A personal loan can be availed for various financial requirements, for instance, medical emergencies, higher education, international trips and marriage expenses. These loans are easy to get and come in the unsecured loan category in which a borrower doesn’t need to offer any collateral. To put it simply, collateral is an item that a bank can seize when a borrower fails to repay a loan on the agreed terms and conditions. The rate of interest of a personal loan is mostly at the higher end when compared to other borrowing loan rates, for instance, home or car loans.
Here’s Your 5-Point Cheat-Sheet On Personal Loans
Eligibility: The eligibility criteria may vary from bank to bank. It includes some primary factors such as income stability (work experience of at least one year), age of an applicant and CIBIL (Credit Information Bureau — India — Limited) score.
CIBIL Score: The three-digit figure is a summary of a person’s credit history, which ranges between 300 and 900. In simple terms, the higher a credit score is, the better the chances of a loan application getting approved.
Interest Rates: It is advisable to check interest rates offered by various banks before applying for a personal loan. The rate of interest (RoI) may vary from bank to bank. In addition, there are also non-banking financial companies (NBFCs) which offer personal loans. A comparison between the interest rate offered by lenders and NBFCs can help a borrower to avail a personal loan at a competitive rate. Banks usually charge interest rates between 10.50 per cent and 24 per cent per annum.
Easy To Apply: A personal loan can be applied either online or offline easily. Also, if a personal loan borrower is an existing customer of a bank or NBFC from which s/he is applying for a loan, then they can also request or negotiate for the lowest interest rate. In addition, credit card holders can get personal loans easily, depending on the frequency of their card usage and repayment history. But, these personal loan interest rates are usually at the higher end.
Foreclosure Charges: Banks or NBFCs usually charge foreclosure fees when a borrower wants to close a personal loan before completion of the agreed tenure. A person must know about the prepayment charges before applying for a loan.