How Do Personal Loans Work?by Arjit Chalmela Finance Student
For many households, the income earned by the salaried employees is not enough. Sometimes, there are additional requirements and expenses. In the case of emergencies, all the savings of the family gets exhausted. All they rely on is borrowed money from relatives, neighbours, moneylenders, banks, etc.
Banks offer personal loans to people who require finance during shortfalls while purchasing a house or a car or even paying for education, medical treatments, and more. It is an unsecured loan borrowed from banks and moneylenders to meet personal needs. It is provided based on criteria such as income level, credit, employment history, repayment capacity, etc.
The interest rates are higher as compared to other options because of the more significant perceived risks while sanctioning them. Defaulting on payment is not a good idea as it reflects in the borrower’s credit report and causes problems while applying for credit cards in the future.
It is provided to individuals and not to businesses and organisations. The eligibility criteria for the loan will differ slightly depending upon the type of applicant. Listed below are the eligibility criteria for different professionals:
Features of this loan
Every service that is provided by banks or money lenders has specific features that can benefit the loan borrower. The features of personal loans are as follows:
- No collateral or security required: When applying for this loan, guarantees such as a house or a car is not needed. They are approved based on the loan applicant’s creditworthiness, which includes the credit score, income, employer reputation, repayment history, etc.
- Flexible use: Use this loan for multiple purposes, such as medical emergencies, travel, house renovation, debt consolidation, etc. The loan can be disbursed within a few hours after the application is approved.
- Flexible tenure: They have a flexible tenure ranging from 12 months to 60 months.
- Minimal documentation: Apply for this loan online as well as offline with very few documents. The main ones include identity proof, address proof and income proof.
- Flexible loan amount: The eligible loan amount is based on many factors such as income, employment and repayment history, employer reputation, etc. Lenders offer these loans starting from INR 10,000 and going up to INR 40 lakh.
Created on Jun 3rd 2020 05:59. Viewed 73 times.