Key things to consider while opting for a personal loan

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Updated: July 13, 2021 6:07 PM

Many people now take personal loans not only for their big-ticket purchases, such as for buying a house or a car but also for children's higher education, among other things. These loans are usually hassle-free and are pre-approved by banks.

personal loan, instant loan, instant loan providers, instant credit, loan apps, digital lending platform, Covid-19 pandemic, personal loan, personal loan interest rates, personal loan charges, personal loan eligibility, personal loan HDFC, personal loan SBI, loan offers, repayment capacity, credit scoreFinance Minister Nirmala Sitharaman had last month extended ECLGS limit by 50 per cent to Rs 4.5 lakh crore.

A personal loan is the most popular and easiest type of unsecured credit that caters to any kind of personal needs of an individual. One can look at personal loans during any kind of financial crisis, be it a medical emergency, or for a big-ticket purchase.

The popularity of this loan is due to its easy availability. It is an appropriate choice to get funds without much hassle. Borrowers with salary accounts can check personal loan offers provided to them using the mobile banking facility of the bank.

Many people now take personal loans not only for their big-ticket purchases, such as for buying a house or a car but also for children’s higher education, among other things. These loans are usually hassle-free and are pre-approved by banks with the least requirement of documents.

While taking a personal loan, experts say, the first thing to check is the amount that needs to be borrowed and when will the loan be needed. Then one should check and compare the interest rates of different lenders. Loan rates vary from lender to lender even for the same profile.

Additionally, experts say borrowers should check the processing fees and pre-closure charges, before going ahead with the loan. While processing fees vary from bank to bank, some banks also charge a hefty amount on foreclosure.

Having said so, experts believe, for people looking for emergency funds or advance salary, personal loans from banks might not the ideal place, with the longest processing time.

To be eligible for taking a personal loan, most lenders base it on the income, repayment capacity, credit score, and current monthly obligations of the borrower. Note that a better score means better rates on borrowings.

In recent times, a lot of lenders also rely on their internal assessment systems, wherein the eligibility is based on alternate data such as bank statements, social media contact details, etc.

The maximum loan amount also depends on the risk appetite and internal policy of the lenders. For instance, while banks may offer as high as Rs 2 lakhs to 40 lakhs, the fintech platforms might range between Rs 50,000 to Rs 5 lakhs.

As personal loans are usually unsecured loans unlike other types of loans, they require much less processing and documentation than other types of loans. Also, an advantage of the personal loan is the usage of funds are not restricted.

and can be used for any purpose such as medical expenses, vacations, weddings, etc. While other specific loans clearly define the usages of the money such as education loan, home loan, car loan, two-wheeler loan, a gold loan can only be used to buy or use for that particular product.

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