Unlike a home or a car loan, a personal loan is an unsecured loan availed by individuals from a bank or a non-banking financial company (NBFC), to meet their personal needs. Lenders provide personal loan on the basis of key criteria such as income level, credit and employment history, repayment capacity etc.
A personal loan is not secured against any asset. Borrower is not required to put up any security like gold or property to avail it, the lender cannot seize anything from the borrower.
Personal loan is a multipurpose loan and it can be used for various purposes. The lender after lending funds to the borrower do not monitor its use. The personal loans can be utilized for various purposes.
Although the eligibility criteria to avail personal loans differ from bank to bank, the common criteria remains is borrower’s age. To avail personal loan, you must have a regular income source, whether you’re a salaried individual, self-employed business person or a professional. An individual’s eligibility is also affected by the company he is employed with, credit history etc.
The maximum loan duration can be from 5 years to 12 to 60 months. A borrower can choose the tenure of the loan as per their convenience. The loan gets disbursed usually faster once approved. The amount borrowed depends on your income and varies based on whether you’re salaried or self-employed.
Usually, the bank restricts the loan amount in a way that your EMI isn’t more than 40-50% of your monthly income. The loan amount differs for self-employed, as the value will be determined on the basis of the profit earned as per the most recent acknowledged profit/loss statement, while taking into account any additional liabilities.
It is important to choose from which bank institution one should avail loan from, which would include lower interest rates, flexible loan tenure, processing fees etc suited to their purpose. The sanctioning of the maximum loan amount may differ from one bank to another.
The disbursal of the loan process is solely at the discretion of the loan sanctioning officer who takes the decision based on the criteria specified by bank and financial institution. Once all documents are in place and the individual meets the eligibility criteria, the disbursal is done.
Availing a personal loan from SBI bank can be the smart choice for most borrowers as SBI is the leading bank in the country with the largest customers base. SBI is the best bank in India and offers lucrative benefits to its loyal customers and even normal customers. The loans are customized as per user’s requirement and offered at affordable interest rates.
There are circumstances in which a personal loan might be a good idea.
- Consolidating credit card bill – If you have more than one credit cards and the bills have mounted higher, avail a personal loan to consolidate all the charges and pay back the amount. The personal loan interest rates are lower than the interest rates charges on the credit cards. The risk here is less in comparison to credit cards and will help you reduce your burden.
- Financing home improvements – A home is a place which lets one to live in peace. To make home a more serene and attractive place home improvements are required and availing a personal loan can help finance the project. The key benefit of renovating a home by availing personal loan is that the home is not pledged against the loan and the risk of losing the home on defaults is not present.
- Refinancing Student Loans – A personal loan can be availed to provide a relief if an ongoing student loan is there. A student loan comes at a higher rate of interest depending on the type of loan selected. There are higher chances that a personal loan can be availed at a higher rate of interest.
- Making a large purchase –As personal loans are not restricted to use, it can even be used for making large purchases. If there are any requirements of home purchases or electronic gadgets, the funds availed from personal loan can be used for this purpose.
- Paying off medical bills – Personal loan funds can be easily utilized for paying out the bills and manage the difficult situation without having to worry about the financial aspect. The difficulty to manage the ever-rising bills piling up due to the expensive costs of treatment can now be managed with personal loans.
- Planning a wedding – The mounting costs in Indian wedding can’t be ignored as it is directly related to status symbol. People tend to save for years for the marriage of their children. But the last-minute additions may put someone looking for money to cater to the requirements.
The personal loan may come to be of great use during such times.
- Consolidating multiple debts –A personal loan can be used for utilizing in consolidating multiple debts. To get things back on track by paying off bills and remaining debts, one can save potential costs. It is important to take proper calculation in mind while consolidating multiple loans by availing personal loan.
Benefits of Personal Loan –
No Collateral – The best part of personal loan is that, a borrower doesn’t have to put up any asset as security. So, the risk of losing any asset is not there.
No restriction on usage –Unlike cases of home loan and car loan, there is no restriction in the usage of funds availed from personal loan. A personal loan is a multipurpose loan and can be utilized for several purposes.
Flexibility to choose the tenure – The tenure of the loan can be chosen as per the convenience of the borrower. A longer tenure means lower EMI and vice versa. A borrower can check the EMI calculator before opting for the loan and get a rough figure for an understanding what would be the amount outflow for loan instalments.
Fixed rate of interest – The rate of interest on personal loans are fixed, so a borrower has to pay the fixed amount throughout the tenure. There is no need to worry about the volatility as per market situations.
Tax benefit – If the personal loan is availed for renovation of house or making the down-payment while purchasing the house, there are tax benefits that can be availed for up to Rs 2 lakhs under section 24B for the interest part in a financial year. However, you will have to provide supporting documents to prove the same.
Availing a personal loan from SBI bank can be the smart choice for most borrowers as SBI is the leading bank in the country with the largest customers base.
