A quick guide on taking a personal loan.

Posted by Rakesh Khurana on May 29th, 2019

The demand for personal loans is not constant but constantly increasing. More and more individuals are dropping their inhibitions towards debt and taking the support of these finance solutions to achieve their dreams and turn their aspirations into a reality. If you too have decided to burst your personal loan bubble and get help for any of your pressing financial needs, this article will give you a brief understanding of these loans. Hopefully, it will help you make all the right decisions and borrow like a pro!

So what are personal loans and what can you use them for?

They are an unsecured borrowing option that you can use to cover any of your financial needs. By unsecured, we mean that you do not need to provide any collateral or security to procure the loan. You can use the funds of a personal loan to plug any of your financial gaps – they can be used to cover the cost of a wedding in the family, pay for emergency medical procedures, used to start or expand your business or even finance the much-awaited world tour.

How much can I borrow?

The amount you are allowed to borrow is termed as your personal loan eligibility. Each individual will have different eligibility as this is decided based on a number of factors specific to your financial profile. These factors include your credit score, your monthly income, monthly expenses, your age & occupation, etc. However, most lenders will usually provide any loan amount you want as long as the expected EMI is not more than 40 or 50 percent of your monthly income. When it comes to minimum loan amounts, a number of lenders will not provide loans less than Rs. 30,000.

 How long will I have to repay the loan?

Most lenders will give you 5 years to repay the personal loan. This means the EMI will be allowed to be stretched over a period of 60 months. If it is plausible for you, you can also choose a shorter tenure of just 12 months. If you want shorter or longer tenures, you will have to negotiate with your lender, but remember that an extension of tenure is extremely rare and is usually provided to borrowers only in certain cases.

What are the interest rates applicable?

Today, you can get personal loan interest rates as low as 10.33%. However, the upper limit can go all the way up to 22% or higher. The rate you are provided depends on numerous factors. Some of these factors include your credit score, your income, your previous history with the lender (if any), etc.

Are there any other charges?

Yes, besides the interest rate, all personal loans come with a set of charges. They begin with the processing fee and also include late payments charges, cheque bounce charges, and many others. However, each personal loan will have a different set of charges which will vary in number and quantum of charges making it of utmost importance that you compare charges before borrowing.

Hope this has been helpful, for more information and for any clarifications, don’t be afraid to approach your nearest lender. Remember to commit to any borrowing decision only after being completely informed. Good luck and happy borrowing!