Personal Loans are one of the most popular forms of credit in India. This is primarily because a personal loan can be availed for many personal reasons. It could be used for financing medical emergencies, a child’s higher education, international trips, marriage expenses, and everything else that falls under the purview of a personal expense.
In this article, we bring you a list of important things you must know before taking a personal loan.
First Off, what is a Personal Loan?
A Personal Loan is an unsecured loan which is not backed up by any asset and needs minimal documentation. That means an individual taking out a loan is not required to put any of their assets as collateral. And if the individual is eligible for a personal loan, the purpose for which it has been taken does not concern the financial institution.
Important Things to Know Before Taking a Personal Loan
1. Eligibility for Personal Loan:
The eligibility criteria for a personal loan are simple but may vary from financier to financier. It includes factors like stability of income, applicant’s age, CIBIL score, etc. To avail of a Personal Loan from Tata Capital, one of India’s most-renowned NBFCs, salaried and self-employed individuals must fall in the age bracket of 22 to 58 years and earn a minimum of Rs 15,000 per month. They must also possess a work experience of at least one year.
2. The Importance of CIBIL Score:
CIBIL Score is a 3-digit creditworthiness score which ranges from 300 to 900. It reflects the summary of one’s credit history along with a report and rating from the previous and/or existing lenders. Lenders generally look for a credit score of 750 and above while sanctioning personal loan applications. You can easily and instantly check your credit score using Tata Capital’s free credit score checking tool!
3. Interest Rate:
Interest rate is a crucial factor which one must check before taking a personal loan, as that decides how large or small an additional amount the borrower needs to pay back besides the principal loan amount. Tata Capital offers personal loans at highly competitive interest rates starting from just 10.99 per cent.
4. EMI Options:
Like any other loan or borrowed money, the repayment of a personal loan involves two components: the principal amount and the interest on the principal amount. These are paid by way of Equated Monthly Instalments (EMIs). Before taking a personal loan, one must check what is payable to the lender. For instance, with Tata Capital, one can pay either a standard EMI amount or step-up a flexible EMI. Under the first option, all EMIs correspond to a normal amount. In contrast, under the latter, one can start with a lower EMI amount and gradually increase it as the loan repayment capacity enhances due to salary increments.
5. Loan Prepayment Terms:
Another factor you must check before taking a personal loan is the terms revolving around the prepayment of the loan amount. Various banks and NBFCs charge a penalty fee when a borrower pay back the loan amount before the completion of the tenure of the loan. However, if one takes a personal loan from Tata Capital and makes a part pre-payment towards it after six months of availing the credit, they need not pay any prepayment penalty or fee.
6. Track Record of The Lender:
One must also check the track record of the financier before availing of a personal loan from them. One can check this based on the lender’s time in the market, their customer testimonials, etc. Tata Capital is the flagship financial arm of the well-known Tata Group, which has been in the market since 2007. The NBFC has more than 200 branches in over 140 cities and a customer base of over 15 Lakh. Moreover, it has disbursed loans worth over Rs 4.5 Lakh Crore.
Final Thoughts
Personal loans are a multi-purpose credit facility which serves as an important financial tool to help one meet their financial obligations, both planned and unplanned. Before taking a personal loan, check the above factors and make an informed and rational decision.