Personal loans have become the go-to financing solution for the middle-class population in India. Many banks and non-banking financial companies (NBFCs) offer personal loans at affordable interest rates. The best aspect is that it does not take a long time to avail of a personal loan. Simple lending criteria make it possible for people from diverse backgrounds to access a personal loan easily. This means people from different walks of life can access this financing solution to fulfil their financial requirements. Many NBFCs do not ask for a perfect CIBIL score to disburse a personal loan. Another aspect of a personal loan is that it has no end-use restrictions. Here is all one needs to know: –

Types of Personal Loans

Many types of personal loans are available in India. A person can apply for these types of loans based on their financial needs. Personal loans can be secured or unsecured, and the eligibility criteria vary accordingly. Here are the common types of personal loans:

• Medical Emergency Loan

A medical emergency can arise at any point and can leave a person in a financial crunch. There are various costs involved in medical expenses, including medical bills, hospitalisation charges, and post-discharge expenses. Top NBFCs offer medical emergency personal loans to lift the financial burden on borrowers.

• Home Renovation Loan

As the name suggests, a home renovation loan covers the cost of home improvement or when buying a new home. The loan amount can help homeowners install modern home fixtures and accessories and complete home construction.

• Education Loan

It is yet another personal loan, available at reasonable interest rates. It enables aspirants to cover their education costs and pursue their dream courses in recognised institutions. Leading NBFCs offer attractive loan features to ensure students get the best financial support in fulfilling their dreams.

• Travel Loan

A travel loan is a type of personal loan that has been on the rise in recent years. It shows the desire of people to travel the world and gather new experiences. They use travel loans to book air tickets, hotel bookings, and tourist activities. Having funds in hand gives individuals the flexibility to plan their travel itinerary in the best way possible.

• Wedding Loan

A big fat Indian wedding is a thing, and why not? It is one of the best moments in a couple’s life. With an easy and convenient personal loan, couples can cover their wedding expenses and entertain their guests. A wedding loan comes as a rescue for those who are unable to fund their wedding expenses.

• Self-Employed Loan

This type of personal loan helps self-employed individuals to manage their expenses, as they may have fluctuating incomes. However, most lenders require additional paperwork to disburse a self-employed loan.

Factors Affecting Personal Loan Eligibility

1. Monthly Income: A stable monthly income highlights the borrower’s financial stability. Due to this reason, lenders prefer borrowers who have a consistent source of income.
2. Credit Score: Having a good credit score is recommended, as it helps bag better interest rates. However, individuals with not-so-perfect credit histories can also avail themselves of personal loans from lenders.
3. Debt-to-Income Ratio: The ratio is evaluated by comparing the borrower’s monthly debt and gross income of a person. Having a low debt-to-income ratio increases the scope of personal loan approval from renowned lenders.
4. Complete Paperwork: Keeping the necessary paperwork handy before applying for a personal loan is a good idea. It ensures the lender can verify all the documents and disburse the loan amount as soon as possible. However, one can also get an instant personal loan without documents with a good credit score, a co-applicant, and a low debt-to-income ratio.

Top Features of a Personal Loan

• Lenient Eligibility Criteria

Top banks and NBFCs have lenient eligibility criteria. It enables all kinds of borrowers, including salaried employees, self-employed individuals, and business owners to avail of personal loans without any worry.

• No Collateral Required

Many lenders provide personal loans without any collateral. This means borrowers can access instant funds without pledging their assets, such as property papers, gold ornaments, and bond papers. It provides much-needed relief to those who do not have a tangible asset to put up as collateral.

• Quick Loan Disbursal

Most of the banks and NBFCs have digitised key processes and simplified the loan application process. It takes less time to apply for a personal loan than ever before. Nowadays, one can get a loan in just a few hours.

• Flexible Repayment Options

Top loan providers have repayment tenures ranging from 12 to 60 months. The borrower can choose based on their monthly budget. They can opt for longer tenure for smaller EMIs, which lowers the monthly burden.

Tips for Choosing the Best Loan Provider

• Be Prepared: The borrower should assess their financial needs before applying for a personal loan. Calculating monthly income, basic expenses, existing debt and repayment capacity is essential to check loan affordability.
• Focus on the Interest Rate: When taking a personal loan, interest rate plays a crucial role. It is recommended to check the interest rates of different lenders to make an informed decision.
• Look for the Hidden Charges: It is essential to evaluate the fees and hidden charges, such as orientation fees, prepayment penalties, and late payment charges. It provides clarity on the total outgoing when taking a personal loan.
• Pay Attention to the Lender: Checking the loan provider’s market reputation is a wise call. Consult your family or friends, research online, and read customer testimonials. These tips will help make the final decision.

A personal loan is one of the easiest and quickest ways to get immediate funds. With many banks and NBFCs offering lucrative offers, it is crucial to check every aspect before signing the loan documents. Considering its many terms and offerings, you can avail of a personal loan suitable for your financial needs.

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