Personal loans are one of the easiest ways to get funds for your personal or business needs. You don’t have to pledge any security as collateral and still avail a loan. The loan is approved and disbursed at the quickest and you get funds in your bank account to cater to your financial obligations.
Due to the ease of availability and non-requirement of collaterals, personal loans are very popular among individuals. However, the loan should be availed only after complete knowledge of its terms and conditions.
If you are also thinking of availing a personal loan, here are five important things which you should know about these loans.
Due to the ease of availability and non-requirement of collaterals, personal loans are very popular among individuals. However, the loan should be availed only after complete knowledge of its terms and conditions.
If you are also thinking of availing a personal loan, here are five important things which you should know about these loans.
The eligibility criteria
Personal loans are not offered to any individual. There is a complete set of eligibility requirements and individuals fulfilling the prescribed criteria can only avail of the loan. Some common eligibility criteria include the following –
- Your age should be between 21 years to 60 years. Some lenders also allow personal loans up to 65 years. Beyond this age, personal loans are not available
- Salaried individuals can avail a personal loan. Self employed individuals and businessmen are not eligible for personal loan and can get business loan.
- Salaried employees should be steadily employed for at least the last 3 years with a minimum of 1 month’s work experience in the current organisation.
- Net monthly income should be a minimum of Rs. 15, 000. However, some banks specify higher income criteria to be eligible for personal loan.
- Individuals who are resident Indians can only apply for the loan
While there are many different personal loan sites, the requirements are similar on most. Most sites do a soft pull of your credit to pre-approve your loan so applying won't affect your credit score. Apply on multiple sites to make sure you're getting the best rate.
Your income determines the loan quantum
Lenders determine the amount of loan based on your monthly income. The loan amount is determined as a multiple of the net monthly income. The maximum amount of loan which is available is restricted to Rs.25 lakhs to Rs.50 lakhs. Moreover, the resultant EMIs should not be more than 65% of your monthly income.
Your credit score is important
Your credit score measures your creditworthiness. It shows your credit history and is an important eligibility consideration for lenders. Individuals who have a good credit score of 650 and above can only apply for personal loans.
However, some banks ask for a credit score of 700 and above to get personal loan. If your credit score is bad, i.e. below 650, your loan application would be rejected.
The associated fees and charges
Besides the interest rate applicable on personal loans, there are other fees and charges associated with the loan which you should know about. For starters, there is a processing fee on the loan which is a non-refundable fee charged for processing the loan application.
Even if the application is rejected, the processing fee is not paid back. This fee usually ranges from 0.5% to 2.5% of the loan amount. Another charge is the penalty levied on late payment of EMIs. There might be prepayment charges and other charges as well. So, before you opt for the loan, understand the charges which are applicable on it.
Documents required
A complete set of documents would be required to be submitted with the loan application form. These documents include the following –
- A valid identity proof – PAN Card, passport, Aadhaar Card
- Address proof – Passport, driving license, bank statement of past 3 months
- Age proof – Aadhaar Card, PAN card, Voter ID card
- Income proof – form 16, previous salary slips, bank account statements for salaried individuals
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