A Personal Loan is a loan availed by individuals for their requirements. This type of loan comes really handy when you have unexpected expenses to take care of. The loan is usually taken from a bank or a non-banking financial company (NBFC).
Personal Loan Interest Rates and other charges
|Particulars||Interest Rate and Other Charges Applicable|
|Interest rate||10.65% to 21% per annum|
|Processing fee||0 to 5% of the loan amount|
|Type of interest rate||Fixed or floating|
|Loan amount||Minimum Rs.1 lakh|
|Loan tenure||1 to 5 years|
|Pre-closure fee||NIL to 4% of the principal outstanding loan amount|
Why take a Personal Loan?
Personal loans are a great way to offset any temporary financial crunch as it allows the users to avail a loan without any pre-conditions on the usage of the loan amount. Personal loans have a quick approval as compared to other loans. Usually, personal loans get approved as early as 24 hours.
- Easy Availability: Almost all banks and non-banking financial companies (NBFCs) offer personal loans for its customers. Personal loans are not very expensive and are available at reasonable interest rates making them a lucrative option to overcome any immediate financial need.
- Minimal Documentation: Getting a personal loan requires minimal documentation as it is based on your credit score and income.
Eligibility for Personal Loan
The eligibility criteria for availing a personal loan varies from bank to bank
Documents Required for Personal Loan
|Application form with photograph||Application form with photograph|
|Identity and Residence proof||Identity and Residence proof|
|Last 6 months bank statements||Last 6 months bank statements|
|Processing fee cheque||Processing fee cheque|
|Latest Salary Slip||Proof of Business|
|Form 16||Business Profile and Previous 3 years Income Tax returns (self and business)|
|Previous 3 years Profit/Loss and Balance Sheet|
Personal Loan EMI Calculator
Personal Loan EMI Calculator is a smart tool that calculates your monthly EMI amount payable to the lender. It’s basically a slider where you enter the values; Principal amount (P), Time duration (N), and Rate of interest (R) to find out your EMI and figure out your budget in advance.
Points to consider before applying for a Personal Loan
- Interest Rates: Since personal loans are unsecured in nature, interest rates could be on the higher side. You need to choose from a fixed or a variable interest rate depending on bank or NBFC.
- Penalty Charges: Banks & NBFCs charge a high penalty on your loan if in case you don’t pay your dues/EMIs on time.
- Analyse loan necessity: Personal loans or any loan are meant for genuine and immediate needs. So, if your financial situation can be handled without taking the loan, you should restrain from taking it.
Process to Apply for Personal Loan
Thanks to digitization, applying for a loan is no more restricted to visiting the bank a number of times. Rather, it can be done online too. Once you understand the whole loan process and agree to the terms and condition of taking a personal loan, the bank collects required documents and initiates the loan process which includes checking of CIBIL score, the nature of the financial urgency, etc.. Based on the evaluation of all the documents, the banks make a decision on the loan.
Different modes of Saving
A great alternative to any financial need is to count on your savings.
Some methods of savings are Savings account, RD (Recurring Deposit), SIP (Systematic Investment Plan) in mutual funds and more.
Let’s find out the best way to save your money assuming you need to save Rs. 5 lakh in 3 years.
|Type||Monthly Investment||Interest Rate||Duration (Years)||Amount on Maturity|
|Savings Account||Rs. 13,888||4%||3||Rs. 5.32 Lakhs|
|Recurring Deposit||Rs. 13,888||6%||3||Rs. 5.49 Lakhs|
|SIP in Mutual Funds||Rs. 13,888||18%||3||Rs. 6.7 Lakhs|
Hence from the above table SIP is the most worthwhile savings scheme; as SIP will enable you to invest regularly, keeping in mind your long-term savings goal and making you financially stable. Learn about ClearTaxSave to understand personalised investment schemes for you.