Availing a loan until a few years ago was not an easy task. You would have to submit many documents, continuously keep following up with the institute and wait with baited breath to know if you have been approved for the loan or not.
Well, times have changed. While there was a time when loans would only be in the form of secured loans, this is no longer the case. You can now avail an unsecured loan in the form of a personal loan, as well.
A personal loan is a financial instrument that helps you to source funds when you need money quickly to take care of paying for some service or product. A personal loan is an unsecured loan which does not require any collateral or security. Its main features include the ease with which you can avail the loan with simple formalities and minimum documentation.
Obviously, because it is an unsecured loan the interest rate tends to be a bit higher than for other secured loans. The other important feature is the freedom to utilize the personal loan amount for any purpose. In fact, you don’t even need to state the purpose for which you want to avail the loan!
It sounds too good to be true, right. You may now be thinking that it is difficult to apply for a personal loan.
Actually, it is not and it is perhaps the easiest loan to apply for. You can see for yourself how simple it is when you read the following guidelines.
1. Before you apply for personal loan decide on the amount of loan and the tenure.
2. Check out the various lenders such as banks and NBFCs. You can visit the websites of NBFCs such as Tata Capital and understand the features and the terms and conditions under which they offer personal loans. Choose the one that suits your requirement. You can also check whether you are within the age limits, income limits and employment status set by lenders.
3. It is better to obtain your credit score from one of the credit bureaus so that you can prepare to negotiate with the lender for good terms as they look at the credit score seriously. You may want to take steps to correct this score (if it is low) before applying for the loan. Remember, a high credit score gives you more bargaining power with the lender and conversely a low credit score may be a reason for rejection or the conditions may be stiffer including high-interest rate and low loan amount and low tenure.
4. Go to the website of the lender you have chosen (for instance, Tata Capital) and study the various parameters listed there under personal loans. Once you are satisfied with the terms and conditions of the personal loan check for the amount of loan you require is within the limits of the lender’s eligibility amounts. You can check on the eligibility by using the ‘check your eligibility’ button usually found on the website. Remember, the lender determines the loan amount you are eligible for based on the income that you earn and the current EMIs you pay for other loans you may have taken such as a car loan, home loan, other personal loans with other lenders or any other loan for which you pay EMI through your bank account. This means that you may not get the maximum loan amount specified by the lender.
5. On the same website, you will find other buttons that you can click on to elicit information on various activities you need to undertake before you apply for a personal loan. Click on those buttons and take necessary action to prepare before you apply. For instance, you will need documents specified by the lender which usually include name, address, PAN, ITR, salary slips, balance sheet and other documents necessary to prove who you are and that you earn the income you have stated you earn.
6. You can further use the personal loan EMI calculator available on the website to determine the comfortable and affordable EMI you can pay by entering the loan amount, tenure and interest rate into the calculator. You can change the parameters and see how they affect the EMI. Check for the lowest tenure and the highest loan amount and the highest tenure and the highest loan amount. If the EMI falls within your self-determined capability to pay to go for the lowest tenure option as this will clear your personal loan the fastest and also help you to pay the least absolute amount of interest. You may also be able to get a lower rate of interest.
7. Don’t forget to check on the processing fees and other charges. You must also check for penalties and other charges for delayed EMI or bounced cheques or ECS. If you default on your EMI you can incur unnecessary costs. If you default for three consecutive EMIs, you will get into complications to reinstate your loan. Therefore, keep these penal provisions and other charges in mind. Remember, the lender sends the repayment record of all loans including personal loans to the credit bureau which will affect your credit score.
8. Once you have examined all the factors that affect your loan and you find that you are capable of meeting all the conditions and that you need the loan click on the apply button and follow the procedure listed there. The lender will revert and take you through the necessary steps.
Remember that if you have all the necessary documents and proof to show the lender that you are capable of repaying the loan along with interest it is easy to convince the lender your sincerity and the lender approves your personal loan quickly perhaps within 24-48 hours. However, if you have a past or current good relationship with your lender you can in most cases avail the loan quicker.
Now, don’t you think it is quite easy to avail a personal loan? The better prepared you are the easier it is to avail the loan, and so prepare carefully and apply for a personal loan.