What is Personal Loan, Interest Rate, Interest Free Loan
In the recent past, there has been a steep rise in the number of people applying for the Personal Loan to meet their increased expenses. The reason the Personal Loan has gained popularity is that they require less processing time, generally unsecured in nature, and can easily be availed from any Bank or NBFC (Non-banking financial company). Since the majority of the Financial institutions provide online services, the personal loan amount gets disbursed within 48 hours.
What is Personal Loan?
A Personal Loan is an unsecured loan or a loan without a mortgage that is availed to meet personal expenses such as wedding expenses, education, medical emergency, home renovation, and the like. This type of loan is provided by Banks and NBFCs based on repayment capacity, employment history, credit score, credit history, profession, and income level.
Benefits of availing Personal Loan
Urgent requirement for finance
Personal Loans are the best credit options when it comes to urgent requirements for finance. The personal loans availed from banks are considered a better option from credit cards, a loan from family members, or unrecognized moneylenders since the rate of interest charged on personal loans availed from a Bank or NBFC is reasonable. Credit cards come with a fixed limit and many vendors don’t accept payment via credit card so in this case opting for a personal loan is a better option.
Less Documentation
Unlike loans such as Home Loan or Education Loan, you need to provide multiple documents but Personal Loan requires fewer documents. It takes less time to get processed and approved.
Flexible repayment
These loans are generally short-term and medium-term loans i.e. you have the liberty to choose the tenure of repayment of the loan amount according to your repayment capacity. It is advisable to choose a short duration for repayment since it saves on interest.
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What is personal loan eligibility?
We have discussed ‘what is personal loan?’ Let’s check out what is personal loan eligibility?
By now we know that personal loans are unsecured loans which makes them an alluring option to go for immediate credit requirements. The amount sanctioned for personal loans depends on the criteria set by different Banks and NBFC’s. Every financial institution has its own eligibility criteria for the loans sanctioned. Here we have listed the general criteria-
• The age of the applicant.
• Profession of the applicant, whether he/she is a salaried person or self-employed.
• The creditworthiness of the applicant.
• The repayment capability of the applicant. • Remuneration / Salary of the applicant.https://9bcf91f8419af1f5ea47df01066cac8c.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
What is personal loan interest rate?
Since personal loans are unsecured loans therefore the rate of interest on them is higher than secure loans such as home loans. The interest rate on the personal loan depends primarily on the following –
• Credit score of the applicant.
• Income level of the applicant.
• Loan amount and tenure of repayment.
• Interest rates prevailing in the market.
What is personal loan interest rate prevailing in the market?
The average rate of interest on a personal loan varies from bank to bank and depends upon the factors discussed above. The average range of personal loan interest rates prevailing in the market varies between 8.70% up to 24% p.a.
What is personal loan processing fee?
This is the charge that needs to be paid in addition to the interest paid on the loan amount. The processing fee varies across the lenders. The fee charged for the loan is nominal and usually ranges from 0.5% to 2.50%.
What is the minimum CIBIL score to get personal loan?
The minimum CIBIL score required to get a personal loan is 750 and above. The CIBIL score ranges from 300 to 900 and the greater the score is the better it is since it describes the applicant’s creditworthiness and financial discipline. Now you know ‘what is the minimum CIBIL score to get personal loan’, you can easily check your CIBIL score from various websites.
What is personal loan application process?
Personal Loan can be applied via different methods-
- Online application for a personal loan
Personal loans can be easily applied with the help of net banking or by visiting the Bank’s website. You just need to submit the KYC documents and income-related documents to get your loan processed.
- Offline application for a personal loan
Simply visit the branch and fill up the personal loan application request form and attach the required documents and submit them. After verification of your documents, your loan will get process.
- Application for a personal loan via email or phone banking
You can request a personal loan via email or phone banking and once your eligibility is assessed by the bank they will contact you for further process.https://9bcf91f8419af1f5ea47df01066cac8c.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
- Application from ATM machine
Nowadays you can even raise a request from an ATM machine and concerned personnel will contact you for the further process.
What are the documents required for a Personal Loan?
Identity Proof – Copy of Passport, Aadhaar Card, Driving License, Voter ID card, etc.
Income Proof – Form 16, Salary slips, Bank statements, Income Tax Certificate, Bank Passbook, etc.
Photographs- Passport Size.
What is personal loan EMI calculator?
EMI calculator is an online tool to ascertain the EMI which will outgo with respect to the amount of loan, tenure, and rate of interest charged.
