Personal loan is one of the most common loan option available to general public, lets talk about personal loan and what is the eligibility criteria for taking personal loan.
What is Loan?
The word ‘Loan’ is very commonly used in our daily life. A loan establishes a relationship between the borrower and the lender, where the borrower borrows money from an individual, organization, or entity. The recipient or the borrower incurs a debt and is usually liable to pay interest on that debt until the principal amount plus the agreed interest amount is paid to the lender. There are different types of loans which can be availed for different reasons but today we are specially going to talk about “Personal Loans”.
What is Personal Loan?
A personal loan is an unsecured loan, which doesn’t require any type of collateral to receive funds. The procedure to avail this type of loan is comparatively easy and the reasons to apply for this loan can be numerous. It can be availed to cater to a wide range of financial requirements like medical emergency, travel, marriage expenses, renovation of the house, etc.
The rate of interest on such loans is higher than the rest of the loans. This may make you wonder as to why people would opt for it when cheaper options are available. Well, a simple principle that might explain this is the fact that everything comes at a cost. Other types of loans may require you to give a warranty, guarantee, pledge collateral, or complicated documentation.
Personal loans require none of these. Also, disbursal of money is quick which makes it apt for emergency purposes.
Things to keep in mind before taking Personal Loan
a) Determine the reason for a loan.
A loan is a loan after all, just because it is easy to get money should not induce you to go for it without a certain cause. Especially when you do not have to go somewhere to get such loans. Almost every day you will get calls from lenders who are willing to provide you loan. The idea of having access to easy money is tempting but remember it comes at a cost (rate of interest).
b) Once you know for sure that you need the loan do some research and look for the most reasonable source of funds.
c) Another important factor to consider before applying for a loan is to examine your circumstances and income source to ensure that you will be able to pay back the installments. Financial decisions should be well calculated.
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Personal Loan Eligibility
Eligibility for a personal loan primarily depends on two things:
- Your credit score and
- Your repayment ability.
A credit score reflects the creditworthiness of an individual. It is based on a credit report which is typically sourced from credit bureaus. If you have a credit card and have been regular in making payments on the card, it shows that you can be trusted to make payments on a personal loan as well. After all, even a personal loan lender would require some sort of security that the money borrowed will be returned with interest.
The repayment ability is determined by your source of income. For a salaried person, it is easier to get a loan as a fixed amount gets credited to their bank account. For self-employed, their bank statements are checked to calculate what is the average regular income.
e) Be ready with documents required which normally include
- ID Card,
- Address Proof and
- Income Proof
So an Aadhar card, PAN card, Salary Slip are basic documents that would be required. As mentioned earlier, we are living in times where financial institutions proactively check the CBIL scores (credit score) of people and make offers to individuals. If your online bank account statement shows that you have a pre-approved loan it makes the procedure simple and quick. Otherwise, it is best to go to your bank and apply for a loan.
Millions of people all over the world take advantage of this facility. You can too. Just think a little, study the available choices and make an informed decision. You might be surprised to know what all can be accomplished by this easy and simple source of funds.
You can use following links to know your CIBIL score for free in just 2 mins:
Video on how to take Personal Loan
Check Rate of Interest on Personal Loan