Personal loans are great for covering personal expenses, be it for a wedding, renovating a home or even attending an emergency financial requirement. These loans are different from other loans as they do not have any restrictions on how the borrowed money is used. This feature makes personal loans beneficial to many. You can say this is a ‘comfortable’ loan for most situations. Some aspects of personal loans are listed below.
1. Criteria for Eligibility:
The eligibility criteria for a personal loan depends on the specific financial institution or bank you are applying for the loan with. In general, the criteria include your occupation, age, place of residence and your capacity to repay the loan. Having a regular source of income is a ‘must’ to qualify for a personal loan. This applies to everyone applying for a personal loan, be it a self-employed individual or a salaried one.
2. Disbursal of the Loan:
Normally this loan is disbursed within seven working days from the time the application was made to the lender, if approved. Once the loan has been approved, you will receive the money in your bank account or receive a draft or a payee check equal to the amount of the loan.
3. Loan Duration:
The duration of a personal loan can be 12 to 60 months or, in other words, 1 to 5 years. However, sometimes lenders can offer longer or shorter-term lengths – check with your lender.
4. The Personal Loan Agreement:
The personal loan agreement generally specifies the loan amount, rate of interest and duration in which the borrower is supposed to repay the loan. Most financial institutions offering these loans charge additional legal fees, filing charges and more. This amount is deducted from the source. The agreement includes the EMI, or the monthly installments the borrower needs to pay every month. The date by which the loan needs to be repaid is also included in the agreement. Make sure you review your loan agreement carefully.
5. Repayment of the Personal Loan:
The repayment is often done by the Electronic Clearing System (ECS) and/or Post-Dated Checks (PDC). This means the borrower hands over the post-dated checks to the lender for the amount to be repaid and this amount is automatically debited from the borrower’s account. The amount to be deducted is specified in the check. In case of the check being dishonored, the amount charged is specified in the agreement.
Opting for a personal loan works well for many reasons including the application process generally isn’t time-consuming, and lenders often do not require elaborate paperwork or documentation. There are also no restrictions on how the money is spent. You should research for financial institutions which offer the interest rates and term lengths which are suitable to your needs.
The maximum amount of loan which can be procured depends on your income, credit score and the type of loan you are looking for, and other factors. Having a good credit score works well for getting a personal loan as the lender is confident in your ability to repay the loan. Your current income is another factor which the lender will assess to decide whether you are eligible for a personal loan.