The mathematical formula to calculates EMI is:-
P x R x (1+R)^N / [(1+R)^N-1]
P = Principal amount of the loan;
R = Rate of interest levied;
Remember if the tenure and the interest rate charged on your loan amount vital for deciding the EMI to be paid. So, if the loan tenure is more than EMI would be less and vice versa. Similarly, if the interest rate is low then EMI would be less and vice versa.
How to pay the EMI?
There are various modes of payment offered by the Banks and NBFCs for the repayment of the loan amount. The most common ones are listed below:-
• National Automated Clearing House: This facility allows payment processing in the real-time. This mode can be used for repayment of the loan.
• Post Dated Cheques (PDCs) – These are the cheque which can be drawn on the future date mentioned on the cheques. These cheques can be used for loan repayment purposes.
• Standing Instruction or Debt Mandate – This is a process by which you instruct your bank to transfer a particular amount of money to another bank account on regular intervals up to a defined period.
What happens if personal loan is not paid in India?
If you default in paying off your personal loan then as per the RBI guidelines you will be charged as a criminal under section 138 of the Negotiable Instruments Act of 1881 if your post-dated cheques are bounced.
Furthermore, if you fail to pay off then your name will be added in the loan defaulters list and this will reflect in your credit history which will adversely affect your ability to get loans in the future. Even you could be charged under section 420 of the Indian Penal Code, which involves imprisonment. So now it is clear regarding what happens if personal loan is not paid in India. So it advised avoiding defaulting on personal loans availed and to always keep funds afloat to pay off the EMIs due.
What is personal loan settlement?
Personal Loan settlement means partly to pay off the total amount due as agreed by the lender and waive off the remaining amount. The loan can be settled if the borrower is genuinely unable to pay off the loan amount due to the loss of a job, medical emergency, or any other genuine reason. If the lender agrees and finds the reason genuine then can settle the loan at the lesser amount and waive the unpaid amount. But the settlement of a loan has an adverse effect on your credit score and will bring down your score which can take up to seven years to get a negative remark cleared from your credit history. This could impact your ability to get loans in the future.https://9bcf91f8419af1f5ea47df01066cac8c.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
What are personal loan prepayment or foreclosure charges?
The prepayment or foreclosure charge is levied by the lenders for earlier payment of the loan amount. This charge varies from bank to bank and few of the banks don’t charge anything for the foreclosure of the personal loan account.
What is personal loan insurance?
Insurance is a financial risk cover that takes care of the finances during adverse conditions. With all kinds of insurance in the market, there is insurance for Personal Loan as well.
Think of a situation where you have availed a personal loan but due to some unforeseen conditions such as job loss, permanent disability, death or the like can lead to default in payment of a personal loan. Here the role of Personal Loan Insurance comes into play where the policyholder is protected from the default and the insurance company pays off the due amount.
Opting for personal loan insurance has its own pros and cons. It protects you and your family from the burden of paying off the personal loan in adverse situations but on the other hand, it considerably increases your total cost of availing the personal loan.
What is personal loan on credit card?
A personal loan on a credit card is a service through which many banks provide a personal loan based on the credit card available limits, monthly spending, payment history, and transaction pattern. This loan can be availed easily with minimum documentation, quick processing, and attractive interest rates.
What is personal loan top up?
Personal loan top-up can be availed on the existing personal loan account after a certain number of EMIs are paid. Similar to the personal loan amount this top amount can be used for any personal use such as travel expenses, medical emergency, education, house renovation, etc. The benefit of getting a top-up on your personal loan is that you require minimum or no documentation and the interest rate offered remains the same as the earlier approved interest rate.
Features of Personal loan top up-
-It is available only when you have a current personal loan account running and you have a clear repayment history. The top-up can only be availed once you have paid off a certain number of EMIs before applying for the same.
-The top-up amount varies from lenders to lenders but generally, it does not exceed the amount originally approved for the personal loan.
-Top-up loan gets processed and approved much faster as compared to the new loans.
-Top-up loan has a flexible repayment facility depending on the existing tenure of the personal loan amount outstanding.
-This loan can be used for any of the personal expenses.
-It does not require any collateral or security just like a personal loan.Apply Now At Lowest Rate
What is personal loan balance transfer?
A Personal Loan Balance Transfer is a process where the customer transfers the due amount to be paid to another Bank/Lender. This can happen when the other Bank/NBFC is offering a lower rate of interest on the outstanding loan amount which in turn reduces the EMI to be paid and the overall debt.
Benefits of personal loan balance transfer-
-Lower rate of interest
-Extended tenure to repay the loan
-Offer better features like zero processing fees, waiver of last EMI, etc.
-Top-up offered on the loan amount at competitive interest rates.
-Better customer service.
To sum up, personal loans can be availed when we need funds quickly with minimal documentation, flexible repayment tenure, and a competitive rate of interest.