Looking for a personal loan? Here are the key things to consider
A personal loan is a type of unsecured credit that meets the personal needs of an individual. Borrowers who use the mobile banking service of the bank where they keep their salary account can consult the personal loan offers available to them. The bank can offer them a hassle-free pre-approved personal loan with the fewest documents required.
Borrowers who are looking for a lender other than the one where they manage their payday account should evaluate the product that suits their financial needs.
What are the factors to consider when taking out a personal loan?
The first thing to check here is the loan amount and date required.
After that, according to Zafar Imam, CEO of FinShell, it is recommended to check and compare the interest rates of different lenders as the rates may vary from lender to lender for the same profile.
â€œFinally, before going ahead with the loan, borrowers should check the processing fees and pre-closing fees. Processing fees may vary from bank to bank. Likewise, while few lenders charge any fees on partial or full prepayment, many of them charge a high amount on foreclosure, â€says Imam.
When it comes to emergency funds and payday advance, Raghuvir Gakhar, CEO of CashBean (PCFinancial Services Pvt Ltd) believes that banks are not the place to be and usually have a longer processing time.
â€œOnline lending agencies, on the other hand, sometimes have a TAT of a few minutes. For a larger amount or for a longer term loan, it is preferable to borrow the banking channel where the interest rate would be better in case of need â€, explains Gakhar.
What are the eligibility criteria for taking out a personal loan?
According to the imam, most lenders decide eligibility based on income, repayment capacity, current monthly obligations and credit rating. A better score means better rates on loans.
Many companies also have their own internal evaluation system. Many fintechs may not require any of the income documents and may decide the basis of eligibility for alternative data, viz. by reading the bank statement, social media contact details, etc.
What is the maximum amount that can be borrowed?
According to Imam, the maximum loan amount depends on the risk appetite and the internal policies of the lenders. While banks can offer up to Rs 1-40 lakh, the fintech company cannot go beyond Rs 1-5 lakh.
What is the difference between a personal loan and other types of loans?
According to Gakhar, personal loans are almost always unsecured unlike other types of loans. Personal loans also require much less processing and documentation than other types of loans.
In addition to this, Imam says that the biggest advantage of personal loan offers is that the use of funds is not restricted.
â€œThe loan obtained can be used for any purpose, namely vacation, marriage, medical expenses, etc. be used only to buy or use to acquire this product, â€emphasizes the Imam.
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