A personal loan is generally an unsecured loan that you can get almost instantly nowadays. If you’re not sure about personal loans in general, consider checking out this article on how personal loans work first. It’s a multi purpose loan that you can take for a range of uses from emergency household expenses, to covering some travel expenses. Personal loans are largely paperless, but this article should help you list the documents required to get one, should you ever be asked for it.
Before you actually go ahead and list out the requirements, take a moment to do a self-check on your eligibility and need for a personal loan.
Different personal loans come with different process requirements, limits, and eligibility criteria. For example, a higher education loan entails a slightly different process as compared to, say, a wedding loan. Similarly, a home renovation loan can get you a higher amount than a consumer durables loan. You get the idea.
So, the first step is to define what you’ll use this loan amount for.
A personal loan in unsecured - meaning there’s no collateral taken from you to disburse the loan. That’s why your credit score has a key part to play in determining your trustworthiness. This in turn dictates the loan terms, interest rate, and loan amount.
It is equally important to know if you qualify for the loan. The factors affecting loan eligibility include:
The higher the income, the better your repayment ability, hence, higher loan amounts
Existing loans mean your expenses are high; hence, you may receive a limited loan amount. But this can be offset if your income-to-expenses ratio is found favourable.
A credit score of 750 gets you attractive rates, higher amounts, and better repayment terms
Metro cities tend to have a higher loan limit
Regularly employed people tend to get higher loan amounts
A personal loan does not require collateral, but if you’re not a salaried professional, then owning a property in your name can boost your eligibility
While the personal loan criteria can vary among lenders and also as per the type of loan being sought, in general, the following criteria are preferred:
The interest rate directly impacts your EMIs. A higher interest rate could mean higher EMIs. But not always. The other variables involved are the amount being borrowed and the loan tenure. If you are in a financial crunch that limits your repayment ability, then you can choose a longer tenor that is likely to reduce your monthly EMI. On the other hand, if you are expecting some financial gains from elsewhere, then opt for a shorter term (yes, this means higher EMIs), and repay the amount soon which will cost you less overall.
Getting good interest rates on a personal loan is also a key aspect to consider. Make sure you research on this first.
Calculating these EMIs can be rather tedious if done manually. Instead, to select the ideal loan tenor, and to plan your monthly budget optimally, you can use the Fi Money EMI calculator.
Getting a personal loan online is inherently more convenient as you simply need to upload the soft copies of the relevant documents. However, if you have chosen the traditional, offline, way to apply for a loan then it is advisable to take original documents along with you when you visit the branch office of the lender.
While you’re at it, give this article a read on how to apply for personal loans online.
Getting a personal loan is usually faster and simpler than other types of loans, given that they’re not secured. On Fi Money, you can avail of personal loans in minutes if you’re pre-approved for one. The loan approval process and disbursal 100% paperless.
A personal loan is an unsecured loan. This means it requires no collateral or security against it. An accurate and complete application with the pertinent documents will suffice.
A credit score of 750 and above is vital for securing a personal loan. If you meet this criterion, then you will not require a guarantor. However, if your score is lower, then some lenders might require you to have a guarantor to reduce their perceived risk. This is entirely up to the lender’s policy and can be checked before applying for the loan.
In a secured loan, the lender (bank or the NBFC) asks for the original papers of the collateral being provided (like property or vehicle). Since a personal loan is unsecured, such a situation does not arise. However, to reduce the risk of non-payment, most lenders ask for the applicant's post-dated cheques (PDCs). This can be 3 months or 6 months, depending on the lender’s policy. Do note: that is not a mandatory process across the lending industry, and several companies may not require any cheques at all.