The definition of personal loan
A personal loan, in simple words, is the money you borrow from a financial institution. It can be a private lender, a bank, a credit company, or a non-banking financial company.
Borrow your personal loans from Buddy Loan explore the benefits of lower interest rates, increasing your CIBIL score and loan repayment options from this loan aggregators. You repay it along with interest as instalments within a fixed number of years.
Personal loan and its types
Personal loans in India generally fall into the following common categories:
• Wedding loan: This is the kind of personal loan you need to plan your big day. Book venue for the auspicious occasion, arrange catering, shop for jewellery, take care of accommodation for guests; everything with the assurance that you have a strong financial backup.
(A) Loan amount from INR1000 to INR1500000
(B) Repayment term from three months to five years
(C) Minimal documentation
• Loan for home renovation: Beautify your home, add up to your furniture or repair your abode; all this becomes possible with a personal loan.
(A) Loan amount up to INR1500000.
(B) Repayment term up to 5 years
(C) Interest rate from 11.99%p.a.
• Loan for travel: It lets you travel wherever you want. And you can pay your bills at a later time. Travel loan often comes with the additional advantage of travel insurance. Thus, you stay safe from unexpected financial emergencies.
(A) Amount up to INR1500000
(B) A fast and simple process of documentation
(C) Extendable repayment term; up to 5 years
• Loan for education: Lenders who offer educational loans are there in plenty. Use it to fund your child’s tuition or overseas education.
(A) Amount up to INR1500000
(B) Low-Interest rates that generally start at 11.99%p.a.
(C) Extendable repayment term, up to 5 years
• Pension loan: This is designed specifically for retired personnel. And the eligibility criteria are generally liberal. Certain lenders even offer up to ten times higher than the pension the person received in the previous month.
Getting a personal loan is now extremely easy!
It’s not a million-dollar question, yet it’s a question that yields a million dollars! How can I get a personal loan? What are my personal loan requirements? How can I check my eligibility for a personal loan? The questions are unending. But the answers are often scattered across – hidden in loan pamphlets, conveyed hurriedly by loan agents or inscrutably described by a bank or financial websites. Here’s some easy information on this topic.
Determine your personal loan amount
- Take stock of your requirements. Always borrow more for incumbencies and not for unnecessary spending.
- Personal loans are pricier financial products than home loans, so borrow with caution.
- Analyze your take-home salary or yearly income vis-à-vis EMI of the personal loan.
How much personal loan can I get for my income?
The rules are simple:
- Check your credit score. Some banks want credit scores in excess of 700; some can do with a little less.
- Non-Banking financial institutions usually cap personal loans at Rs. 25 lakhs. In other cases, individuals can get a personal loan that is 30 times their net take-home salary per month or net income per month.
- EMIs of loans is roughly 45% of the monthly salary or income of the borrower.
- Check for pre-approved offers. Call up the financial institution customer care to check.
- Approach the bank
Personal loan to be considered:
Common personal loans need no collateral. Personal loan interest rates are therefore higher. However, to obtain them, you may need a good credit score. Interest rates can be as low as 10% to a higher slab of25% depending on the bank and type of personal loan product.
- Needs no collateral.
- Disbursed faster. Generally, in a week.
- May be based on a good credit score
- Require collateral as security. It could be in the form of property papers, car title ownership papers etc.
- Some banks offer secured personal loans online where the borrower can borrow money against their car, home, property etc.
- Interest rates are nominal.
- EMIs of fixed-rate personal loans do not vary.
- The advantage is that if interest rates of loans become higher, the rates of fixed-rate personal loans remain the same.
- EMIs of variable-rate personal loans vary.
- The advantage is that if interest rates of loans become lower, the rates of variable-rate personal loans also lower.
- Debt combining personal loans
- Multiple debts, in the form of other loans, home loans, car loans or credit card payments can be consolidated into a single personal loan.
EMI calculation on my personal loan…
Expanded as Equated Monthly Instalments, EMI is often the source of confusion. More than confusion, it’s often anxiety over the amount paid. Besides getting a personal loan at the right time, you can reap better benefits without any push or pull of approval through Buddy Loan, one of the best loan aggregators.
Doubts arise over the lender’s interest charging criteria. Lack of clarity on the computation method of EMI may also deter people from taking personal loans. The following information discusses the calculation method of EMI. Knowing how much interest is charged, and how much is going towards repayment of the principal is every borrower’s right.
Salient Features of EMI: Personal Loan
• EMIs are dependent on the amount of loan taken, rate of interest and the loan period.
• EMIs are decided on the date of loan sanction and never change during the tenure of loan repayment.
• Interest component and principal component constitute the EMI.
• EMIs paid in the initial part of the repayment schedule have a substantial portion that goes towards the overall interest on the loan computed based on the loan period and per annum rate of interest. In the later years, the portion of the EMI towards repayment of the principal component becomes higher and the interest component lower.
• Those who have opted for floating interest rates can experience a change in EMIs.
Types of EMI to avail personal loan
Pre EMI – Given in stages for construction of the home.
- Disbursed in phases for in-development projects or under-construction homes
- Pre EMI instalments are levied on the loan disbursed. By the time of completion of the project, the entire loan is disbursed. Pre EMI is applicable within this period.
