A personal loan is a loan that is taken by the borrower to satisfy the personal needs of an individual. The loans can be obtained for five years maximum. Multiple banks and finance companies provide loans to the borrowers at low-interest rates or, say, competitive interest rates. The loans can thus be availed at lower interest rates by negotiating with the lender. The loan installments start with immediate effect from the time since the loan is taken. The credit score of the borrower should be good in case of availing of loans. The loans interest rates should be checked thoroughly on the internet before applying for the loans. There is a wide range in which the interest rates are being charged. There is a drastic difference between the interests charged by various lenders. The banks may also sometimes charge a pre-payment penalty to the borrower to repay the loans early. The banks approve the loans with minimal documentation and on a quick basis as the loan amount is short. The banks charge a penalty on the loans been taken if the borrower delays or defaults on the loans.
The benefit of the personal loan is that the borrower does not have to dig into the savings and can utilize the funds gained from the bank for personal use like marriage purpose, renovation purpose, medical purpose, travel purpose & for the purchase of white goods.ETC. Obtaining funds for personal purposes and repaying them on time can help the borrower improve the credit score, thus making a clear way to approve future credits. Personal loans while applying are also charged with processing fees to the borrower by the lender; the rest, no other charges are levied on the borrower. The loans can be repaid in lower installments of lower than five years in case of a higher salary or an increase in the borrower’s salary. The terms & conditions of the borrower should be thoroughly be checked by the borrower before applying for the loans. If the terms & conditions are not found to be satisfactory, then, in that case, the borrower should check for another lender who has favorable terms & conditions of the borrowers. The personal loans should be taken in lesser amounts despite the bank approving higher amounts, as repaying a higher amount means higher the interest amount and also a higher burden on the borrower.
Mistakes to avoid while taking personal loans
Improper documentation:
If the borrower does not submit the proper documents or some of the documents are missing then in that case the personal loan application may get rejected. The income proof can be one of the major documents required along with the address proof. If the applicant is unable to provide the proper address proof then in that case the personal loans application may get rejected.
Taking excessive credits:
Loans should be taken appropriately by the borrower. Taking excessive credits may increase the burden on the borrower. Loans can be taken up to a maximum of Rs.25 lakh by the borrower in the case of personal loans. If excessive borrowing of the loans is being done then that case the burden of the repayment can increase excessively on the borrower. Also taking multiple loans at a time can even increase the burden excessively on the borrower.
Low CIBIL score:
If the borrower’s CIBIL score is less than 750 then in that case the borrower’s loan application may get rejected. Thus having a better CIBIL score is necessary. The borrower can check for the CIBIL score in case of the verification of the score. If the CIBIL score is found to the inappropriate then in that case the borrower may improve the CIBIL score by paying the existing EMI’s on time. This can help an individual improve the CIBIL score thus making it easy to obtain personal loans on time.
The borrower should take care that the loans should be repaid on time and also proper documentation be maintained. The personal loans can be taken up to a maximum of Rs.25 lakh however the actual approval of the loans depends upon the income of the borrower. Having a good CIBIL score is also necessary in case of the approval of loans by the borrower.