Your Most Comprehensive Guide to Personal Loans

In this modern-day world, credit or loan is no longer a taboo. Individuals are more open to avail of a loan to meet various financial commitments, whether in an emergency or for a routine requirement.

What are personal loans?

Personal loans are unsecured loans that can be availed of

  1. for a short period of time without offering any collateral (generally for a maximum of 5 years).
  2. The maximum amount of loan that can be availed of also remains small (Maximum of 25-40lakhs) in comparison to loans like home loans.
  3. Also, the amount availed of as loan can be used for a variety of purposes.

Who can avail of personal loans?

guide personal loan

The eligibility criteria for a personal loan differs between lenders. Some of the factors that decide the eligibility of a loan applicant are

  • Age
  • Salary/Income
  • Other obligations like existing loan EMIs, etc.
  • Credit Score (CIBIL score)
  • Other factors like the city of residence, your employer, etc.

What are the uses of a personal loan?

There is no end purpose that is fixed with a personal loan. So, it can be used for any purpose as per your needs. Some of the purposes where a personal loan proves useful are.

The maximum amount of personal loan allowed and tenure

guide personal loans

Personal loans are short terms loans with a maximum tenure of 5 years. The maximum amount allowed as a loan varies between lenders and various factors of the applicants. While there are some lenders who lend small amounts like Rs. 5000, there are others who can lend even up to Rs 25-40 lakhs.

How do you choose the ideal personal loan?

Personal loans can be availed from different lenders. They can be banks, NBFCs, Co-operative Banks or Online Lenders. The rate of interest and other terms and conditions associated with each of the lenders vary.

Loans from banks and NBFCs may come at a lower rate of interest; however, their eligibility criteria for availing a personal loan is more stringent, especially in terms of credit score and minimum income. Whereas, online or fintech lenders like Money View allow loans at a lower credit score of 650 and a minimum income requirement of Rs 13,500.

Other factors that should be kept in mind is the ease in availing the loan and the time taken to disburse the loan. Banks and other financial institutions often require you to visit their branch and submit hard copies of your supporting documents. On the other hand, online lenders allow you to apply for personal loans easily on their apps or through their websites. The entire process from approval to disbursal of loan, including document submission happens online.

You might like to read the entire process of availing a personal loan online here.

Documents required to avail a personal loan

The documents required to avail a personal loan is extremely minimal. All you require is

  • Proof of Identity.
  • Proof of Address
  • Proof of Income

The documents accepted as proof in each of the categories varies between lenders. So, it is good to check with your lender before applying.

Interest rates and other charges applicable on a personal loan

Interest rates on a personal loan can start from 10.5% onwards. However, the rate of interest offered to an applicant depends on the risk profile of the applicant which is measured by the credit score of the individual, loans and other commitments of the individual, age and the income of the applicant.

In addition to the credit score of the applicant, online personal loan lenders have their in-house credit scoring models that consider many other data points which makes it easier for individuals to avail personal loans from them.

A processing fee which is calculated as a percentage of the loan amount availed is also charged.

Prepayment or partial repayment of personal loans

Any early repayment (before the tenure) of the loan availed is called as Prepayment of a loan. This could either be complete or may consist of a partial amount. Generally, personal loans carry a prepayment penalty or fee which can be done only after the completion of the set period of the loan.

You would be glad to know that Money View does not charge any pre-payment penalty when the loan is prepaid anytime after payment of 3 EMIs. However, partial prepayment is not allowed.

How can you increase your chances of availing a personal loan?

The pain of loan rejection, especially when in an emergency is bad. We wish you never have to face such situations. As this blog takes your financial fitness seriously, we had come up with 7 simple tips to increase your chances of getting your personal loan approved. Make sure to read them before applying for your next personal loan.

Personal loans and credit score

A credit score is an important factor that determines the loan eligibility of an individual. Though there has been widespread dissemination of information regarding credit score, there are many doubts in the minds of individuals. Some of the major ones being, Can I get a personal loan with a low credit score? or If the rejection of a personal loan affects your credit score and the most commonly asked query being How can I improve my credit score?

We have tried to cover all possible aspects of a personal loan in this post. Do let us know in the comments below, if this was helpful and if you like to read about any other topics concerning personal loans.

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