ESSENTIAL THINGS TO KNOW ABOUT PERSONAL LOANS

NO RESTRICTIONS ON HOW YOU USE THE LOAN

Unlike specific loans like home or car loans, personal loans can be used for almost any expense. You have full freedom to spend the funds on travel, weddings, home improvements, or big purchases like refrigerators and washing machines. Many people also use personal loans to handle regular expenses, unexpected medical bills, or to pay off other high-interest debts.

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QUICK APPROVAL AND DISBURSAL PROCESS

Personal loans are usually processed faster than secured loans, which require collateral. Some lenders approve and disburse personal loans within a few days, while others, especially those with digital platforms, may offer funds in just a few hours. This speed can be highly beneficial if you need money quickly. Applying through a lender’s online portal or app can make the process even faster, allowing you to get the funds you need without long waits.

PRE-APPROVED LOAN DISCOUNTS FOR CUSTOMERS

Many banks and NBFCs offer pre-approved personal loans to existing customers with good credit histories. These pre-approved offers often involve instant or near-instant disbursals and very minimal documentation. If you’re in need of funds, check with your bank to see if you qualify for a pre-approved loan, which may even be available through your bank’s mobile app or online banking platform. For instance, customers of the State Bank of India (SBI) can check eligibility on the SBI YONO app or net banking platform and apply immediately if eligible.

OPTIONS FOR FIXED OR FLOATING INTEREST RATES

Public sector banks typically offer floating rates, which are tied to external benchmark rates like the repo rate. This means your rate can go up or down over the life of the loan, depending on changes in the benchmark. Private banks and NBFCs generally offer fixed-rate loans, where the interest rate remains the same throughout the loan term.

NO NEED FOR COLLATERAL

Since personal loans are unsecured, you don’t need to offer any property or other assets as security. This can make the process easier, but it also means lenders face a higher credit risk. As a result, they may be more selective about who they approve, focusing closely on your credit profile and repayment ability.

MINIMAL DOCUMENATTION NEEDED

Personal loans usually require less paperwork compared to other types of loans. You typically need to provide documents for proof of identity, residence, and income. Proof of identity and residence is generally the same for everyone, but proof of income differs for salaried and self-employed individuals. Salaried applicants generally need to provide salary slips and bank statements, while self-employed applicants may need to submit tax returns, financial statements, and bank records for the past year.

FLEXIBLE REPAYMENT TERMS

Most personal loans come with a repayment period of up to 5 years, though some lenders offer terms as long as 6 or 7 years. The loan term is often set based on your ability to repay, as assessed by your lender. Lenders use an EMI/NMI (Equated Monthly Instalment/Net Monthly Income) ratio to determine repayment capacity.