Addressing immediate financial requirements like medical emergencies, higher education, etc., requires instant funding. An individual who pledges collateral to avail instant monetary backing often end up in long-term debts, defaulting, which leads to the loss of the asset.
Alternatively, for instant monetary assistance, opt for unsecured loans. It comes with a flexible loan repayment option and zero collateral. It also ensures no-end use restrictions and can be channelled towards meeting any number of requirements.
Before making an application for an instant loan, an individual needs to gather requisite information about the same. Listed below are a few points that you need to know before applying for a personal loan.
5 Points that you should know about personal loan
Point 1: Doesn’t require any collateral
Personal loans are unsecured in nature and don’t require borrowers to pledge any assets as collateral. Financial institutions and NBFCs check personal loan eligibility and disburse the funds against an individual’s credibility as a borrower.
Any financial institution requires an individual to maintain a credit score of 750 or above to approve the loan application. Lenders deem an individual to be risk-free as a borrower if they have a high credit score.
The lender must understand that you are capable of repaying the loan amount within tenor. Therefore, ensure that you have a clean credit history before submitting a loan application. Also, check that your financial statement for the last six months doesn’t have any payment defaults or any negative entry.
These are some of the factors to check to ensure that an individual is eligible for a personal loan for debt consolidation or any other purpose.
Point 2: Documents required
The disbursal process for a personal loan is quick. It requires minimal documents for verification that speeds up the approval process. The applicant needs to provide ID proof, address proof, and income proof to the lender to ensure that he/she is eligible for the loan amount.
When applying for a personal loan, the applicant must provide the following documents.
- Voter card
- PAN card
- Aadhar card
- Passport
- Driver’s licence
- Ration card
- Electricity, maintenance and utility bills
- Property documents
- Financial statement of previous six months
- Employment certificate
- Salary slips of last three months
Point 3: Rate of interest for an unsecured personal loan
The personal loan processing charges and rate of interest can be comparatively higher than secured loans as it comes with higher risk for lenders.
There are, however, several factors that come into play that determine an individual’s interest rate for a personal loan. This includes the tenor of a loan, credit score and repayment capacity.
Create a proper plan for interest and loan repayment each month to prevent any chance of debt accumulation.
Point 4: Maximum tenor period
The repayment tenor for a personal loan ranges from 1 to 5 years. This repayment term for an unsecured personal loan is set considering the financial obligations of an individual. The tenor chosen also influences the total interest payable on the loan.
Point 5: Guarantor of personal loan
If a financial institution is unsure of a person’s loan repayment capacity, he/she can sign up with a guarantor. The guarantor of a personal loan must be aware that payment default also affects their credit score and the borrower.
With these factors into consideration, you can get an online personal loan of up to Rs.25 lakh from financial institutions like Bajaj Finserv. It comes with benefits like no hidden charges and instant approval on applying.
This NBFC also brings pre-approved offers that make the application process more streamlined. These offers are also available on other products, including business loans, credit card, etc. Check your pre-approved loan offer by providing your name and contact details. So, before applying for a personal loan, conduct a proper market analysis. Ensure your repayment capacity and the purpose for the loan first before availing this source of funding.
