Your Personal Loan Check-list!

Personal loan allows you to borrow money for almost all your requirements. You can use the funds for a dream vacation, home renovation, medical treatment, or a wedding in your family. Since a personal loan is given for any lawful purpose, it gives you a helping hand for meeting all your personal desires. Before you get a personal loan, make sure you understand how they work and what the alternatives are.

Unlike home loan and car loan, a personal loan is usually an unsecured loan, i.e. it is not guaranteed against any collateral that serves as a security in case of a loan default or, when a loan is not repaid. Since this loan is not backed with any collateral, it is bigger risk for lenders. Due to this, they typically charge a higher interest rate on these loans than secured loans (such as a Home Loan).

Important Factors in a Personal Loan:

The personal loans are typically designed for salaried employees. The unsecured loans for self-employed businessman or self-employed professionals, are named as Business Loans and policy norms for these loans are slightly different than personal loans. Before you take the plunge of borrowing funds through a personal loan, there are certain points that you should know. These points are mentioned below:

1) Loan Amount & Tenure: Although all the lenders follow their internal guidelines before extending loans, a personal loan usually ranges from Rs.50,000 to 15 lacs depending on your income and repayment capacity. The repayment tenure ranges from 12 to 60 months.

2) Eligibility: The applicant has to be minimum 21 years of age and should be employed. The minimum income criteria varies by the location where you are staying right now. Usually in metro or Tier 1 cities (like Mumbai, Delhi etc.), minimum salary desired by lenders range between Rs.15,000- 23000 per month. In non-metro or Tier 2 cities (like Ludhiana, Chandigarh etc.), the minimum income required is usually 10,000 to 15,000 per month.You can club income of your parents or spouse if you wish to apply for a higher loan amount than youreligibility. Lenders also verify your last 3 months’ bank statement to validate timely credit of salary in your account and assess your banking habits.

3) Processing Time: Once you submit your application form and the required documents, you can expect your loan approval within 2-5 working days, provided everything is in order. All loan approvals are at the sole discretion of the bank. Lenders usually take maximum 2-9 working days for disbursement of a personal loan.

4) Interest Rate: The rate of interest on personal loan ranges between 14% and 20%. Specific interest rate applicable to a customer, are dependent on the loan scheme offered, his employer category and location. Bank reserves the right to revise the rate of interest and processing fee from time to time, at its sole discretion.

5) Repayment History: Personal loans are mainly granted on the basis of one’s financial health and his credit worthiness. The financial health can be assessed through your pay slips and your bank statement. The credit wellness can be verified from your credit history and reports.

6) Documentation: Since personal loans are unsecured, they are processed with minimum documentation. The documentation for a Bank personal loan varies from individual to individual. The requirements are based on your profession, income and loan requirement. The main documentation however required is as under:

(i) Proof of identity: Copy of passport/voter ID card/driving license/ PAN Card (any one)

(ii) Proof of address: Copy of ration card/ Utility Bill (not more than 3 months old)/rental agreement/passport (any one)

(iii) Latest 3 months Bank Statement (where salary/income is credited)

(iv) Salary slips for last 3 months

(v) 2 Passport Size photographs

The Bank reserves the right to call upon additional documents at its discretion.

7) Foreclosure: Always ensure that all your outstanding dues must be cleared before you request for a foreclosure. All the banks have independent foreclosure policy and charges. The foreclosure charges for some popular banks are discussed in the table below:Personal loans are a very popular financial instrument for riding a short term financial crunch. They are a real help in emergencies, as one can avail it with minimum documentation and without any collateral as security.

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