Why should I consider a personal loan for personal expenses?

There are dozens of reasons to get a personal loan in financial exigencies. A personal loan comes handy to meet a host of financial requirements like your daughter’s wedding, education, travel, home furnishing, medical bills, credit card payments and a lot more. Both salaried and self-employed individuals can apply for a personal loan for their unexpected financial problems. Now lenders have implemented cutting edge digital technology to offer loans to their customers. Hence, you can get a personal loan as soon as you can get it from your friends and relatives. Personal loan interest rates have also come down after the Reserve Bank of India reduced the repo rate. 

Personal loan interest rate 2020

Here is the list of personal loan interest rate 2020 by top lenders like ICICI Bank personal loan, RBL bank personal loan, HDFC personal loan and Bajaj Finserv. 

Features and benefits of a personal loan

As a personal loan borrower, you don’t need to submit assets as collateral to get the loan. There are several banks, NBFCs, lending apps and peer-to-peer lenders that make different offers on a personal loan like flexible loan tenure, competitive interest rates, lower EMIs, no prepayment charges, the simple application process, top-up loan facility and so on. 

Minimal documentation: Unlike secured personal loans that need lengthy documentation, a personal loan is collateral-free and offered based on the income of the applicant. You can apply for a personal loan with fewer documentation formalities.

Digital process: The entire loan application process is online. If you qualify for the loan, you can get it into your account within a couple of hours of application.  

Flexible term: Personal loan repayment tenure is very flexible ranging from as low as 3 months to 60 months. You can select a convenient tenure, depending on your repayment capacity. RBL personal loan is offered for 1 year to 5 years. 

Competitive interest rates: With dozens of lenders including banks, NBFCs and lending apps offering a personal loan in India, it is simple to shop for and compare rates to find the lowest. Additionally, the interest is calculated on a reducing balance every month.

Multipurpose loan: When you apply for a personal loan, the lender doesn’t ask you the purpose of the loan. You can use the loan for any legal purpose. The fund can be used for holidays, purchase of the latest electronic gadgets, next trip, wedding expenses, debt consolidation, education etc.  

Unsecured loan: A personal loan is an unsecured loan, which means borrowers don’t need to give collateral to get the loan. It is sanctioned based on credit score, monthly income and debt to income ratio of a borrower. 

Eligibility criteria for a personal loan

All salaried and self-employed individuals with regular cash flow can apply for a personal loan. Personal loan qualification requirements vary from lender to lender like RBL personal loan eligibility criteria vary from HDFC and ICICI personal loan criteria. Here are the common requirements you need to meet to get a personal loan from banks. 

Age: Salaried employees aged between 21 years to 55 years and self-employed individuals aged between 25 years to 65 years can apply for a personal loan. 

Employment: While all lenders offer a personal loan for salaried professionals, some of them offer for both salaried as well as self-employed borrowers. You must have a minimum of 2-year work experience or 2-year business experience to get a personal loan. Additionally, you should be employed with the current company or involved in the current business for at least one year. 

Salary: Borrowers need to meet the income criteria set by lenders. Traditional lenders require borrowers to have a minimum income more than 25,000 per month. For example, the minimum monthly income required to get RBL Bank personal loan is Rs. 25,000 per month for residents of Delhi and Mumbai and Rs. 20,000 per month for elsewhere. 

CIBIL Score: CIBIL score is one of the most important factors considered by lenders for a personal loan. Typically, a credit score of 750 or above is ideal for a personal loan. However, some personal loan apps provide a personal loan with a low or without credit score.  

Debt to income ratio: Debt to income ratio is the percentage of your gross monthly that you use to pay your monthly debts including the personal loan you are applying for. Generally, debt to income ratio of 50% or below this is considered ideal for getting a personal loan. 

   Documents required to get a personal loan

While the documentation requirements vary from one lender to other, here is a checklist of basic documents you are required to provide for a personal loan: 

• Filled loan application form along with self-attested passport size photos 
• Identity proof: Any of – Passport / Driving license / Voter’s ID / PAN card /Aadhaar card 
• Address proof: Leave & License Agreement/ Ration card / Electricity bill or water bill or telephone bill (for the latest 3 months) – provided the document has the same address as on in the loan application form
• Age proof: Birth certificate/ PAN card/ Passport
• Income proof: Salary slips for the previous 3 months 
• Bank statement: Bank statement showing salary credit, latest Form 16

Personal loan interest rate 2020

Personal loan interest rates vary from lender to lender ranging from 10.50% to 26% per annum. For example, RBL bank personal loan interest rates are in the range of 14.50% to 23% per annum. Lending apps usually charge interest on a monthly basis.

Personal loans can be saviour in financial problems. Individuals who have a decent monthly income, good credit score and lower debt to income ratio and good employment can get a personal loan at favourable terms to meet their expenses in financial crisis.