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Personal Loans
In today's blog post, we will be discussing Personal Loans and everything you need to know about them. We will learn in detail.
- How to take a personal loan.
- we'll see in what situations you should go with a personal loan.
- In what situation should you take a personal loan?
- What is the eligibility requirement and what is the documentation required?
- How much is the interest charged generally?
We will learn everything in detail and at last, I will give you tips on what are better alternatives to personal loan or how you can get eligible for a loan.
Let's go straight to our topic.
What a personal loan? and its important features.
Personal loan is an unsecured loan with high-interest rates, An unsecured loan means there is no security involved. Like in the case of home loans, your property is mortgaged in case of a gold loan, your gold is kept as a security. In case of car loan, car is kept as security. There is no security of any sort in the personal loan, hence the interest is high.
Secondly,
You are getting a personal loan based on your credit history. Because there is no security involved, so credit history means if you have taken any loans in the past or owned a credit card so how was your payment history, if you paid your dues on time you credit score will be good.
On that basis, you will get a personal loan. The approval is instant in the case of a personal loan. You can get approval in under 30 minutes. So this is the biggest positive point, minimum documentation is required and the load approval is instant.
what purposes can you take a personal loan?
So the main purposes to get approved in banks are one is if you are planning a vacation, you can
easily get a personal loan for that. Or if you want to renovate your interior, you can easily get a loan
for that. If there is a wedding in your family, If there is a medical emergency, or you want to fund
education of yours, your children or your relatives. Or if you want to buy a big home appliance. Or if
you want to transfer a loan of high-interest rate you can take a personal loan and transfer.
.
CIBL score
Is calculated out of 900, and generally, you should try to keep your score 750+ . Keeping it over
750 have benefits that you can get credit card and loans very easily. You don't want your credit
score to be bad, so you should not default on your loan payments. Definitely is the bank doesn't
get their money, they will try to ruin your credit score.
A loan size of a minimum of Rs 50,000 gets approved very easily in most banks as a personal
loan. And maximum it goes to upto Rs 25 lakh. In some banks it could be Rs 15 lakh. And some
bank allows upto 25 lakh. You will generally get a tenure of 1 year to 5 years, a minimum of
1year, and a maximum of 5 years. Interest rates are always high and this is the biggest
drawback. I will write here as well this is the biggest drawback so I always advise you to prefer
a personal loan the least.
So for example,
Let the home loan rate be, 8% so keep in mind personal load will be of 12- 20% interest rate, whenever home loan is of 8%. If we talk about a customer of the same profile getting a home loan at an interest rate of 7- 8% will get a personal loan at a rate of 12- 12.5%. So this is a lot at least 40- 50 % more than a home loan. Still, there could be some cases where you need to take a personal loan.
For example,
you take a personal loan of 5 lakh at an interest rate of 15% per annum. So your EMI will be around
Rs 12,000. And you will definitely need to repay the principal amount of 5 lakh. And your total interest payment after 5 years will be around Rs 2 lakh 13 thousand 7 hundred. So you can see, you have taken a loan of Rs 5 lakh and you need to pay almost half as interest under 5 years. Your total repayment is calculated to be around Rs 7 Lakh for a loan of Rs 5 Lakh.
So, secondly,
there is a lock-in period in generally every personal loan of minimum around 3 months to 12
months in which you can't close your loan. The bank would want to earn a minimum interest.
So generally every bank keeps a lock-in period of a minimum of 6 to 12 months.
Then how is a personal loan paid?
It is generally paid electronically we call it Electronic Clearance Scheme (ECS) or Auto debit.
So this is generally debited from your bank, the bank auto-debits the EMI amount. Another option
is post-dated checks, nowadays it is preferred less and ECS and Auto debit are preferred more.
Most of the banks will ask to fill an ECS form, so that your EMI will be deducted automatically.
These are the important features of personal loans.
Now let's see the eligibility requirements for this.
How much loan can you get and what factors determine that. First of all, it depends on your
repayment capacity, it means what is your annual income, and how many other loans are you
already paying. Let me explain you with an example,
Let say your monthly income is Rs 60,000 and let's say you are already paying EMI if i suppose
your current EMI let say you are paying an EMI of Rs 15,000 and i have already told you in earlier videos, that you can just pay max of 50% of your income as EMI.
In this way your loan eligibility gets calculated. And this other Rs 30,000 is used for your
household and normal expenses and you can pay EMI of maximum Rs 30,000. If you are currently paying an EMI of Rs 15,000 so you can afford a maximum EMI of the rest Rs 15,000 right. So over this sum of Rs 15,000, your eligibility will be calculated.
And this way will know your capacity. So your minimum income should be Rs 15,000 per month
then only your personal loan get approved. In some banks it can also be Rs 20,000, every bank
has a different requirement but generally it is of Rs 15,000- 20,000.
In today's case and future
It may increase as well. Then your customer profile is seen if you are salaried, self-employed
professional or run a business
- what type of occupation are you in?
- What type of your company is?
- How is your income stability.
If there are many ups and downs in your income, so maybe you cannot get a loan easily. A loan
for the salaried class gets approved very easily because of income stability. In the case of
professional or business. if there is a lot of ups and downs in your income so your loan will get
approved according to minimum monthly income generally.
Then they see your age, generally for salaried, minimum age is 21 years and maximum 60 years.
In the case of professional or business minimum age is accepted to be 25 and the maximum to
age 65. 25 years is taken because they want your business to be in the running of a minimum
of 3 years.
So in the case of professionals and businessmen,
The business should be running stable for at least 3 years. Other than this, a credit score is also
a big deciding factor always in a personal loan, whenever there is an unsecured loan. I have already
told you many times a score of 750 is considered to be good so your should try to increase your score
if your score is less.
Now how to increase CIBIL score, (Click here for more Details)
Your assets are liability are accounted for, your liability should not be more than your assets.
Let's say your assets are Rs 1 crore and have already taken liabilities of Rs 50- 60 lakh. So the bank
sees that negatively, your loan will not get approved easily in that case. This tells you to have a habit to
dependents take a lot of loans right. so repayment could be a little problematic for you. Other than this,
Your are also looked upon. Now in this example, we see, your income is Rs 60,000 and you have a lot
of dependents, and so your monthly expense itself is Rs 50,000.
So How your Ineligibility will be calculated?
According to Rs 10,000. Then other than this, income earned by the spouse is also accounted, it may
happen you have a lot of dependents, but your husband or wife also earns so your eligibility could also
be calculated by adding it. Bank also calculates your spouse's income for eligibility. These are the
factors used to calculate eligibility.
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