When it comes to personal finance, taking out a loan is one of the most common solutions and it is also one of the most hassle-free. Personal Loans can help you pay for a variety of living expenses, such as tuition fees, home improvements, and even a wedding. But before you decide to take out a Personal Loan, you should make sure you know what the loan requirements are and if you are ready to take on the responsibility of a loan. Let’s start by finding out more about Personal Loans.
What is a Personal Loan and What are its Types?
A Personal Loan is a type of financial product that can be used to fund almost any personal requirement. It is usually a collateral-free loan and can be availed of easily without much hassle.
You should also know the different types of Personal Loans available. These include secured loans, unsecured loans, and lines of credit:
- Secured Loans – A secured loan requires collateral, such as a car or home, to secure the loan.
- Unsecured Loans – An unsecured loan does not require collateral, but the interest rate is typically higher than with a secured loan.
- Lines of Credit – Lines of credit provide you with access to a certain amount of money, and you can withdraw from the line of credit as needed.
Regardless of the type of Personal Loan you choose, you should make sure you can meet the requirements of your chosen lender.
What are the Loan Requirements of Personal Loan Lenders?
Lenders typically require you to have a good credit score to get a Personal Loan, a steady income, and proof of employment.
- Credit Score – Your credit score represents your creditworthiness, i.e., your ability to repay debts on time. A high credit score of 750 and above is considered excellent by Personal Loan lenders.
- Income – The minimal income requirement for most Personal Loan lenders is ₹40,000 per month.
- Employment Proof – Your proof of employment allows lenders to verify your employment status as part of the loan application process.
You may also be required to provide a down payment, depending on the amount of the loan and the lender’s requirements. All these are part of the eligibility criteria and necessary documents required to apply for a Personal Loan.
Things to Know Before Applying for a Personal Loan
Before you apply for a Personal Loan, you should bear the following things in mind:
- Determining the Loan Amount – You should always determine the loan amount you need. Many lenders have minimum loan amounts, so it’s important to make sure you don’t borrow more than you can afford to repay.
- Researching Different Lenders – Once you have an idea of the loan amount you need, you should compare the terms and rates of different lenders. This will help you find the best loan for your budget and financial needs.
- Considering the Loan Repayment Terms – Next, you should consider the loan repayment terms. Personal Loans typically require you to repay the loan in monthly instalments (EMIs) over a set period. Some lenders also offer a flexible repayment tenure of up to 60 months.
- Making the Final Decision – Once you have considered all of the loan requirements, it’s time to decide if you are ready to take on the responsibility of a Personal Loan. Ask yourself if you are financially stable enough to make the monthly payments, afford the interest rate, and are comfortable with the repayment terms.
If you are unsure, it’s best to talk to a financial advisor or loan specialist to get advice on whether you are ready for a Personal Loan.
Conclusion
The realm of personal financing in India has seen a positive transformation over the past couple of years. And, with a consistent increase in the cost of living across major cities, this comes as no surprise. Therefore, Personal Loans can be a great solution for those who need financial assistance. However, it’s important to make sure you are ready for a Personal Loan and understand the loan requirements before you apply. By taking the time to research different lenders and loan terms, you can find the best loan that suits your need and budget.
Also, Check: What Is Personal Loan Limit On Salary Of 50000?