What is a Personal Loan?

A personal loan is a type of unsecured loan that an individual can avail from any bank or non-banking financial company (NBFC) to meet their financial needs during emergencies or times of crisis. It is quite contrary to its counterparts like home loans or car loans. The reason for this is simple- personal loans lack security against any asset. Hence, this makes them riskier for lenders. Personal loans also come with greater interest rates than secured loans. But, they are more convenient to avail as they do not necessitate any collateral.

Eligibility Criteria:

If you want to know whether you are eligible for availing a personal loan or not, they simply depend from lender to lender. Some daily common eligibility criteria for attaining personal loans include age, income, employment status, credit score, and so on. What’s more, the eligibility criteria differ with different types of personal loans.

Some common eligibility criteria include:

  • Age: Typically, the minimum age requirement for availing loan is 21 years, while the maximum age can vary from 60 to 65 years, depending on the lender.
  • Income: This is one of the most important criteria for availing a loan. The minimum income requirement for an individual to avail of a personal loan is Rs. 20,000. However, this also differs based on the type of loan and the lender’s policies.
  • Employment Status: In order to avail of a personal loan, the first and foremost criterion is to be a salaried individual. But, in some cases, the lender may also offer personal loans online instant basis to self-employed individuals. 
  • Credit Score: Your chances of getting a personal loan in an instant timeframe heavily rely on your credit score. Ideally, a credit score of 750 or above is a must to approve your personal loan request.

How Many Types of Personal Loans?

There are various types of personal loans that individuals can avail of, depending on their requirements. Some common types of include:

  • Debt consolidation loans
  • Wedding loans
  • Home renovation loans
  • Travel loans
  • Education loans
  • Medical emergency loans
  • A personal line of credit
  • Pre-approved

Benefits of Personal Loan:

Personal loans offer a plethora of benefits to the borrower. This makes them a popular choice amongst individuals who are in immediate need of financial assistance.

Some of the key benefits of personal loans include:

  • No collateral required: One of the major reasons why personal loans are in high demand is because they do not require any collateral. This makes it an ideal option for individuals lacking any assets to pledge against their loan.
  • Quick approval and disbursal: What could possibly be better than a loan which gives you instant approval with disbursal happening just within a few days? Yes, a personal loan online with instant approval gives one all the benefits and features seamlessly.
  • Flexibility: Personal loans are super flexible. This implies that they can be put to use for a variety of purposes, providing borrowers the flexibility to use the loan amount suiting their requirements. This also helps people who require personal loans online instantly.
  • Lower interest rates than credit cards: Personal loans come with remarkably lower interest rates than credit cards. This makes it an affordable option for individuals who want personal loans online instantly with short-term credit.

How to Get a Personal Loan on the Lowest Interest Rate:

Getting a personal loan at the lowest interest rate is essential to minimize the overall cost of borrowing. Here are some tips on how to get a personal loan at the lowest interest rate:

  • Compare rates from multiple lenders: There are plenty of lenders in the market who are offering the same loan policy and different interest rates. So, the best way to get you an ideal deal is to stay vigilant. Thoroughly compare the rates from various lenders to get a personal loan at the lowest interest rate.
  • Maintain a good credit score: This is one the sole factor by which lenders determine the interest rate. The best practice is to keep your financial health in good shape by timely EMI payments, keeping a sufficient balance in your account and never settling your loan.
  • Consider secured loans: A secured essential entails the involvement of collateral against which you require to pledge your loan. These could be a car or home and these can help you lower your interest rate. However, there is always a probability you may lose your collateral if you fail to repay the loan.
  • Choose a shorter loan term: As the name suggests, a short loan term offers lower interest rates. But, this directly implies that it would require you to make higher monthly payments.
  • Opt for automatic payments: As a general rule, a number of lenders in the market offer discounted interest rates if you choose to make automatic payments. This practice ensures that timely payments are made, which can considerably help you improve your credit score.
  • Improve your credit score: If your credit score is not where you want it to be, take steps to improve it before applying for a loan. Pay down debt, make payments on time, and avoid opening new credit accounts.

How to Get a Personal Loan Without CIBIL

CIBIL, or Credit Information Bureau (India) Limited, is a credit information company that is responsible for collecting and maintaining records of credit-related activities, including loans and credit cards of individuals and companies. So, if you want without CIBIL personal loan, here are a few tips.

