By virtue of being an unsecured loan, personal loans have a very high rate of interest attached to it. So one should consider taking a personal loan only if:
You do not have an asset/security against which you can get a loan. For electronic. For more about MyJar alternative have a look at our web page.
g. if you have an FD you are able to pledge, a secure loan will make more sense.
You have some visibility on your cash flows and are sure you will be able to repay the EMIs (Equated Monthly Installments) in time. Else you might be bound to enter into a debt snare.
There is an emergency and you need funds immediately. A personal loan can be taken because the processing time is much lesser on account of minimal documentation.
Opt for personal loans only to meet your essential requirements which cannot wait. It should be your own last resort. Taking it with regard to satisfying leisure needs can prove to be expensive i. e. for gambling, purchasing a new car (a car loan is a better bet with a lower interest) etc .
Before you choose your personal loan:
Calculate the cheapest loan offer: These types of loans come with very high interest rates ranging from 14% to 25%. Compare rates of interest and get the complete picture by comprehending the annualized interest rates for each offer. Then figure out the total amount of repayment you have to shell out with all the offers before choosing the loan of your choice.
Processing fee et al: You need to bear in mind the processing fee and other fees that will be levied when you apply for your personal loan.
Prepayment penalty check: Inquire upfront if there would be any penalty payments for prepayment of the personal bank loan at any point in time. More often than not loan consumers tend to pay up their financial loans earlier than planned to be rid of financial debt. Hence, it’s important to know if your personal loan offer allows part prepayments. When that is the case, then you should be aware from what time frame in the loan period you can start prepaying and understand the set you back incur due to such prepayments simply or full.
EMI and tenure: Evaluate all loan offers. The very first condition for loan offer selection is the total money outflow that the loan will cost. The second factor may be the EMI. A loan offer with a decrease EMI and a longer tenure might seem attractive, as it could be easy on your purse strings, however not all this kind of loans prove to be cost effective in the long run. Hence, first calculate the total loan price and then try to opt for a higher EMI, which you can comfortably manage to enable the shorter loan tenure.
Keeping track of your credit history: Especially in the case of unsecured loans, your credit track record, which is recorded by CIBIL (Credit Bureau India Limited) plays a crucial role in your loan application being recognized. A good repayment track record ensures an immediate loan approval but brownie factors in the form of more attractive interest rates.
Who is eligible for a personal loan?
The eligibility criteria and their specific details varies from banks to bank depending on their perception of the risks connected with such loans. However , nearly all banking institutions divide the potential borrowers into 3 categories:
Self employed people
Self employed professionals
Other factors which are taken into account are, age, residence, work experience, repayment capacity, past obligations and place of work.
What documents are needed for personal loans?
Personal loans require minimal number of documents, making it the fastest to be approved. Typically, financial institutions might require proof of identity, residence, revenue and also 3 to 6 months of your bank statements. Some banks also require guarantors and the same group of their documents.
Alternatives to a personal bank loan
As indicated in the beginning of the write-up if you have access to investments that you can pledge, like shares, fixed deposits, precious metal, insurance policies etc . you can obtain a mortgage against them. The interest rates are lower compared to personal loan interest rates.