Personal Loan is one of the most attractive credit options because it is provided with no restrictions on the end use and also without insisting for loan security. Most of us get lured with this kind of an offer and end up acquiring unnecessary financial commitment. An unplanned Personal Loan can be a long- term financial commitment with a rigorous repayment schedule.
Delayed payment of EMI can bring down one’s credit score. Though Personal Loans seem to be the best solution for any financial crisis, considering the stakes involved, one should understand all about the loan before applying for one. To simplify the whole procedure, we have consolidated a few questions one should ask the lender before Applying for a Personal Loan.
All banks have certain eligibility criteria which the applicant should satisfy to qualify for the Personal Loan. Common Eligibility criteria include: the age should be between 21 to 60 years; applicant should have a steady income source; the credit score should be between 700 to 750. Before submitting the loan application, you must understand whether you satisfy these criteria or not.
The interest rate on Personal Loans ranges between 11% to 20%. This again depends on the bank one chooses and also on one’s credit score. The interest rate varies to a large extent which will have a direct impact on the equated monthly instalments (EMI) and also on the overall cost of the loan. It is better to ask the bank to draw the credit score and give an estimate of the interest that would be charged. Based on this, you must assess the EMI using a personal EMI calculator.
Though Personal Loans, by and large, can be utilised for any purpose, some banks have different Personal Loan schemes depending on the purpose for which it is utilised. For instance, travel loan, loan for wedding expenses, NRI loan, loan for home renovation, etc. One should inform the bank the purpose for which the loan is sought and seek guidance regarding the loan that is best-suited.
Generally, the maximum loan tenure offered for Personal Loan is 60 months. One should consolidate all the monthly payments and arrive at the residual amount left to service the proposed loan before applying for a loan. Based on the amount at disposal for the proposed EMI bank will fix the maximum loan tenure. If the repayment period is longer then monthly EMIs will be shorter; however, the outgo towards the loan by the end of the tenure will be very high. If the income is good and you have sufficient funds available to service higher EMIs, then it is recommended to choose shorter repayment tenure to reduce the cost of the loan.
All banks collect upfront charges ranging from 0.50% to 3%. One needs to be aware of the charges before applying for the loan since it may run to a few thousands which would be an additional cost. If the applicant is a long-standing customer of the bank with a good credit score, he or she can leverage this goodwill to negotiate on the processing fee or even request for a waiver.
Most banks collect pre-payment charges ranging from 2% to 5% on the outstanding loan amount to discourage closure of the loans before the actual loan tenure. Pre-payment of the loan is one of the most efficient ways to lower debt burden and save on the interest outgo. It is better to be aware of the pre-payment charges before availing the loan. If one has a good relationship with the bank, it can be used to his or her advantage by negotiating with the bank for waiver of the pre-payment charges.
The quantum of the loan is fixed based on the income, credit score and the disposable funds available to service the proposed loan. But the loan comes with a whole lot of charges collected by the bank in the form of documentation charges, late fee, processing charge, etc. This may add a few thousand to the cost of the loan. So, it is necessary to get an assessment of the loan quantum to be mentally prepared for the additional cost that has to be borne. It will also help you to decide whether the loan is really worth availing considering the additional cost that has to be borne.
The loan if delayed will not serve the purpose for which it was availed. Generally, banks take 2 to 5 days to process and disburse the loan. It is always better to ask the bank about the time required to process the loan.
An applicant has to submit some mandatory documents like address proof, photo id proof, income proof, bank account pass sheets, photographs, etc. along with the application while applying for a loan. There may be some additional documents to be submitted which may vary from bank to bank. You must learn about the documents to be submitted beforehand so that you can approach the bank with all the required documents and enable the quick processing of the loan.
Availing a Personal Loan is one’s own financial decision. But it is very much necessary to read the terms and conditions before you take the final decision. On understanding the terms, you can choose the most affordable loan which will benefit you in the long term.
Bank of Baroda and RBL bank offer excellent deals on Personal Loans. You can apply for Bank of Baroda Personal Loan or RBL bank Personal Loan online by visiting their official website and by visiting the nearest branches and submitting the application with supporting documents.
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