.
- Do not apply for multiple loans: Do not apply for loans in many banks at once. It’s considered a hard enquiry and may affect your CIBIL score. You must carefully evaluate and choose the right bank for loans, as different banks have different interest rates and eligibility criteria. Applying for several loans at a time increases the probability of the loan plea getting rejected as the query often revolves around the credit report.
- Evaluate your need before taking the loan: before you decide to take a loan, assess the requirements. Once you take a loan, you have to pay EMIs. Evaluate if the loan you are taking is for a productive purpose. If you are already having unpaid bills or dues, consider paying them first. This will ensure you do not land in the debt trap.
- Wait for 6 months before re-applying: Also try to maintain a minimum gap of 6 months, if your application has been rejected due to a poor credit score. Try to improve your score in these 6 months by clearing off dues. If your loan gets rejected by one lender, it is futile to approach other lenders. Multiple rejections can cause your credit score to drop.
- Maintain a good credit utilization ratio: Credit utilization ratio is the percentage of the borrower’s available credit, that is currently being utilized. It is a calculation that represents the total debt a borrower is utilizing in comparison to total revolving credit that has been approved by credit issuers. A borrower’s credit utilization ratio varies from time to time as borrowers make purchases and payments. While using credit cards, make sure to maintain a credit utilization ratio between 40-50%. This helps to maintain a good credit score.
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