  •  Explore alternative lenders: Some lenders specialize in offering loans to individuals with low or no credit scores. These lenders may be more lenient in their lending criteria and can offer without CIBIL personal loans.
  • Offer collateral: The best way out is to opt for a secured loan where you necessarily need to offer an asset such as a car or property as collateral. This can shoot up your chances of getting a loan even with a low CIBIL score.
  • Apply with a co-applicant: Another best option is to take help from your friends or family who have a good credit score. A co-applicant with a healthy credit score can considerably increase your chances of getting approval for your personal loan. During the approval process, the co-applicants healthy credit scores will be taken into consideration.
  • Provide evidence of income: Lenders may consider your income and employment status to determine your ability to repay the loan. Providing evidence of a steady income source, such as pay slips or bank statements, can help strengthen your loan application.
  • You can save money by paying lower premiums online. Online insurance plans have lower operational costs and distribution expenses than offline plans. You can also avail of discounts and offers from the insurance company or the online aggregator.
  • You can enjoy convenience and flexibility by buying online anytime and anywhere. You don’t have to visit an agent or branch office or wait long hours to complete the paperwork. You can also pay your premiums online using various modes of payment such as credit cards, debit cards, net banking, etc.
  • Buying online can reduce the risk of fraud and mis-selling. You can rely on someone other than an agent or a middleman who may not disclose all the details or may sell you a plan that is not suitable for your needs. You can directly interact with the insurance company and get all your queries answered.
  • You can get better customer support by buying online. You can access various online services such as policy renewal, policy status, claim status, etc. on the insurance company’s website. You can also chat with a customer care executive or call a toll-free number for assistance. 

What Documents are Required for Personal Loan?

  • Identification proof: Any government-approved document such as a passport, driver’s license, or Aadhar card will be required as proof of identification.
  • Proof of income: In order for the attainment a loan, lenders will need to ensure that borrowers have a stable source of income to repay the loan.
    Employment verification: Employment verification is a must to demonstrate your ability to repay your loan. These can be letters from your employer, pay slips, and so on.
  • Credit score report: It is a very common practice for your lenders to cross-check your credit score to evaluate your creditworthiness.
    Loan application form: You’ll need to fill out a loan application form that includes personal information such as your name, address, and contact details.
  • Collateral documents: In case of attainment of a personal loan, you will need to present proof of ownership such as a car or property.

Frequently Asked Questions

Your loan eligibility and the amount of money you can borrow via a personal loan are dependent on a number of facets like credit score, income, and the lender’s policies. In India, the loan amount typically ranges from Rs. 10,000 to Rs. 50 lakhs.

When assessing your loan eligibility and the loan amount, your credit score plays a very critical role. As discussed above, a higher credit score can remarkably increase your chances of a seamless approval of your loan amount.

In India, it is a common practice for lenders to carefully consider your income, employment history, and debt-to-income ratio when deciding the loan amount.

In certain cases, the lender’s policies also significantly impact the loan amount you can borrow. Some lenders have a minimum loan amount of Rs. 10,000, while others may offer up to Rs. 50 lakhs or more. It’s essential to compare various lenders and their policies to find the best loan amount and terms that suit your needs.

The time it takes for the approval of your personal loan is dependent on a number of factors such as the lender’s policies, credit score, and the entirety of your loan application.

Generally, it usually takes somewhere close to 1 to 7 business days to get approval on your loan policies. It may be a practice with some lenders to give instant approval or pre-approved loans that get disbursed just in a few hours. The probability of getting such loans depends on your credit score and your source of income.

Another crucial element is your credit score which plays an indispensable role in your loan approval process. Lenders will always carefully evaluate your credit score in order to assess your creditworthiness before granting the loan. You may be perfectly eligible for a faster loan approval loan if you have a healthy credit score.

Some of the most common features on which your interest depends are the lender’s policies, loan amount, tenure, and credit score. Generally, personal loan interest rates in India range from 10% to 24% per annum.

Your credit score is an imperative element on which your loan eligibility depends. In case your credit loan is flourishing, then you may get a loan at a lower interest rate. Additionally, lenders in India may offer lower interest rates on personal loans to customers with a stable income and a good repayment track record.

Some other factors are the loan amount and tenure which also influences your interest rate on a personal loan.

It is a common practice for lenders to offer considerably lower interest rates when the amount to be borrowed is significantly high and the tenure is also long.

Yes, you can definitely opt to pay off your loan early. But, it is advisable that you must check with the lender to understand the prepayment penalties or charges before taking this step.

Lenders in India may charge a prepayment penalty fee if you want to repay the loan before the end of your tenure.

The penalty fee is usually a percentage of the outstanding loan amount or a fixed fee.
Hence, it is ideal for one to thoroughly go through the loan agreement and understand the terms and conditions of prepayment.

Choosing to pay off your loan early also has its own set of benefits. These can reduce the overall interest cost and save you money in the long run. It can also help in improving your credit score and debt-to-income ratio.

If a situation like this arises, the lender may charge a penalty fee or the latest payment fee. The penalty fee is usually a percentage of the outstanding loan amount or a fixed fee. Consequently, if you happen to miss a payment, it can negatively impact your credit score and make it difficult for you to access credit in the future.

In case you miss your loan payment, the first step is to immediately go ahead and inform your lender about such a happening. Lenders may make a decision to come to your rescue and create a flexible repayment plan, or offer a cooling-off period before charging a penalty fee.

However, it is fully possible for the lender to take legal action against you if you repeatedly miss making payments. The loan recovery process is also a step that the lender may wish to take. The recovery process involves legal notices, capturing your assets, or filing a case in court.

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