What is a personal loan? Here’s a guide

When it comes to funding the peripheries of life involving big-ticket expenditure, personal loans are among the popular financing options to look out for. With this financial product, one can even meet emergency financing, whereby the money is required at short notice.

When it comes to an understanding of what a personal loan is, it involves various aspects related to its features, usage, and repayment method. Here are the essential details related to this financial product to help you better understand what it comprises.

Meaning and scope of a personal loan

Personal loans are unsecured advances that lenders extend to individuals meeting the minimum eligibility criteria laid down by them. As these loans are collateral-free, one might come across interest rates that are a tad higher than those for secured loans. However, with in-depth research, it is easy to find small personal loans at competitive rates.

Personal loans are also advances that do not come with any restriction on end-use. It makes them suitable to meet any financing need, both personal and professional. Below are specified some of the reasons why you can opt for a personal loan.

  • Medical emergencies: When it comes to medical emergencies, a personal loan can allow eligible individuals to avail of quick funding to meet the required expenses at short notice. With some of the best lenders, these loans are approved in just a few minutes of application.
  • Funding for higher education: As the cost of education increases, financing gets challenging if one has only savings to fall back on. Personal loans eliminate this constraint, allowing people to finance higher education at the desired college or university with ease.
  • Meeting wedding expenses: Indian weddings are costly, and they can drain one’s savings quickly. With a personal loan in place, one can conveniently meet such expenses without straining their finances. One of the best reasons to take a personal loan for a wedding is readily available against minimum eligibility criteria.
  • Renovation of home: Home renovation is another aspect requiring lump sum funding, whereby personal loans come to the rescue.
  • Overseas travel: Just like any other travelling expense, overseas tours have witnessed increased costs as well. With suitable financing in place, like personal loans for travel, one can rest assured that the necessary travel expenses can be met easily.
  • Consolidation of existing debt: Another aspect where a personal loan can be of remarkable use is debt consolidation. This lump sum personal financing can be used to repay any running debt. The borrower then needs to service just one advance against multiple ones and also save on interest payment. It is also one of the best ways to manage your debt.

Now that one knows what is a personal loan is and its uses are, let’s move on to other pertinent details related to this advance.

Interest rates and charges on personal loans

As already mentioned, personal loans are available at competitive rates. Individuals can further apply with improved eligibility to better negotiate for affordable personal loan interest rates. Some of the useful steps that enhance personal loan eligibility include – 

  • Maintaining a credit score above 750
  • Applying with all primary and secondary income documents
  • Adding a co-signor to the loan application
  • Repaying all existing debts before applying
  • Keeping the credit utilisation ratio under 30%
  • Not exceeding the debt-to-income ratio above 50%
  • Applying for a loan amount lower than the maximum eligibility

Individuals who meet these parameters stand a better chance of negotiating with lenders for favourable rates on their personal loans.

As for other charges involved, it is essential to compare available lenders in the market to find the financial institution that keeps these rates at the lowest. One can go for a lender comparison to find the lowest interest rates as well. Financial tools like a personal loan EMI calculator also assist one in computing the total interest liability on the chosen loan amount. It further helps an applicant to make an informed borrowing decision.

How to get a personal loan in a few simple steps?

Availability of a personal loan is not much of a hassle if individuals meet the minimum eligibility requirements. They can simply visit their selected lender’s website and navigate to the application form. Therein, provide the necessary personal, professional, and financial details before submitting the form. Complete this application process by providing all documents to a lender. Financial institutions like Bajaj Finserv also provide a doorstep collection facility for convenient documentation.

Borrowers can also avail pre-approved offers on personal loans from the lender, which make loan application quick and convenient. These offers are available on several financial products, including business loans, credit cards and personal loans. Provide only essential personal details to check the pre-approved offer.

To better decide which loan option to go for, individuals can check what is a personal loan features and benefits are offered by various lenders. Use an eligibility calculator provided by lenders to assess the maximum loan availability before applying and proceed accordingly.

6 thoughts on “What is a personal loan? Here’s a guide

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