Everything You Need to Know About Personal Loans

A personal loan is an unsecured credit. It is provided by banks or credit unions upon examining your monthly income, financial history, credit score, profession, and repayment capacity.

The loan amount is disbursed when you fulfil the lending institution’s criteria. Once you receive the amount, you must make monthly instalment payments over your repayment period with the interest.

Steps to Avail of a Personal Loan

1. Firstly, you must do your due diligence and find the lender that fits your requirements. Consider the personal loan interest rate, repayment tenure, and processing fees.
2. Check if you meet the lending institution’s eligibility criteria. See if you fall within their income, credit score, credit history, and employment brackets.
3. Calculate the monthly instalment amount and check if it is workable for your current financial situation.
4. Once you establish your eligibility and are satisfied with your monthly instalment amount, prepare the required documents, such as your identity proof, address proof, and income proof.
5. Visit the lending institution physically or online to fill out and submit the application form and the requisite documents.
6. You will receive the loan terms or offer when your application is approved. Review this carefully and accept it only once you’re pleased.
7. A few days later, the lender will disburse the amount to your bank account.

Why Would You Need a Personal Loan?

Swift disbursement makes personal loans instant, effective solutions for a variety of reasons:

Debt consolidation

This is helpful for consumers who have accumulated high-interest credit card debt.

Emergency expenses

You can apply for a personal loan and receive the funds within a few days, making it a great option for medical emergencies or other unforeseen expenses.

Home renovation

These loans are beneficial for home improvement projects like expansion and interior decoration.

Funding big events

Major personal milestones like weddings, dream vacations, or a family car can be funded wholly or partly.

Securing the Right Loan for You

1. Gather quotes from multiple lenders. Compare the personal loan interest rate, processing fee, monthly instalment, and repayment period.
2. Use a personal loan calculator to budget your monthly loan amount in your finances.
3. Review the lending institution and check your eligibility.
4. Read every point of the loan offer carefully, especially the fine print.
5. Do not choose a short repayment period if you can’t make the monthly payments.

Documents Required

The documents vary from lender to lender and if you’re salaried or self-employed. However, the standard documents required are:

1. Income proof (salary slip, ITR forms, or bank statement/audited financial statement)
2. Identity proof (PAN card, Voter’s ID, or driving license)
3. Address proof (utility bills, passport, Aadhaar card)

4 Tips for Getting Your Loan Application Approved

1. Fill out every detail asked in the loan application form.
2. Check your eligibility before applying.
3. Maintain a good credit score.
4. Add a co-borrower with a credit score above 750 if your score is low.

Final Thoughts

With a plethora of lending institutions, personal loans have become more accessible than ever to secure. However, it is very easy to get confused amidst the choices. Therefore, it is crucial to research the lender, the interest rates, the monthly instalment amount, the eligibility, and the repayment period before applying. With this due diligence, you will find that a personal loan is a good financial tool to make big-ticket purchases, sail through emergencies, and consolidate debt.