A personal loan is an amount given to another person for personal use. The person who incurs the loan becomes the debtor to the person lending the money.
Personal loans can be used for any reason- enjoy a good vacay, buy that new phone you always wanted or if you are tired of traveling by public bus, buy a new car.
There are different types of Personal Loans:
- Wedding Loan- Type a personal loan given for marriage-related expenses.
- Small Personal Loan- These are unsecured personal loans, meaning no collateral is in place.
- Higher Education Loan- These loans can be taken out for educational purposes.
- Debt Consolidation Loan- Loans taken out for repaying the older loans.
- Medical Loan- Loans taken out for paying off medical bills.
How To Apply For A Loan
- Determine your reason
The first step is understanding why you want a loan and how much you need. You must be reasonable with your demand to get approval.
- Check for eligibility
After determining your reason, check for the institutions or banks that are providing loans for which you are eligible. Different banks have different eligibility criteria.
Some of the common eligibility criteria are:
Must be a resident of India,
Age criteria: between 21 to 70 years old,
Must be employed.
These three are just the standard criteria, and banks have some more criteria like the range of salary, credit score, and how much your debts are.
- Calculate EMI
Use an online tool to calculate the EMI. This will give you an idea of how much you will be required to pay. After talking with the bank, the calculation can also be done, so you have a statement of what the bank is ready to provide.
You can calculate estimated EMI using,
P = L . c(1+c)^n__
(1+c)^n – 1
Where L is for the loan, C is for monthly interest, and n is for the tenure.
- Approach the bank
When you are sure of what kind of loan you want and your demands, talk to the banks and find out with whom you are the most compatible. Always pick a bank that matches your expectations.
- Filling the document and accepting the loan
In the final step, you fill out the form. Accept the bank offer and the amount will be added to your bank in 2-4 (or as per the bank say) working days.
The target audience for this type of loan are people looking to take out loans for personal use, including auto loans, travel loans, renovation or home improvement loans, and similar things.
Personal Loans are helpful as they are easy to acquire and can be used for several reasons without much hassle. Personal loans do not demand many documents, just Identity proof, Residence proof, and a salary slip of the past three months.
These are some basic information you need about Personal Loans, and don’t forget to always check with the banks as to what they demand.