Important things to consider when deciding on a personal loan
A personal loan is the most popular and easiest type of unsecured loan that is tailored to all of a person’s personal needs. Personal loans can be considered during any type of financial crisis, be it a medical emergency or a major purchase.
The popularity of this loan is due to its easy availability. It is a suitable choice for making money with little effort. Borrowers with a salary account can view the personal loan offers made available to them via the bank’s mobile banking.
Many people now take out personal loans not only for their major purchases, such as buying a house or a car, but also for their children’s higher education, among other things. These loans are usually hassle-free and are pre-approved by banks with the least amount of documentary requirements.
Experts say that the first thing to do when taking out a personal loan is to check the amount of the loan and when to take out the loan. Then one should check and compare the interest rates of different lenders. Lending rates vary from lender to lender, even for the same profile.
In addition, experts say borrowers should check processing fees and prepayment fees before taking out the loan. While processing fees vary from bank to bank, some banks also charge a large amount for foreclosure.
However, experts believe that bank personal loans may not be the ideal place with the longest turnaround time for people looking for emergency funds or salary advances.
To obtain a personal loan, most lenders base it on the borrower’s income, repayment ability, creditworthiness, and current monthly commitments. Note that a better score means better loan interest.
Recently, many lenders have also been relying on their internal rating systems, where eligibility is based on alternative data like bank statements, social media contact details, etc.
The maximum loan amount also depends on the risk tolerance and internal policies of the lenders. For example, while banks can offer between 2 and 40 lakhs rupees, the fintech platforms can range between 50,000 rupees and 5 lakhs rupees.
Since personal loans are typically unsecured loans, unlike other types of loans, they require much less processing and documentation than other types of loans. Another advantage of the personal loan is that the use of the funds is not restricted.
and can be used for any purpose like medical expenses, vacations, weddings, etc. While other specific loans clearly define the use of the money such as education loan, house loan, car loan, two-wheeler loan, a gold loan can only be used to buy or use that particular product.