Personal loan is a type of loan taken to fulfil personal expenses like repayment debts, funding vacation, buying electronics, wedding expenses, home renovation, medical expenses, etc. Personal loans being unsecured loans are usually issued on the credibility of the borrower. This majorly depends on their repayment capacity. The amount sanctioned under this type of loan can be between ₹50,000 to ₹50 lacs. The tenure usually ranges between 24 to 60 months. If you are planning to apply for a personal loan here are few things, you must consider and compare before applying for one.
- Reason – There are various reasons for which a person may apply for a personal loan. These reasons include funding for functions like weddings and anniversaries, medical emergencies, renovation of house, funding education, funding vacation, etc. You can also take a personal loan to buy new or second-hand vehicle or make down payment of the property. The reason for which you apply for a personal loan is an important factor as it effects the tenure and interest rate.
- Eligibility – Eligibility check is thoroughly done by the lender party in case of personal loans as there is now security involved to recover the loan amount. Your income check, repayment capacity and occupation details are checked by bank in eligibility check to be sure about the smooth repayment of loan.
- Credit Score – Credit score is the common and basic step of eligibility check conducted by any bank or financial institute. Usually, if you have a credit score above 700 it is considered to be a good credit score and can pass the loan eligibility test easily. Even if you manage to get your loan application approved despite having poor credit score, you will have to pay higher interest rate on it.
- Tenure – The duration of the loan is decided based on the repayment capacity of applicant. You can opt for repayment tenure up to 5 years. The repayment is divided into Equated Monthly Instalments (EMIs). Opting for higher EMIs can help you repay the loan in shorter tenure.
- Interest Rate – Interest rate is earned by the lenders on the principal loan amount. This interest gets divided and adds to the EMI amount. A good credit score and clean repayment history can help get lower interest rate.
- Charges – Any loan offered by bank or financial institute comes with a processing fee. The processing fee is usually 2 to 5 % of the total loan amount. The processing fee is a non-refundable charge and the amount varies from bank to bank.
- EMI Calculator – The loan amount is repaid through the Equated Monthly Installments (EMIs) and therefore it is important to estimate the EMI amount before you apply for a loan. This is the amount that you must pay every month and so estimating its amount is crucial for planning the easy repayment. You can use the online EMI calculator to estimate the EMI amount you will be charged by filling the basic details.