Complete Details of Personal Loan You Should Know
Personal loans are a great way to get the finances you urgently need. It can be an excellent way to build a good credit score for yourself. Before applying for any personal loan, you should know the personal loan details. This article will answer questions about personal loans and how to take a personal loan.
What is a Personal Loan?
Personal loans are usually taken from banks, NBFCs, or other financial institutions. The amount of the loan can vary. It generally ranges depending upon the personal loan details provided at the time of availing.
You may be wondering why someone would need a personal loan. Well, there are many reasons why you would need one:
- There is an urgent expense such as buying new furniture or getting their car repaired
- To start a business
- To renovate their home
- One desires to buy something expensive
But anyone looking to apply for a personal loan must be eligible for the same. This is before they know how to take a personal loan.
How Do Banks Calculate Personal Loan Eligibility?
The first thing banks do is look at a person’s credit score. It is a good sign if they have a history of paying off debts on time. This helps lenders determine whether they should approve them for a personal loan.
Next, they’ll check how much you make per month. They will also check for factors that affect the person’s ability to repay the money.
Finally, they’ll calculate what collateral lenders can use against defaulted payments. This includes assets such as real estate properties. But, this is only for those personal loans which need collateral. The majority of personal loans are collateral free.
It is very important to know about the concept of credit scores. So what exactly is a credit score?
A credit score is a number that represents the credit history. Lenders use it to determine whether a person is a good risk for a loan. Your credit score will help you to decide how much money you will tend to receive. This will further determine how much interest they will offer.
You should know what all documents are to be submitted with a personal loan application.
What Are the Documents Required to Get a Personal Loan?
If interested, you will have to submit the following documents while applying for a personal loan:
- Identity Proofs: They need to provide their PAN card or Aadhaar card in case of an online application.
- Address Proofs: You can submit their official identification card as their address proof.
- Income Proofs: You can submit tax returns, bank statements, and other financial documents. This is to show income from previous years. They also need to show their current year’s salary to prove their eligibility for this product.
Types of Personal Loans
A personal loan, as was said before, may be used for a wide variety of reasons. Your immediate wants and requirements may be met by this method. Personal loans are categorised further by their intended purpose for the borrower’s convenience. The following are examples of well-known categories of personal loans:
- Wedding Loan
Efforts to top one other in lavishly preparing for a wedding day seem endless. These costs may wipe out a person’s savings if they have not saved wisely. To have the finest celebration, most individuals spend more than their original plan. When people require money, many will not think twice about borrowing it.
A wedding loan is a short-term unsecured loan taken out to pay for a wedding. It is not uncommon for a couple to borrow money from close relatives or friends to cover the cost of their wedding. Hence, you can avail of the facility from formal institutions according to their terms. No stigma is attached to getting a loan to pay for a wedding.
- Festival Loan
Cultural celebrations often occur throughout the year in India. They have a special meaning for people and are celebrated with great enthusiasm.
Some cultures even consider holidays as lucky times to make major purchases. They see such actions as a sign of prosperity. But monetary constraints might dampen the holiday spirit at times. For this reason, festival loans are there to help everyone.
The holiday season is when many financial institutions introduce their Festival Loans. A festival loan is available for those who lack immediate funds. Lack of cash may prevent them from enjoying the holiday season to the fullest.
- Vacation Loan
A person’s plan for a trip might become a reality with the help of a personal loan. A personal loan specifically designed to cover the costs of a trip is known as a “vacation loan.” Thus, a holiday loan is a short-term unsecured loan taken out for the express purpose of a trip. Depending on your financial situation, you may benefit from the same.
Anyone should be aware of all the uses and details of a personal loan. The benefits of borrowing from banks or NBFCs should also be known. The article will discuss how taking a personal loan may help a person now.
What Are the Benefits of Taking a Personal Loan from Banks or NBFCs?
If a person is looking for a personal loan, consider taking one from banks or NBFCs. There are several benefits to taking a personal loan from banks or NBFCs. It is better than borrowing from friends and relatives.
For example, when one avails of a personal loan, they can get the money immediately. Banks usually approve the application on the same day a person applies. Besides, personal loans are much more flexible than other types of loans. The borrower can use the money for any purpose. Banks and NBFCs also offer lower interest rates on personal loans than on other loans. This makes it easier for anyone to pay back their debt. In the end, it becomes a win-win situation for the borrower.
The best way to get a personal loan is to ensure one is eligible for the same. As emphasised before, one should know all the details of a personal loan. Then, it is important to ensure that you have calculated your needs and know how to apply for a personal loan. If a person faces any drawbacks, it is advisable to seek professional advice.
Do avail the products and services of Piramal Finance. They are here to assist everyone in streamlining their finances. Do visit this space for more financial knowledge and awareness!
Also Read: Is It Good to Take a Personal Loan on a Credit Card?
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