Different Aspects Of A Personal Loan

Small personal loans solve your immediate financial needs effectively. Be it a machine for home improvements like a washing machine or an entertainment-related system like television, personal loans provide you an easy solution to any kind of impending need. With the global consumer now on a higher money spending spree, financial institutions are breaking all boundaries to reach to the new modern customer who wants to make his/her life comfortable on all counts. Television, radio, person-to-person advertising, newspapers and online ads! The financial institutions are leaving no stone unturned to reach out to and to influence more consumers and today you can also compare and apply for a loan online in India.

Majority of people work today to pay their EMIs apart from solving other financial issues. An average urban Indian salaried employee has around 3 or 4 EMIs to pay each month. These EMIs are most often related to education loan, credit card loan, home loan and car loan among others. Today debts are no longer considered as a shameful consideration and saving is not the first thing an Indian citizen considers while managing his/her earnings and assets. The phenomenal attitudinal change (saving was a prime consideration in early days, and people tried to save every penny they had or earned) is attributed towards the modern lifestyle and also easy availability of finance and loan options.

Personal loan

The amount of personal loan in India ranges from Rs 10,000 to Rs 30 Lacs. The extent on loan taken or granted depends on the borrower’s pay back ability and lender’s capacity. A personal loan requires minimum documentation, and the process is also fast and speedy. The loans are mostly taken for purchasing consumables by consumers, but some also invest the money in financial avenues and businesses.

Duration

A personal loan is of shorter duration, and its payback tenure may vary from 1 to 5 years. The loans provide easy repayment solutions to customers, and the flexibility varies with the credit history of the customer and on the lender’s terms and conditions.

Unsecured

Personal loans fall in unsecured loan category as the customer is not required to provide a collateral or security for taking the loans (as in loan against property or education loan). Also, the consumers are not required to make any down payment towards the loan (as in a car or a house loan). If you want to apply for a personal loan online, you can use the EMI calculator for a personal loan and for the loan against the property to know the difference.

Higher Interest Rate

As the loans are unsecured, customers and loanees are required to pay a slightly higher interest rate on the EMIs and the loan repayments in comparison to other loans like the loans against property. But as many customers do not have massive collaterals and property to take a loan against, the option is widely exercised by the salaried and urban class employees in India. There are also several other factors that decide the interest rate on a personal loan. These include:

Income - The income of the borrower is toady an important factor towards finalizing of interest rates. Many MNCs and private financial institutions have ventured into the loan segment and have a flexible interest rate pattern to gain more number of consumers.

Status of the Company that Employs the Borrower - If a salaried employee wants a personal loan, the lending institution or bank reviews the company in which he/she is working. The companies operating in India have been divided into 3 financial classes or categories on the basis of their revenue/profit, employee strength, infrastructure and other aspects. Under category A, top 1000 companies are listed. Under category B, MNCs or Multi National Companies are listed. Under category C, smaller companies are listed. The fourth category is of other non-listed companies with 100 or lesser number of employees. The interest rate varies with the company category, and a better company’s employee gets a loan at lower interest rates.

Payment and Credit history - If the borrower’s credit history is not bad, the loan is provided at a higher interest rate or the loan application may also be rejected.

Other Aspects

People with savings or salary account with the bank may get some waiver and benefits in terms of processing fee and interest rate respectively. The customers also negotiate to achieve greater benefits.

Vaibhav Dhanawade, a passionate writer on finance is closely associated with several financial companies. The writer wrote this article to educate his readers about the various intricacies involved in loan processing.