Personal loans are a popular choice when it comes to financing life’s big purchases. They provide a convenient way for arranging money for various needs - from funding your next trip to making home renovations, they are the most feasible way to ensure cash when you need it. But a personal loan is both, an obligation and a commitment. Which is why, it is very important for a personal loan aspirant to do thorough research and analyze all the available options before making a decision.
However, before you begin that journey, it is necessary to evaluate your requirement and ask yourselves a few questions. Check out these questions to ensure you are ready for a new personal loan.
The minimum and maximum borrowing limits are set by each lender and the amount of your personal loan limit depends on your creditworthiness. Personal loans can start from as low as Rs.10,000 and can even go up to Rs.30,00,000. This is based on the lender and the borrower & ability to pay back. However, as a rule of thumb don't live beyond your means i.e. only take a loan for the amount that you can easily repay. Also, make sure that your debt-to-income (DTI) ratio is well within the acceptable limits at all times. It is typically preferred by lenders for borrowers to have a lower DTI ratio.
The time frame for you to receive your funds may depend on multiple factors such as the loan amount, the lender you choose and their application process. Some lenders may process your application and electronically transfer your amount on the same day, some may take between 48-72 hours, while others may take longer. Make sure that you take into account all these delays when deciding on a timeline for your loan.
Following the disbursal of the personal loan, you will have to begin the EMIs within 30 days. Both, your interest rate and monthly installments, will be impacted by the tenure of the loan you choose in addition to the loan amount. Since personal loans are usually short term loans, the repayment duration can range anywhere between 12 to 60 months, depending on the lender you choose and your credit history.
Your loan interest amount is decided based on various factors including your CIBIL Score, loan amount and the loan tenure. Generally, having a good to excellent CIBIL Score will help you secure the lowest possible interest rate. You may even check out CIBIL Marketplace which is an online platform that provides tailor-made loan offers based on your CIBIL Score and Report.
You will typically be charged 2-3% of your loan amount as processing fees when you apply for a personal loan, depending on the lender. Also, if you pay off your loan in advance i.e. before its tenure, there may be a prepayment charge ranging from 2-3%.
Different lenders may require different types of documents when applying for a personal loan based on whether you are a salaried employee or self-employed. Usually, lenders require to verify your identity, residential details, proof of income and the purpose of your loan. They also evaluate your borrowing behavior by analyzing your credit history.
Knowing your CIBIL Score is the first step for any personal loan applicant to ensure that they qualify. Most lenders evaluate borrowers based on their credit and repayment history. They are looking for borrowers with a good to excellent CIBIL Score. Having a good credit history also helps speed up the entire approval process since it attests to the fact that you are a trustworthy and disciplined borrower. In other words, the higher your CIBIL Score, the higher your chances of getting approved for a loan.
A personal loan can be an effective tool to help you plan for any of your financial requirements as well as deal with life & uncertainties. Reviewing your personal loan requirement using these questions will help you make a better and informed decision.
Disclaimer: The information posted on this blog (Information) is prepared by TransUnion CIBIL Limited (TU CIBIL). This Information is for generic informational purposes only and is meant for consumer education and awareness about credit scores, credit history and credit reporting. The Information posted on the blog does not constitute credit advice and the user will need to consider the same and take independent informed decisions . No part of this Information may be quoted out of context, distorted ,distributed, published and/ or reproduced in any form and manner whatsoever. Consumers are advised that the Credit Information Reports (CIRs) prepared by TU CIBIL are based on collation of information, substantially, provided by credit institutions who are members with TU CIBIL. TU CIBIL is not responsible and /or liable for errors and/or omissions caused by inaccurate or inadequate information submitted to it by credit institutions. TU CIBIL does not guarantee the adequacy or completeness of the Information and/or its suitability for any specific purpose nor is TU CIBIL responsible for any access or reliance on the Information. TU CIBIL expressly disclaims all such liability. Further, this Information is based on the data available with TU CIBIL at the time of publication and therefore may not be up-to-date.