Personal Loan FAQs: Get Answers to Your Personal Loan Queries

One can need money whenever there is an emergency. A personal loan would be the best option for them to get through the crisis. It not only protects the person during crises but also allows them to meet their long-term goals. This includes wedding plans, dream jobs, higher education abroad, and so on. 

But, before deciding to take a personal loan, one may have many questions and confusion about it. It is always preferable to seek answers to questions before deciding on a personal loan. Continue reading to learn more about personal loan questions and answers.

Personal Loan FAQs

How are loan amounts up to a maximum limit decided? 

When determining the highest personal loan amount for salaried individuals, banks ensure that the EMI does not exceed 30% to 40% of the person’s pay.The amount of the personal loan is decided after taking into account all loans that the person is currently paying back. 

For a self-employed person, the loan price is set, taking into account any extra penalties (such as current business loans, etc.) that the person may have.

How does one choose which bank or monetary firm to get a loan from? 

Before settling on a specific provider, it’s always a good idea to compare the offerings of several banks. One should use free tools to find the loan option that best suits their needs. It includes a personal loan EMI calculator and a loan eligibility calculator. 

When choosing a loan provider, it’s crucial to take into account many important factors. For example, consider interest rates, loan terms, processing costs, etc.

Should one always choose the loan provider with the lowest EMI possible? 

Low-interest rates, lengthy repayment terms, or both can lead to low EMI offers. As a result, if one opts for the lower EMI option, one might, in some cases, end up paying their lender a higher interest. 

Rather, one should assess their interest costs over the loan term. One should also check their ability to repay using free tools like the personal loan EMI calculator before making a choice.

Is there an extra charge for taking a personal loan?

Yes, when a person takes out a personal loan, there is an additional non-refundable fee that must be paid apart from the interest that will be charged on the total amount. 

To handle any paperwork that must be done as a component of the personal loan process, the lender charges processing fees. It is usually 1%–2% of the loan principal. If one has good links with the lender, they might waive this fee.

Are the interest rates on personal loans floating or fixed?

With a fixed-rate loan, one’s EMI amount stays constant. So, the person will pay the same amount each month for the period of the loan. When a personal loan has a floating interest rate, the EMI will keep going down. The interest is charged by the use of a reducing balance method. 

When it comes to a floating rate, the bank may change the interest rate from time to time. According to the new MCLR rules, the floating interest rates might be changed either annually or semi-annually.

What is a relationship discount? 

Suppose a person already has a connection with the lender. In that case, he may be eligible for a relationship discount from them. 

A savings account in the bank, a credit card, a loan with the lender, or a fixed deposit are examples of pre-existing relationships. When a person applies for a loan, the lender might give them discounts based on their relationship. It includes waiving processing fees or low-interest rates.

How much time does it take to get a personal loan?

Getting a personal loan takes only a few minutes. After filling out the online application form, the lender will contact the applicant. Then, they will be asked for documents that support the loan request. 

Lenders may issue the personal loan in the next 48 hours after one has submitted all the proper documents. This whole process usually takes 4 to 5 working days to be completed.

Is there a balance transfer offer available for a personal loan? Does the balance transfer have any benefits?

In some scenarios, a lender might allow the person to switch their personal loan‘s current balance. It means the amount that has yet to be paid back —from one lender to another. Then, the current lender would accept funds from the new lender for the whole amount. One will be liable for paying off the rest of the amount on his current loan. They also have to pay any applicable interest to the new lender once the balance transfer process is done.

A balance transfer offer allows one to get the benefit of the lower interest rate given by the lender. However, there may be fees associated with the process.It has pre-payment charges, balance transfer fees, and so on.

Do personal loans have any tax benefits? 

A personal loan taken for home repair or a down payment may qualify one for an income tax deduction under Section 24. It does not matter if they usually have no tax benefits. 

The total amount of the loan is not included in this tax benefit. Only interest is included. To make a deduction, the person must also provide the proper receipts.

What are the benefits of having a higher credit score? 

A higher credit score shows that the person has a solid track record when it comes to previous loans. As a result, if the person’s credit score is high (more than 750 in the case of CIBIL), the chance that they will be approved for a loan is high.

By using a high credit score as leverage, one might also be able to get benefits like a lower interest rate, a larger loan amount, the removal of processing fees, etc.

Conclusion

Personal loans are a good way to overcome money issues. It is critical to conduct research before applying for a loan. 

This article helps explain personal loans. It will make one’s financial journey easier and less stressful. So, one should apply online to meet urgent financial needs.

If one has any more questions, they can visit the Piramal Finance website. They can also explore their products and services.