Loan – 1 solution for all your Financial Needs
Build the house you have been thinking of. Buy the cars of your dreams. Take that long pending vacation. Get your children enrolled in the top schools. Do all this with loans. When you require money in a pinch, you have several alternatives to look at.
You could rack up a tab on your credit cards and pay it off over time, you could tap your home equity and borrow against it in a loan or credit line form. But another avenue you might pursue is taking a personal loan.
What is a personal loan? Important Facts
A personal loan is a type of unsecured loan that does not require collateral security. Unlike a car loan or a home loan, a personal loan comes with a flexible end use and can be availed to meet any personal expense. The application process of a personal loan is simpler as compared to other loans as the banks do not need to verify the details of any security or collateral. The only characteristics that a bank requires to verify is the eligibility and credit worthiness of a person availing the loan. Also the online application and minimal documentation has made the whole process more approachable and easy.
Benefits of personal loan –
There are a number of benefits to borrowing via a personal loan. First of all, you are not restricted to how you use your money. If you want to take out a personal loan to start a business, you can. If you want to spend that money on a luxury vacation, that’s your choice as well.
Plus, personal loans tend to close quickly. Often you will have your money within some days of submitting your loan application. And in a few rare cases, you may even have your money the day you apply, or within 24 hours. But personal loans can be a good way to borrow.
A swift Guide – 8 easy steps to get a personal loan
The steps to apply for a personal loan in India are as follow –
1. Online and Offline Application –
If you have plans to avail a personal loan the 1st step would be to fill an application from asking from you personal as well as professional details. The form can be filled online or offline by visiting the nearest branch of the bank. However, applying for a loan online will be easy and save you time.
2. Bank Verification –
When a bank receives your loan application, it starts verifying the information provided by you, including your personal as well as professional details and check if you meet the eligibility criteria including age, minimal monthly salary, profession, etc. if you are already an existing customer of the bank, your financial details like bank statements, previous loan [ if any ], etc., are immediately verified by the bank.
3. KYC Process –
After your basic details are verified, the bank will start verifying your KYC documents that you have uploaded online along with application form or would have submitted to the nearest branch.
4. Address Confirmation –
The bank executive may make a visit to your home to confirm the address mentioned in the application. Also, if you are a self-employed individual, there are more chances of the bank executive visiting to confirm your office address.
5. Credit Score Check –
After checking your eligibility and completing the verification process, the bank will check your credit score and will see your past repayments, salary tips or IT returns.
6. Loan Approval –
if you meet the eligibility criteria, your documents are verified and your credit score is 750 or above, the personal loan will be sanctioned to you without any further delay.
7. Loan Amount, Tenure and Personal Details –
The loan amount and interest rate that the bank will offer will be based on your credit score, age, employer, number of years left in service, etc. The bank will also offer you the opportunity to choose the repayment tenure on your own as per the repayment ability.
8. Processing Fee –
Once everything is decided including the loan amount and tenure, you will have to pay a processing fee to process loan disbursal. After you have recompense the fee, the personal loan amount will be disbursed to your account within 3-5 working days.
A personal loan can solve your various problems like paying medical bills, getting married, going on vacation, purchasing consumer durable, etc. But it is important to borrow or take the amount that you can simply repay. Also it is obligatory to submit all the authentic documents and fill all the information accurately for smooth processing, approval and disbursal.
3 things you should avoid when taking out a personal loan
There are certain pitfalls that you will want to avoid taking out personal loans. Here are some to keep in your radar.
1. High Fee Interest –
Generally speaking, you will be charged less interest on a personal loan than on a credit card. But that does not mean personal loans are universally affordable. Ultimately, it’s up to each lender to set an interest rate for a personal loan, so if you do not shop around, you could get stuck paying more interest on the sum you borrow.
Of course, if you are in need of money in a pinch, you may not have all that much time to do that rate shopping. But try to get at least a few quotes from different lenders so you get a sense of the interest rate is competitive given your situation.
