ARE YOU GOING TO TAKE PERSONAL LOAN?

Most of us factor in emergencies while planning our finances. However, sometimes, eve our best efforts fail to foresee certain contingencies. Perhaps we need to raise cash at short notice and our accessible investments are in inadequate. Or perhaps we don’t want to dig into our savings to meet a sudden demand.

It is precisely in the situations that personal loans offered by banks and financial institutions come in handy.

WHY PERSONAL LOANS?

Unlike a home loan, a personal loan would generally not require any collateral to be provided by the customer to any bank or financial institution. It is basically an unsecured loan and carries a slightly higher rate of interest from 16 to 30 percent than a secured loan.

HOW DO I GET A PERSONAL LOAN?

Although the paperwork for a personal loan is less than that for a secured loan, the eligibility criteria are much stricter. The criteria, however, varies across banks. Typically, to sigh up for a personal loan, you should have a net take-home salary of at least Rs. 8,000 per month and have completed 21 years of age.

Before you apply for a loan, check the eligibility criteria on the bank’s website. Most banks provide this information. In some cases, they also provide an EMI calculator, which will give you an idea of the quantum of loan that you can afford. Bear in mid, though, that not more than 40 per cent of your net take-home salary should be directed towards servicing all your loans.

As with any other loan, you will need to apply with the bank/financial institution. Some banks/financial institutions along give you the option of applying online. In case you apply online and provide the necessary details, an executive of the bank will approach you for the necessary documentation.

If you are a salaried professional, you will need to attach papers like your salary slip, income tax return forms for the past two years, recent bank statements that show the salary being credited, proof of identity and residence and proof of educational qualification along with the application form. A self-employed person will need to furnish proof of his business continuity and business continuity and business turnover.

Once the bank/financial institution verifies the authenticity of the papers, the loan application may take around four working days for approval. The amount sanctioned, however, will depend on factors like your net monthly income, occupation, years in service, your education, etc.

HOW MUCH CAN I BORROW?

Typically, you can borrow up to 12 times your monthly take-home salary. The maximum amount of loan that can be sanctioned varies across lenders. In India, the upper limit is usually Rs. 15 lakh. The repayment tenure can vary from 12-72 months. The repayment of the loan can be done through post-dated cheques for the loan tenure. Some banks may also offer electronic clearing system (ECS) facility to repay the loan.

However before you approach a bank/financial institution for a personal loan you should always check the details on the company website. Most of the information about the product is already available online. Once you have done your background study, you can list down your specific queries that you can take up with the concerned official at the bank/financial institution and get them answered.