Looking For A Personal Loan? A Step-By-Step Guide To Choosing The Perfect Scheme (2024)

Most lenders consider your credit score while determining the interest rate and loan amount. A higher credit score often leads to more chances of getting a loan. ( Image Source :Getty )

Do you think that every salaried person and self-employed person is satisfied with their income or does it fulfill most of the requirements? The answer is 'No'. To meet financial needs for big expenses like weddings, travel, medical expenses, home renovation, and many other things, people need extra financial support.

Therefore, a personal loan is a great way to reduce the burden of expenses when financial deficiency is hovering over your heads. This is a kind of unsecured borrowing that is available in all banking and non-banking financial institutions.

The best part is that it is unsecured and there is no requirement to pledge any asset as security. Unlike secured loans like auto or home loans, you are not obligated to offer your property, gold, or any other asset as collateral for a personal loan. Therefore, if you fail to repay a personal loan, the bank or non-banking financial institution cannot seize your property to recover the defaulted amount. Typically, the interest rates for this loan are highest in comparison to other loan types in India.

ALSO READ | Unveiling The Reality Of Zero Cost EMI, A Look Into The Hidden Charges Involved

Factors To Consider While Picking A Personal Loan:

Before applying for a personal loan, it's important to conduct comprehensive research on loans that all the banking and non-banking institutions are disbursing. So, here are a few factors that need to be considered while applying for loans:

Interest Rate: When you are obtaining a personal loan, the most important factor to consider is the interest rate. It's advised to target the lowest interest rate to reduce the overall cost of your loan.

Processing fees: The processing fee stands as a solitary fee levied by the lender to manage administrative costs associated with processing your loan request. Therefore ensure the processing fees across different lenders alongside their interest rates to discover the most economical choice available.

Loan tenure: Choosing a longer repayment period reduces your monthly installment burden, but it also means paying more interest over the loan's duration. On the other hand, opting for a shorter tenure results in higher EMIs but lowers the total interest paid. It's essential to select a repayment duration that aligns with your financial capabilities and repayment timeline.

Documentation: Facing a lengthy and pro-longed application process can prove to be time-consuming and frustrating, especially in situations demanding urgent access to funds. Many online lenders offer simplified application processes that necessitate minimal documentation. These lenders often leverage technology to authenticate your details, expediting the decision-making process significantly.

Credit score and eligibility: Most lenders consider your credit score while determining the interest rate and loan amount. A higher credit score often leads to more chances of getting a loan.

ALSO READ | Want To Open A Demat Account? Here Are The Details Of Different Types Of Accounts Available In India

Eligibility Criteria

Are you curious about your eligibility criteria for a personal loan? The eligibility requirements for personal loans can vary among different banks or lenders. To determine if you meet the criteria for a personal loan from a particular bank, you can visit their website and review the details provided. Personal loans are accessible to both employed and self-employed individuals. The general criteria on which a personal loan is given are the applicant's income, CIBIL score, employment history, age, repayment capacity, address, previous borrowings.

ALSO READ | Major Income Tax Reforms Effective From April 1: What You Need To Know

Documents Required

⦁ Identity Proof
⦁ Residence Proof
⦁ Income Proof
⦁ Employment Proof
⦁ Photographs

ALSO READ | Bank Holidays In April 2024: Branches To Remain Closed For 14 Days, Check State-Wise Holiday List

Hence, By considering a variety of factors of different banking and non-banking institutions, you can ensure that you choose a loan that meets your needs and does not impose an unnecessary financial burden that makes you trapped in debt.

Follow Business News on abp LIVE for more latest stories and trending topics. Watch breaking news and top headlines online on abp News LIVE TV

View More

25°C

New Delhi

Rain: 100mm

Humidity: 97%

Wind: WNW 47km/h

powered by

#Farmers Protest# Nitish Kumar# Bihar Floot Test# Qatar# Indian Navy# Imran Khan# Narendra Modi# Arvind Kejriwal# Bharat Jodo Nyay Yatra# Valentine Week