2. High Fees –
Personal loans aren’t free. In addition to the interest, you will generally be charged certain fees to put a personal loan into place. Once again, this is where shopping around could work to your benefit, because if one lender’s fees are notably high, it will inspire you to take your business elsewhere.
As a general rule the fees you pay on a personal loan should not be more than 5% of the sum you are borrowing. If you are quoted a sky-high number, you may want to find a different lender.
3. Prepayment Penalties –
Your personal loan may have a generous repayment period. But what if your financial situation improves and you are able to pay off your loan sooner? That’s an option you shouldn’t shy away from – that’s why it is important to sign a personal loan agreement that does not include a prepayment penalty. After all, why should it cost you extra money to get out of debt soon?
4. Taking a Loan Without a Purpose –
A personal loan is advisable to take when you have personal needs. Taking it for recreational motives like throwing a party for your friends, going on a vacation, etc., will become a headache later
5. Not Checking Eligibility Criteria –
Different lenders have different eligibility criteria such as – income, age, employment, good credit score, residential location, etc. applying for the loan after checking your eligibility criteria could help you enhance or upgrade your eligibility and get better loans.
6. Applying for Too Many Loans –
This is a misstep when you want funds for an immediate need. In a hopeless situation for money you might tend to apply for a personal loan from excessive lenders. When the lender processes your application, a rigid or solid enquiry is made which will reflect on your credit report. If too many hard inquiries are build, it could spoil your credit score.
7. Opting for Longer Tenure –
In order to pay smaller EMIs, you might want to opt for a longer tenure. But this could only increase the debt burden. With longer time, you will end up paying more on the interest rate. Miniature loan periods will aid you save more on interest outgo and overall debt burden.
8. Not Reading the Fine Print –
The lenders might assure you speedy approval and a high loan amount during your application. Don’t fall to such promises. Go through the terms and conditions meticulously and be informed about the charges imposed upfront. If the terms are not favorable to your repayment volume, make the equitable choice in choosing the prime loan.
When you are in need of money, it’s worth seeing if a personal loan is a better solution. But if you are going to that route, make a point to avoid these pitfalls along the way. All of them could end up costing your money, needlessly and that’s not something you want.
Can you get a personal loan if you are unemployed?
Couple of things are more stressful than being unemployed and even though you know that it’s not a permanent situation, you likely have a lot on your mind, including your finances. You may even be wondering whether you are eligible for a personal loan to get you through. Here I will tell you how it’s possible to get a personal loan while unemployed, and help you decide if it’s the right move for you.
Unemployed because of COVID-19
If you are one of the millions of unemployed individuals impacted by COVID-19, you might qualify for a coronavirus hardship loan. To learn more about this type of financial assistance, click here – https://www.fool.com/the-ascent/personal-loans.
Getting a loan while Unemployed –
The earnings you use to repay the loan debt does not have to come from an employer. The best personal loan understands that everyone’s situation is different.
A lender will consider some of these as income:
- Unemployment benefits
- Child support
- Disability payment
- Social security
- Rental income
- Regular payments from a settlements
If you don’t have a fixed income, ask your lender if you can use something of high value as collateral. When you get a loan with collateral, the loan is known as a secured loan, and lenders can take this collateral if you are unable to pay.
Examples of collateral include:
- Saving account
- Retirement account
- Something else which holds a value
Personal loans that don’t need collateral are known as unsecured loans. With unsecured loans, the lender can’t take your house or car, if you miss payments. But unsecured loans are harder to approve for. If you are struggling to get approved for a loan, find out if preferred lenders offer secured loans.
Should i get a loan while unemployed –
Yes, if you need it and if the payments won’t add additional worry to your life. If you can’t bear to put together the monthly payment on a loan, look for a less stressful way to cover expenses.
You are likely to be more stressed right now than you have ever been in your life, and if adding up one more bill to your life adds a lot of stress, take care of yourself by not taking on the obligation.
Family and Friends –
There is not a person in our country who has not been impacted in some way by the pandemic. If you have family and friends on solid financial footing, consider asking for a loan to get you though. You are naturally concerned about your life, brood and finances. If a personal loan can help you though this time without adding further stress, consider it as a loan alternative.
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