Guide to Personal Loan

 

With an improvement in standard of living, the desire for a luxurious and comfortable life is growing in every heart. Therefore to meet personal needs, the concept of personal loan has been established.
A personal loan is a type of unsecured loan and helps you meet your current financial needs. You don’t usually need to pledge any security or collateral while availing a personal loan and your lender provides you with the flexibility to use the funds as per your need. It can serve as your solution for managing your travel costs and wedding expenses as well as the expenses of a medical emergency, home renovation, debt consolidation and others.

Purpose of Personal loan
It can be used for any personal financial need and the bank will not monitor its use. It can be utilised for renovating your home, marriage-related expenses, a family vacation, your child's education, purchasing latest electronic gadgets or home appliances, meeting unexpected medical expenses or any other emergencies. Personal loans are also useful when it comes to investing in business, fixing your car, down payment of new house, etc.

Eligibility Criteria
Although it varies from bank to bank, the general criteria include your age, occupation, income, capacity to repay the loan and place of residence. To avail of a personal loan, you must have a regular income source, whether you are a salaried individual, self-employed business person or a professional. An individual's eligibility is also affected by the company he is employed with, his credit history, etc. 
 

Benefits of Personal Loan
1. No security or collateral is required
Being an unsecured loan, there is no collateral of any asset required. It is offered on the basis of your credit history and repayment capacity. 

Less documentation

Many abhor applying for personal loans due to lengthy documentation process. But personal loans are approved with minimum documentation.

1. Quick loan disbursement

These days it takes few hours for loan disbursement. If bank feels that you have the capacity to re-pay the loan within the stipulated time and need loan for genuine reason then getting a personal loan disbursement is easy.

1. Fixed rate of interest over the tenure
    Rate of Interest on personal loan is fixed at the start of the tenure and remains constant throughout. So, it becomes easy for loan applicants to plan for their future EMIs well in advance.
2. Flexible loan tenure of around 1-5 years

Personal loans offer loan tenure ranging from between 1 year to 5 years. So you have the flexibility to choose your tenure as per your repayment plan. Best is to opt for a lower tenure loan and save on the interest outlays.

1. Easy EMI facility is available

Equated Monthly Instalments make the idea of loan simpler. Personal loans too offer easy EMI facilities and help you re-pay the principal amount over the tenure.

1. It is a multipurpose loan

Unlike home loan or car loan, personal loans can be availed to meet almost all aspirations.

Documents required for Personal Loan

Some of the basic documents required for Personal Loan are as below:

1. Income statements
2. Salary slips and Form 16
3. Bank statements
4. Latest Income-Tax Returns
5. Credit report
6. Age proof (birth certificate, passport, Aadhaar card, voter id, PAN card etc.)
7. Address proof (Aadhaar card, passport, electricity bill, telephone bill, ration card, etc.)
8. Photo identification proof (Aadhaar card, voter id, PAN card, passport, driving license, etc.)

These documents along with the Personal Loan application form and few photographs need to be submitted to your lender.

These days many banks and financial lending institutions offer online loan application facility as well. You must check these and apply for the best suitable option.

Once the Personal Loan is sanctioned, duly signed loan agreement copy will be sent. You also need to provide a standing instruction request / ECS mandate form and security deposit cheques are to be provided