Personal loans are unsecured loans that individuals can use to meet a wide range of financial requirements. These loans are easy to avail, collateral-free, and come with no end-use restrictions. Consequently, the personal loan segment has gained much popularity lately. A recent report shows that the personal loan segment has grown 11 times in volume and three times in disbursements between FY17 and FY21.
Before applying for one, borrowers should know what a personal loan is and its application process to avoid any hassle.
Personal loan: A brief overview
A personal loan is a credit instrument that a customer can use for a variety of purposes. One can use personal loans for debt consolidation, fund a business, renovate homes, buy land, finance a wedding, or pay medical bills. It is an excellent way to handle a wide range of emergency or non-emergency financial needs.
Personal loans are usually unsecured, which means one can avail of the credit without putting a valuable asset on the line. Now that the idea of what a personal loan is has been established, one should know its application process.
How to get a personal loan?
Here is a step-by-step guide on the application process of applying for a personal loan –
- Visit the official website of the preferred lender
- Fill up the loan application form with relevant personal and professional details
- After the initial approval, submit the required documents
- After verification, one will receive the loan approval, and the loan quantum will be credited within 24 hours
Therefore, individuals who plan to apply for this financial product need to also learn about a few factors that will help them make an informed decision.
Factors to keep in mind before applying for a personal loan
Determine the loan amount
The first thing a borrower should do is find out how much they need to borrow as a credit. A clear assessment and estimation of one’s requirements will help them repay the loan effectively and thereby manage their finances smoothly.
Check eligibility criteria
A borrower needs to fulfill specific criteria to be eligible for a personal loan. Before applying for a loan, one must carefully assess and determine whether one meets the eligibility criteria or not. Individuals can use an online personal loan eligibility calculator to determine the maximum amount they can borrow as per the criteria.
Calculate the monthly EMI
It is vital to accurately estimate the monthly EMI amount before applying for this financial product. The personal loan interest rate plays a crucial role in determining the EMI amount. Borrowers can calculate the monthly outgo estimation using an online personal loan EMI calculator to find a suitable loan as per their requirements.
Keep the required documents handy
Borrowers can apply for a personal loan with their preferred lenders either online or offline. However, they need to keep certain documents handy to facilitate the personal loan application process. Borrowers need to submit the following documents while applying for this credit instrument:
- KYC details
- Employee ID card for salaried individuals and business proof for self-employed applicants
- Income proof (salary slips for salaried individuals and business turnover details for self-employed individuals)
Some lenders might ask borrowers to provide additional documents at their discretion.
The loan verification and approval process here is quick. However, leading financiers like Bajaj Finserv extend pre-approved offers that further help in streamlining the loan application process. These offers are available on various financial products such as business loans, credit cards, and more. Prospective borrowers can check their pre-approved offers by simply providing their name and contact information.
Besides knowing the factors that one should consider before applying for this financial product, he/she should also learn about the factors that can affect the eligibility of this financial product.
Top factors affecting personal loan eligibility
Numerous factors can influence the eligibility of a personal loan. Some of them are discussed below:
Credit score plays a crucial role during loan approval. Lenders tend to prefer consumers with a credit score higher than 750. Like all other loans, one needs to have a decent credit score to secure a personal loan at convenient terms.
Since a personal loan not supported by collateral, lenders want to ensure that the applicant of this financial product meets the monthly income requirements. The minimum monthly income will vary from lender to lender.
Availability of a personal loan is usually a hassle-free and straightforward process. However, one must be aware of the things to avoid while applying for a personal loan to reduce the chances of rejection. Therefore, besides knowing what a personal loan is and its associated factors, one should also go through the loan terms and conditions before deciding.