In the life full of uncertainties, the only assured thing is the arrival of tough times without a knock at the door. A tough time in a person’s life can come in many forms, such as medical emergency, break down of the car, urgent house repair, paying the unannounced fee for your child’s education and so on. In an ideal world, every one of us has saved the earning of at least twelve months to fight those bad times. But sadly, doing the same in the real world is too tough to bring in practice. When having an adequate fund in hand becomes the life-saving factor, the most reliable avenue through which we can bridge the financial gap is availing a personal loan.
How do Personal Loans Work?
Personal loans are one of the best credit products available in the present finance market. One can avail a personal loan from almost all banks and NBFCs. Personal loans are collateral free loans. A personal loan can be taken even if you are lacking valuables such as property, gold, insurance etc to keep as a security of the loan.
What makes Personal Loans so Worthy of Choice?
Unlike home loans or auto loans, personal loans are multipurpose loans. There is no fixed use of such loans; a borrower can use it to satisfy any of his financial needs. Personal loans are fast in disbursal. It takes very less time in processing. Even the processing of personal loan has become faster with the advent of the internet in the finance sector. One can apply for personal loan online using either the mobile application or the website of the lender. The present era where time has become costlier than money, the provision of getting things done online, without visiting the lender’s office makes it the first choice of the commoners. The other advantage of opting personal loan the minimal documentation. Gone are the days when a person has to submit heaps of papers to the lender for applying a loan. Nowadays just the basic KYC documents and the income proof are enough to get the loan sanctioned.
How to Become Eligible for a Personal Loan?
As there are a number of benefits of a personal loan, a person must be eligible to avail the benefits. Personal loans are unsecured loans. The only thing that a lender can do to minimize the risk of defaulting the loan is checking his present financial condition and his previous repayment history. Income is the primary factor which determines the amount which you can take as a personal loan. A lender also checks the credit score of an applicant which tells his how regular was he in repaying his last credits. With a credit score above 750, an applicant is considered eligible for a loan. The credit history and the present cash flow is not just enough to become eligible for a loan, the other financial obligations of a person is also cross-checked. Before lending, a lender finds out the ratio of total monthly financial obligations to the take-home income. If the total payable of a month is more than 50% of the total take-home salary than the applicant will be considered ineligible for one more loan.
The Cost of Borrowing
The cost of borrowing a personal loan depends primarily on the interest rate. But along with interest rate, there are many other factors which determine the actual cost of borrowing such as processing fee, tenure, the spread of the loan etc. The present interest rate of a personal loan starts from 10.99% and can reach up to 30%. The interest rate which is going to impose on a person depends on the lender as well as the credit score of the applicant.
One can reduce the cost of borrowing by opting for a short tenure. The interest rate on a personal loan is calculated in compound basis. So a short tenure saves some money in interest payment. The other way of reducing the cost of borrowing is by applying for a higher amount. One can even negotiate the interest rate if he/she possesses an excellent credit score.
The Top Lenders of Personal Loan
When you want to get the best from a personal loan, you must choose the best lender. As mentioned earlier, one can get a personal loan from almost all banks and NBFC. Finding the lender which is best suited for a person is one of the crucial parts of availing a personal loan. Here are the three lenders who are the most popular ones.
HDFC Bank: HDFC provides personal loans at a competitive interest rate without any collateral. The maximum loan amount which can be availed is INR 25,00,000 and the minimum is INR 100,000. HDFC bank claims to disburse a personal loan within 4 hours of applying.
Bajaj Finserv: This NBFC provides best and of course prompt services on personal loans. The interest rate starts from 11.99% to 15.50%. One can borrow up to 25 lakhs and they provide the facility of prepayment. One can get an instant approval on personal loans with Bajaj Finserv.
ICICI Bank: ICICI bank provides multipurpose personal loans with an easy repayment through ECS, PDC and Auto-debit. One can go for a tenure as long as 60 months which will make the EMIs small. ICICI bank provides a personal loan at the interest rate of 10.99% which is indeed very cheap as compared to present personal finance market.
How to Reap the Best Benefit from a Personal Loan?
A personal loan is generally a beneficial credit product for a needy but sadly not always! Personal loans fetch best benefits for a person only when he avails it cautiously. The first and foremost thing to do while availing a personal loan is selecting the lender who is best for you. One can do an online research to find the best lender. The next consideration is the amount of the loan and purpose of the loan. One must take a loan for a meaningful purpose and the amount should be only which is actually needed. If the loan is taken for less meaningful purposes such as buying gadgets, gifting expensive gifts etc than after some time one may need to regret on taking the loan. The same ethics apply to loan amount too. If a person takes a loan which is beyond his repayment capacity, he may need to cut off essential expenses to pay the EMI of the loan. A personal loan is disbursed in hours but the repayment takes many months. Once the loan is disbursed, the next month onward you are to pay the EMIs until the end of the tenure. It is a must to make a budget and stick to it so that the repayment goes smoothly. A delayed EMI or missed EMI can spoil the credit score and also lead to paying penalties.
With the nature of being unsecured and fast in processing, personal loans have become the saviour for many in tough times of life. The personal loans nowadays can be availed faster than the fastest with Finance Buddha. One can get the loan amount in the bank account of the applicant within 24 hours of application which makes it the best tool for fighting emergencies.