A personal loan is one of the most in-demand loans in India. This is because; this type of loan offers easy processing, less paperwork, and a wide range of payment options. But at times when the financial situation goes beyond control, even the best-laid plans can go haywire. And at such times opting for a personal loan becomes necessary. Even then people avoid going for this kind of loan as they feel that this loan will cost them more than they can afford. However, it is not true and one can get a personalized loan at reasonable interest rates.
Many people find it very difficult to take a personal loan. This can be because of a couple of factors – the most prominent being high-interest rate and not understanding the terms that are mentioned in the document. But this is completely a myth and is only applicable in case you have already taken a loan before or have less than perfect CIBIL.
Here are three reasons why you should not just recommend, but also consider applying for a personal loan:
Maintain Your Credit Score
As we know, to get a good credit score, we need to have a good mix of loan payments in our credit wallets. So how does taking a personal loan help in improving your cibil score? When you take a loan and repay the same back successfully on time, this gives your credit score a boost.
Debt Consolidation
Another major reason to borrow a personal loan is to consolidate your debt. Pay off multiple debts While some people use personal loans to avoid paying bills, others use them to pay off their current debts. If you have several hefty monthly payments for credit cards, car loans, or student loans, using a personal loan to eliminate them can save you money in interest.
Assistance in Unplanned Emergencies
While it’s important to build a sizable emergency fund to cover unexpected expenses, sometimes it’s not possible. An unplanned expense, such as a car or home repair, or in the case of an emergency loan, can come up at any time. This can be financially crippling if you haven’t prepared for these incidents.
Invest in a Big Purchase
You make a single or large purchase and you know it’s going to take some out-of-pocket cash. This can be a major issue if you don’t have any savings. Personal loans are designed to help people facing these situations. A personal loan gives you a secured loan, with terms that will help you meet the cash needs you have.
How Can You Get a Personal Loan
Get Your Requirements Clear in Your Head
The first step is to figure out why you need a Personal Loan and how much you need. This will affect the various parameters in your loan requirement and determine where you should apply for the loan i.e whether, at a bank, NBFC, or payday lender
Check if You Are Eligible
Determining your eligibility is the second step in getting a personal loans. A bank or lending institution can help you see how much you qualify to borrow based on your credit history, savings, and income. Many lenders these days provide an online eligibility calculator on their website which can help you to know your eligibility better.
Calculate your Monthly EMIs
Now you have a very rough estimate of the loan amount you need, and an approximate interest rate on the loan. A third step we recommend is using an online EMI calculator to calculate how much your monthly payments will be. In this step, you can change the interest rate and tenure to better match your monthly income.
Do Your Research and Approach the Bank
Now that you know all about your loan requirements the next step you need to take is to research your best and find the bank that matched your loan requirement and approach them. Most banks these days offer offline as well as online methods of applying for a personal loan.
Get Your Documents Right
Now, this is a critical step because your documents say a lot about your loan approval as banks are very strict when it comes to every single piece of document required. Usually, you will need proof of income (bank statements, salary slips, or tax returns), proof of address, and ID proof. Once you have gathered all the necessary documents, take them to your bank branch and ask them to process your application for a Personal Loan, or go for an online process to make it smoother and more convenient.
Once all your documents are verified and submitted, you will have to wait for a few days or weeks depending on the bank. Money will be deposited directly into your bank account. Funds will typically be transferred to your account within 5 – 10 days, sometimes even within 48 hours!
FAQs
Most lenders list the criteria you will need to meet in order to be approved for a loan on their websites. You can also use a personal loan eligibility calculator, which can be found on most financial institutions’ websites and on third-party financial services websites.
Many banks give borrowers the option of choosing a loan tenure between one and five years, based on their needs.
When applying for a personal loan, you should consider the interest rate, repayment flexibility, processing fees, and customer service availability of the loan scheme.
Yes, it is certainly important to have a good cibil score while applying for a personal loan.
If you have a good credit score, the chances are quite high that you will be offered a loan at a low-interest rate. Your credit score indicates how likely it is you’ll repay the loan on time.