Things you need to know about Personal Loan



Things you need to know about Personal Loan 
There are times when you don't have the financial support, yet you need it the most at that moment. In the earlier days of India, people used to seek help from money lenders to clear their financial problems.

As time progressed, the advent of banks and their loan schemes came as a boon for those who were least ready with money at the crucial moment. And the personal loan is one such loan scheme offered by financial organizations like banks to meet your immediate personal needs. 

So, if you are planning to opt for a personal loan and wonder if it's the right choice, this article will help you gain detailed insight into personal loans, their benefits, and the ways to choose the best loan scheme. 

Personal loans can be generally defined as loans that don't require any collateral or security submission. They are offered based on minimal documentation, and hence it may be considered the most basic and quickest form of loan sanction. 

The purpose of personal loans is to enable the borrower to meet the needs of the hour. A personal loan is often a borrowing of a small amount of money that an individual may use for simple yet essential purposes. The most common reasons people take personal loans are as follows. 
  1. To consolidate debts that help pay off all other multiple debts and loans. 
  2. Home renovation and remodeling purpose 
  3. Emergency expenses like medical treatment, funeral charges, etc. 
  4. Purchasing of vehicles for transportation 
  5. Purchasing of furniture and home appliances for a more extensive household 
  6. To take care of wedding expenses and other events 
  7. Pursuing higher education for career progress 
  8. Planning for a memorable and significant vacation 
Taking a personal loan as a choice has some great benefits for you, which are not easily applicable to other forms of loan. The most notable benefits of opting for a personal loan from banks or NBFCs include the following. 
  • Approval span: A personal loan can take less time to be sanctioned than most other loan forms. It can be approved within days and, in worst cases, a few weeks. Lenders will also show maximum approval if your credit history is strong. 
  • No requirement of surety: Personal loans refer to a form of unsecured loans, which do not require the borrower to provide any collateral or security to borrow money. It explains why they are easier to acquire for a smaller amount. 
  • Multipurpose: Personal loans are not limited to a single purpose and can be used for various purposes. This versatility and flexibility are why personal loans are much prevalent in society. 
  • Minimum documentation: Personal loans require minimum documents compared to all other loans and can be availed easily. They generally need only 3 documents for verification and approval. 
  • Flexible tenures: Personal loan repayment tenures are designed to favor customers who typically need them to repay within 12-60 months. 
Key points to remember when comparing personal loans: 
Before choosing the bank or NBFC, you want to take a personal loan from; there are certain important factors you have to check and compare among the different lenders to best suit your purpose and avoid getting into unknown risks. 

So, here are some critical parameters to consider before opting for a personal loan. 
  • Interest rate: Personal loans typically come up with a higher interest rate due to their insecurity. If your repayment potential, income, and credit history are good, the lender will demand a lesser interest. However, if one of those factors is not good, you can expect a higher interest rate. 
  • Loan amount:  The borrower should choose the bank or non-banking financial company (NBFC) based on the loan amount they can provide. Banks like HDFC provide personal loans based on income details and payment potential. Axis bank can give you a loan of about 15 lakhs, while banks like Standard chartered can offer you up to 50 lakhs. 
  • Initial processing fee: The bank may charge a one-time processing fee for your transaction amount. However, you do not need to pay it upfront as the lender will deduct this amount from the loan amount and then disburse the remaining in your bank account. Banks such as SBI may charge 1% of the loan amount or may not even charge, depending on the amount. And companies such as Bajaj finance may charge 3% of the amount. 
  • Time of turnaround: Various banks offer loans at different turnaround times. Compare the average time to disburse the amount and choose your ideal lender based on that. For example, HDFC bank typically provides the loan within 24 hours from document submission and banks, whereas SBI can take 7 days. 
Opting for personal loans comes with its own set of pros and cons depending upon the financial organization you choose. But according to practical measures, a personal loan can be beneficial to an individual who requires urgent financial aid. Nevertheless, always compare the specifications of lenders and check if your repayment methods and financial capabilities match while applying for a personal loan.