We need personal loans for meeting our daily expenses. A personal loan is a type of loan which does not require any collateral or security offered. Also called an “ instant personal loan” It requires minimal documentation. And as stated this loan can be used for any personal use. It may be paid back in form of monthly installments with a stipulated period.
These types of loans are offered by banks, credit unions, and even online lenders. You can use these loans to cover expenses such as vacation costs, medical bills, wedding expenses, any repairs, and even unexpected expenses. In some cases, you might be asked to show for what personal purpose and they might restrict you so read terms and conditions properly before accepting it.
Types of Personal Loans
Secured loans – This kind of loan requires collateral or some kind of security to be kept with the lender. You may keep assets like cash or saving account certificates. Also, physical assets may be kept in the form of car or house papers. If you default the loan lender can take on these assets officially to recover the debt.
Unsecured loans – It requires no collateral or security to be kept while taking loans. This may be considered riskier as there is no means to recover the loan. But still, these types of loans are offered but with a backdrop of charging higher interest rates which might help them to cover their margin.
Eligibility for personal loans
Eligibility criteria might be different for self-employed and salaried professionals. For a self-employed person, the minimum age to apply is 25 years – 65 years. You must have proofs to show stable income and also it must depict that your business is on an uptrend for at least two years. For salaried persons, the minimum age to apply is of 21 years – 60 years. He or she should be employed for at least two years with a minimum salary of 25,000rs.
Other necessary documents might be needed such as one’s credit history. It may be evaluated using a credit score. Other basic requirements are Age, Employment type, Collateral security, Minimum salary, Resident Indian or NRI, and other marginal requirements. Documents required are identity and residency proof, last six months’ bank statements, land documents if applied for secure loans, and many more.
Where to find it?
You may look at your current bank where you have your registered account. Your bank may advise you to go for which type of loan and what option is best suitable for you. Personal loans can also be found online. You can compare the interest rates of loans and then apply. Some factors such as fees, repayment terms, borrowing limits, security requirements are to be checked before applying. Once approved y your side and even from the lender’s side, the loan amount is transferred to your bank amount within 24 hours to 72 hours.
Other Fees And Charges On Personal Loans
Rate of interest – according to the current Indian market situations interest rates on personal loans go around 10% per annum to 24% per annum.
Processing fees – it might go up to 4% of the sanctioned loan amount excluding some other additional taxes.
Bounce charges – it may be in form of a fine if your cheque bounces. It varies from 600 Rs to 1,200 Rs per bounce
Charges are swapped in the repayment mode – There is normally a fee if you alter your loan repayment mode (for example, from cheque to auto-debit). Lenders can charge roughly Rs 500 (plus 18%) for each repayment option change made throughout the loan’s term.
Stamp duty – as required by the lender. most document or statement charges – if you want your documents to be downloaded as e copy you won’t be charged but when you wish to have a physical copy with you these charges may be levied on you.
Penal interest – due to some instances if you delay your payment of monthly installments you shall be attracted with additional interest o 2% to 4%. It will be charged according to monthly installments.
Tax on Goods and Services – The current rate of GST on all loan-related services is 18%. Processing fees, prepayment and part-payment charges, repayment mode change charges, canceling charges, delayed payback charges, duplicated statement issuance charges, and so on are all included in these services. Note that interest costs on loans are not subject to GST.
Charges for loan cancellation – If you want to cancel a personal loan after it has been approved or disbursed, your lender may charge you a loan cancellation fee. If a loan is terminated, some banks impose a set rate (such as Rs. 3,000) plus 18 percent GST. Others refuse to levy a flat cancellation price, instead of charging the corresponding interest payment between the loan disbursal and the cancellation date and not refunding the processing fee.
As a result, consider it carefully before asking for a personal loan, as cancellation fees might be costly. You should also avoid applying for several loans in a short period, as this has an impact on your credit score.
After knowing everything about personal loans you now can apply for them without having any second thoughts. You are now aware of types of personal loans and how to apply and different methods of repayment too. Personal loans act as extra money which we have in our hands just it is to be taken out from the bank. to conclude we may say it is easily approved and available it becomes a handy tool for people who are in constant need of cash.