Though it sounds incredible, it is very true that sanctioning of personal loan is a matter of just 2-3 days. Simply, a bank official will reach you at your house, induce all your necessary documents and complete the necessary formalities legally. Unlike consumer durable loans, marriage or gold, personal loan will leverage you to use it the way you want. No matter what is your need; educational expenses, hospital bills or a house renovation; personal loan comes to your rescue.
How is it different?
Your home take salary will decide the sanctioning amount. You can have the amount from Rs. 20,000 to Rs. 10 lakhs. If at all, the loan is to be claimed jointly with spouse, his/her income needs to be specified for the loan amount determination. In case of home loan, the sanctioned amount includes only the amount required to either build or maintain a house unlike the personal loan, wherein the banker has to do nothing with the cause you spend money over. You are not even asked to produce guarantors, collateral or security.
What are the eligibility criteria?
A salaried employee with a private, multinational or government organization or public working in the current job for 1 year and is aged between 25 to 58 years.
Self employed trader, engineer, CA, manufacturer or a doctor, who makes a notable net amount post tax profit, and is aged between 25 to 65 years. But, every bank has a different draft of its eligibility criterion and in regards with same; these professionals are required to show the bank their assurance in repaying the loan.
Some banks lend home and personal loan to their customer with additional lucrative rates. Few other banks also sanction loans to public or government sector banks or the pensioners, who are eligible to retire voluntarily.
How to compare rate of interest?
Few banks and NBFCs offer personal loans at a 16 percent rate of interest while few others at just 10 percent. During such time, which one should be opted? Are there any hidden clauses under such cases? Or is it that one should blindly choose the bank offering less percent of rate of interest? This is the time wherein one should ask for a detailed clarification.
It is mandatory to know if the rate of interest is being levied on computed balance or reducing balance. When the interest is for reduced balance, interest automatically gets levied once you pay an installment. For annual reducing balance, interest is calculated for the next 12 months on the outstanding loan at the start of the year. While on the other hand, for monthly reducing balance, the interest is be computed on the balance reduced that had been calculated at the start of the month. To find out the best deal for you pertaining to the rate of interest of the bank charges, it is advisable to compare the total repayment and the EMI that will be incurred for the loan. Due to this, a more realistic picture will be craved in front of you than the rate of interest alone. I regards to the same, look out for processing fee, application fee or any other relevant penalties.
Whatever the rate of interest the bank charges, to find out which is a better deal for you compare the EMI and total repayment that you will have to make for the loan. This will give you a more realistic picture than the interest rate itself. Also look out for application fee, processing fee and any other penalties.
Is personal loan a debt trap?
It is an undoubted fact, that home and personal loan indeed look quite appealing. It even takes a little time for them to get approved once you produce the necessary documentation. There is no need of becoming a part of the serpentine queue. Financial institution put in their best shot to rope in the customers. Without the need of any security or collateral, these loans are surely an additional income to your pocket. However, it is also to be considered that a loan is more of a constant sum deducted from your purse every month in the form of an EMI.
So, it is good to go for personal loan only during unavoidable emergencies. Ask for only what you can pay off in return!