You might be going through tough times right now due to COVID 19 crisis may it be emotionally, mentally and most of all financially there are ways how you can still manage to get on track by having a personal loan.
What is a Personal Loan?
Personal loan is a type of unsecured loan, personal loan will be provided by the banks or other non-banking finances based on the personal income of the persons. Personal loan is the best source for the funds to complete your small dreams, marriage expenses, medical emergency, vocations etc.
If you are interested in getting or acquiring this financial product or service, you may get it from a financing institution like banks, cooperatives, or other Loan Firms in your area. There are some of many requisites for you to avail a personal loan but before that let’s get to know the characteristics of a Good Personal Loan.
5 Characteristics of a Good Personal Loan
1) Fair and low interest rate.
2) Flexible loan terms.
3) The right match for your needs.
4) Minimal requirements to be submitted.
5) No hidden or excessive fees and charges.
The main advantages of a personal loan include the following:
- Relatively quick (because they do not require as much documentation as a home or auto loan).
- No restriction on how you can spend the money
- Do not require any collateral. So if you do not have any assets like a home, or shares or gold to offer as security, and are in need of money urgently, this is perhaps the most convenient option.
The main disadvantage of a personal loan is the higher interest rate when compared to other loans. Since the lenders do not have any security against payment default, they charge high interest rates to cover their lending risk. Personal loans can work out to be one of the most expensive loans to take in terms of interest payments.
What are the different types of Personal Loans?
Types of different personal loans include short-term loan, cash advance loan, business loan, payday loan, education loan, renovation loan and vacation loan.
There are many doubts and misconceptions about personal loans that make people apprehensive about applying for them in the first place. Now, prospective debtors can be sure about many aspects of personal loan.
Even if one needs a personal loan, there are many who do not apply just because they hear about the difficulties one has to go through to get an approval. However, most of them are myths or even if true, are not as hard to tackle if only one has some sound financial planning. There are some myths to be busted about Personal Loan Rejection upon which you can rely. Following are these myths:
Personal Loans Have Long Processing Time
Many borrowers think that personal loans have a very tedious approval process and a lot of time has to be spent waiting. However, this is not true. If the documentation is correct, and if one has made an online application, then the loan could get approved in as less as 24 hours. Unsecured loans with no collateral take even less time. Lenders work very fast to understand the needs of the client and approve the loan.
Low Credit Score will Lead to Rejection
It is true that a high credit score is one of the criteria for getting the loan approved but that does not automatically mean that a low score would lead to rejection. Factors like income and repayment plans on the part of the borrower shall be taken into account. One might also have to pay higher interest, but chances of outright rejection are low.
Only Banks can Give Personal Loans
This is one of the biggest myths today. Banks of course provide personal loans, but there are many major NBFCs, who are helping people realize their dreams. They offer personal loans at attractive interest rates and in most cases are also more considerate, which means they would not reject a loan application outright on certain grounds as a bank would.
Interest Rates of Personal Loans are Higher
There is a common misconception that personal loans have exorbitant amounts of interest but in reality, personal loan interests can be as low as 10.99% if one has a good credit score and a solid repayment plan in place. There are confusions about what is the personal loan interest rate in many cases. Lenders also settle interest rates on loans depending on the borrower’s credit score. In contrast, credit cards have interest rates as high and 18% to 25%. Looking for a loan to meet your financial needs? You may check and compare the interest rates of personal loans across banks on GoBear and find the right loan that suits your needs.
A Second Loan would not be Granted in Case of an Existing Loan
There is no rule that says that a borrower is not eligible for a personal loan if he already has another loan like a car or a home loan. The creditor will only judge the repayment capacity while deciding whether to approve your loan or not and if they see you have sufficient income to pay up your personal loan in spite of having another loan, your loan would be approved. In fact, in some cases, the chances of getting approved are higher if the creditor sees that you are making timely payment on the other loan you have and that makes you a safe borrower to lend to.
No Prepayment Option
Another myth is that since personal loans have short duration, one cannot make prepayments, but that is untrue. One could have to pay a pre-payment charge but there are options for making prepayment with almost all banks and NBFCs.
Personal Loan Eligibility
Individuals who can take a Personal Loan
- Salaried Employees Salaried doctors Employees of Public and private limited companies. Public and private limited companies Government sector employees including Public Sector Undertakings and central and local bodies
- Minimum age of 21 years
- Maximum age of 60 years at loan maturity
- Minimum net monthly income
Keep your documents ready
Documents required for Personal Loan
- Application form
- Age proof
- ID proof
- Income proof
- Bank statement
- Residence proof
- Signature verification proof
Post-sanction / pre-disbursement documentation
- Loan Agreement duly signed
- Standing Instruction (SI) Request / ECS Form. Security Cheques required for SI and ECS
Qualification or registration proof required for doctors, architects, CA, CS, ICWA, MBA consultant, engineers may vary from customer to customer
Getting ready for a personal loan will prevent you from incurring bad debts. Preparation, good payment plan, additional income-generating activities, and proper loan usage are major considerations in evaluating your readiness.