Whether buying a new home theatre or taking your family out on an exotic vacation, personal loans can be used for virtually any expense. It’s perfect for those small expenses and can be repaid within a couple of years.
A Personal Loan is taken by a borrower for his/her individual wants and needs; it is commonly referred to as an unsecured loan because there is no security/collateral against it. It is also called “All-purpose loan” at times as there is no restriction on the end use of the funds.
Borrowers use personal loans for various reasons such as vacations, refurnishing their homes, buying a new appliance, to fund weddings etc. All personal expenses the borrower wants to make can be made by availing a personal loan.
A Personal loan is generally taken by borrowers who are looking for loans for quickly and with minimum documentation. In addition, since there is no monitoring of the end use, it gives flexibility to the borrower to use the loan for any purpose they like.
Personal Loans can range from 10,000 – 30,00,000/- based on the lender and the borrower’s ability to pay back. Go through this educational video to understand the loan approval process and to understand what your borrowing capacity is.
Personal Loan is a short term loan. The repayment options are usually flexible, and it can be between 12-60 months, depending on the lender and the credit history of the borrower.
Interest rates for a personal loan vary from borrower to borrower & lender to lender, depending on their individual credit history and amount borrowed. You can log on to Market Place to check the interest rate (and other features) being offered to you by participating Banks basis your CIBIL TransUnion Score and other parameters.
The lending rate depends on :
- The amount of loan as compared to your income
- Loan tenure that you opt for
- Credit profile which is ascertained from your Credit Report
There are usually 2 types of charges that are levied- 1. When applying for a personal loan. These typically vary from 2-3% of the Loan amount. This varies from lender to lender. 2- When you prepay your loan i.e., if you pay-up the loan before the loan tenure then, there is a prepayment charge varying from 2-3%.
Your annual income, current EMIs, credit history of a borrower & your profile in terms of the company you work, are taken in to consideration when you apply for a loan. Since it is an unsecured loan, lenders specifically look at the repayment history and the credit score of a borrower. It is advisable to conduct regular checks of your CIBIL TransUnion Score and CIR to make sure there are no errors and the overall report looks favorable to the lender.
The time taken to disburse personal loans varies from lender to lender. Your loans may be approved in as little as 24 hours or may take up to 7 business days, based on your credentials.
While applying for a Personal Loan, make sure you borrow within your means or else the repayment will become a long and tedious process which could affect your credit history and credit score if you have outstanding payments. Personal loans are one of the most expensive forms of loan available in the market. Choose carefully after conducting due research and understanding of the cost & the benefits involved.