Tranche – Borrower pays the complete EMI
- The borrower pays the complete EMI even if the complete loan for the under-construction project is not disbursed.
Accelerated – Borrower expedites repayment of the loan
- A facility available only with select financial institutions, the borrower is allowed to repay more than the EMI amount to repay the loan faster and reduce the tenure.
Calculate your EMI here:
The formula for EMI calculation is as follows:
[Principal x Rate of Interest Per Month x (1 + Rate of Interest Per Month) ^ Number of Monthly Instalments / (1+ Rate of Interest Per Month) ^ Number of Monthly Instalments – 1]
Let’s calculate the EMI for a loan of 15 lakhs with an interest rate of11.99% per annum with a loan tenure of 5 years.
- Rate of interest per month is = 11.99 / 12 x 100
- ^ is to the power of
1500000 x 0.00999 x (1 + 0.00999) ^ 60 / (1 + 0.00999) ^ 60 – 1 = 14984
Every month instalment for this loan will be Rs. 14984.
Besides calculating the exact principal amount, interest and tenure of repayment. To acknowledge the benefits of the NBFC, banks or any other financial institution, you would require a road map. Let’s focus on the tips to get your personal loan application approved successfully.
Tips for a successful personal loan application:
If you avail a personal loan, you can use it for a variety of purposes such as paying off for wedding expenses, medical expenses, renovating your house, supporting your child’s education, or even paying back an existing loan. Most of the time, it is taken in need of urgent and temporary cash depending on the situation. The situation might be health treatment, weddings, holiday vacations, etc.
In such cases, when the loan application is rejected, it can be extremely frustrating and upsetting. There are certain factors that are always considered by lenders before approving any loan application. Knowledge about these factors will help you ensure that you successfully get your loan application approved.
Here are a few tips to ensure a successful personal loan application:
- Improve your credit rating
Your credit rating is the first thing that a lender examines when you apply for a personal loan. Your credit rating is the clearest indication of your financial behaviour and history. Lenders use it to determine whether or not you would be able to pay back the loan amount. So, before you apply for a loan, make sure to check your credit file first. If you have a low credit score, take the necessary steps to bring the score up before making the personal loan application.
- Manage your finances
Managing your finances not only involves using your regular income efficiently but also proper utilization of any existing credit that you may have access to. Both of these points have a big impact on the approval of your loan application.
Check the outstanding balance on your credit cards, your payment history with all kinds of credits as well as your previous financial history. If you have any existing credits, make sure to keep up the repayments. Don’t let your credit cards ‘max out’. Instead, use them to 20-25 per cent of the credit limit. Also, ensure that you pay the entire outstanding amount each month, not just the minimum payable amount.
Efficiently managing your finances shows the lenders that you are a good borrower and in complete control of all finances.
- Borrow only what you need
For a lender, it is obviously riskier to lend someone a greater amount than if they were lending a small amount. So, apply for only the amount that you need to improve your chances of getting your application approved.
So, before applying for the personal loan, make sure that you have done everything possible to ensure that your loan application is a success.
- Points to Ponder on Personal Loan
Personal loans often attract some of the highest interests in the financial market. Interest rate starting at lowest, 11.99% p.a., personal loans become one of the biggest sources of interest-based fund for the lenders. However, loan aggregators help you with the best repayment options for a good 5 years. Explore Buddy Loan in order to reap more benefit for a personal loan.
Crucial benefits of taking a personal loan through an online aggregator:
Valid and Vivid Schemes: Loan aggregators are known for They give you a platform to compare the loan offers of various banks and also suggest the ones, best suited to your profile and requirements Customer reviews and feedbacks by previous successful personal loan applicants acts as a helpful tool for new applicants to get the best personal loan deal.
Calculative Tools: The loan aggregators have the specific and easy tools integrated online-only t make the customer service beneficial and less time-consuming. They include, EMI calculator and Eligibility calculators come in handy to estimate the loan amount you can be eligible for. Also, calculate the EMI you need to pay every month on the borrowed loan amount, given the interest rates and chosen loan tenures.
They are absolutely free of cost and allow you to define your loan requirement more precisely, thus reducing your chances of loan rejection.
Instant e-approval and quick disbursal: Most of the aggregators run special schemes from their banks which include pre-approved loans or instant e-loans for borrowers of who meet the eligibility criteria for such schemes. Even otherwise, these aggregators are integrated with their partner banks on the technology platform, which allows them to process and coordinate your loan application with the banks on a real-time basis.
Unique customer service: These online aggregators run their customer desk service, wherein a dedicated loan advisor helps you to understand the complete process of availing a personal loan and clear all their doubts regarding eligibility, offers, procedures, documentation, and repayment options. Not only this, they even coordinate with the banks and follow up on your behalf. So, this makes them unique in the sense that their offerings are a blend of digital as well as personalized services for their customers.
Confidentiality: All personal loan applications submitted with online aggregators are sent electronically to the concerned bank department assuring complete privacy and transparency. So, with the help of online aggregators, your personal loan search becomes very easy, transparent and hassle-free. The best part is that with even with personalized and quick services, these loan providers do not charge any fees from their customers and even offer attractive cashback schemes.