Before taking Personal Loans...

Taking a personal loan is very easy, all you need to do is just apply for a personal loan on any bank or brokers website. Their agents will call you within 48 hours to collect your documents and if you are eligible the loan will be sanctioned within 4 working days. That much simple...

But don’t forget other side of the coin, Getting a loan is easier but Repaying may not be that easier. Let’s see Pros and cons of personal loans, though I may not suggest you to go for personal loan.

What is a personal loan?

Mostly when one needs for an urgent cash and do not have emergency fund in hand they go for personal loan because it do not requires any security or guarantor and you can use it for any purpose as u wish.

Who is eligible for a personal loan?

Any Salaried individuals or self employed individuals / professionals can get personal loan who have income proof and address proof/ identity proof. Below are the lists of documents you need to submit for applying personal loan.

• Proof of Identity (Passport Copy/ Voters ID card/ Driving Licence)
• Address Proof (Ration card Tel/Elect. Bill etc)
• Bank Statements
• Latest salary slip or latest Form 16
• Latest ITR in case of self employed

Also some bank requires credit history like previous loan or credit card history. This may creates a problem for one who applies for the first time.

What are Interest rates offered on personal loans?

Flat rate: Interest calculated for entire tenure for the loan and divided in each month EMI. DONT take personal loan which has fat rate of interest because it will be costly.

Reducing rate: Interest calculated on the outstanding amount each month. Mostly all banks offer reducing rates. Always go for reducing rates personal loans.

Interest rates for personal loan could be anywhere between 14% and 25%. 

What are others charges?

• Non-refundable Processing fees normally 5-10%. You can negotiate on this.
• Prepayments charges normally 5-10% on outstanding amount after 6-12 months.
• Payment Protection Insurance (PPI) charges, negotiate on this.
• Service TAX.

Always calculate Total Amount Repayable (TAR) while taking personal loan. Try to take loan for minimum tenure so that less interest is paid towards it.

• As far as possible try to avoid personal loan for Travel, shopping or any other unnecessary things.
• For Emergency Purpose, you should have Emergency Fund & not the Personal Loans.
• DON’T go for a personal loan without considering alternatives.