The Ultimate Guide to Personal Loans
Published on : November 13, 2020

Be it an unforeseen circumstance or an event you wish to plan, a sudden financial shortfall or a medical emergency, financial requirements are a constant! If such financial shortcomings catch you off guard, what is the best solution? With monthly expenses lined up, do you find the space for additional purchases or unplanned expenses? Not quite, isn’t it?! In such cases, a personal loan can help meet these financial requirements without straining your monthly budget. 

However, millennials today are very cautious about their financial decisions; and rightly so.With the emergence of a number of lenders, the concept of personal loan and the right choice of lenders has become transparent. With the thought of availing a personal loan comes the set of a number of questions like – Which lender to choose?, Which personal loan will best fit the monthly expenses? Will I get a personal loan at affordable interest rates? Or Am I even eligible for a Personal loan? .. and the list can go on!

To contribute to your decisions of availing a personal loan, we have summarised a guide to answer all your questions and help you make the best decision!

What are Personal loans?
Personal loan is a form of credit easily available in the market, all thanks to digitalization. 
Online lending platforms have made it possible to access these debt instruments from the comfort of your home. All you require is a personal loan app of the lender from which you wish to avail a loan from. A simple online application process can give you the access to the funds you require in a few steps only! 

Once you have availed your personal loan, you are liable to repay back in the form of Equated Monthly Installments (EMIs) i.e, the combination of Principal and Interest component broken as per the repayment schedule agreed upon by you for the said loan tenure.

Is collateral required for taking a Personal Loan?
Personal Loans, based on collateral requirement are of two types – 

Unsecured Personal loans: Personal loans are generally unsecured in nature. In layman’s terms, you do not need to pledge any collateral against the sum you choose to borrow. This makes these debt instruments more desirable and affordable. 

Secured Personal loans: Usually, personal loans are unsecured in nature, however, in certain cases where the risk of extending the loan to a said borrower is high, a lender may demand for a collateral. These Personal loans demand an asset to be pledged against the sum borrowed.

Some of the lenders have innovated in the personal loan segment in order to customize loans in a manner that they are fit to pocket and do not burden your monthly cash outflow towards EMIs. Thus, you must check for such lenders and look out for flexible repayment plans. 

Who is eligible for a Personal loan?
The personal loan eligibility criteria is a crucial part of availing a personal loan with any lender. It defines the parameters of how an ideal borrower must be, from the lender’s perspective. This is why the personal loan eligibility criteria differs from lender to lender. However, there are a few common criteria that are more or less constant amongst all lenders. 

Personal loan being unsecured in nature, lenders prefer extending personal loan to individuals who have a steady/fixed income. The usual minimum income criteria is INR 30,000 to INR 35,000. Another important parameter considered under the eligibility criteria for personal loans is Age. The bar set under the age criteria also differs from lender to lender. However, individuals who are 21 years and above are usually considered eligible for a personal loan. 

What are the documents that are required to avail a Personal loan? 
The documents demanded by each lender would certainly differ as the lenders have to define their requirements in liner with their company policies. As you are not required to pledge any asset against the borrowed sum, lenders prefer demanding sufficient documents before being decisive in extending a personal loan to any borrower. However, there are certain documents that are common regardless of the choice of lender approached. They are as follows –

  1. Identity Proof such as PAN-Card, Aadhar
  2. 3-6 months Bank statement
  3. 3-6 months Salary slips
  4. If you have changed your job within the past 3 to 6 months’ span, the lender may ask you to provide the salary slips of the previous employment as well as the current one.
  5. Address Proof

If you provide all the documents true to your knowledge you can be assured there will be limited or no interruption in your personal loan application and verification process. 

What are the interest rates demanded by Personal loans?
Interest rates are often influenced by the type of personal loan you choose to avail. Also, primarily interest rates differ from lender to lender too. However, Interest rates are usually in the bracket of 18% to 30% per annum depending upon products, personal circumstances, credit assessment procedures and other related factors.

What is the process of applying for a personal loan?
Traditionally, we would have to visit the lender multiple times to avail personal loan. However, thanks to the innovation in the personal loan segment, lenders have made it possible to avail these loan products from the comfort of our homes. The process of availing a personal loan is really simple. Here’s how it’s done –

  1. Choose the lender of your choice post adequate research and personal loan eligibility checks available on the lender’s website.
  2. Fill an online application form by either visiting their website or by downloading their personal loan app.
  3. Upload the necessary documents demanded by the lender. Post verification of the documents, disbursal will be activated. 

Simple isn’t it? To ensure an uninterrupted and smooth personal loan application process, you must provide genuine documents and personal information that is true to your knowledge. If any documents are found to be tampered, it will hinder with the verification process and can delay your loan disbursal.  

What are the different types of Personal loans available in the market?
Owing to the fact that personal loans have no restriction on the usage, they can be used for multiple purposes. Fintech start ups, with the help of technology, have customised personal loans with a very need specific approach. Each of the personal loan offerings come with different repayment plans to help you choose the loan that best suits your monthly cash outflows. Take a look at the different types of customised personal loan offerings available in the market.  

EMI Free Personal loan 
EMI Free loan is a unique and one of a kind personal loan that helps borrowers enjoy EMI free months! Yes It’s true. This loan allows you to pay only interest every month and make bullet payments towards the principal outstanding every 3/6 months. This way you can lower your monthly EMI outflow by 40%. How cool is that?!

Advance Salary Loan
An Advance Salary loan is a short term personal loan best suited for salaried professionals who wish to meet sudden short term cash requirements. Here the lender extends 2.5X the net salary of the borrower as a loan and the borrower repays the loan in fixed monthly installments across the loan tenure. This way the borrower is not chained to service a loan for longer tenures. 

Credit card Takeover loan
A credit card takeover loan, as known as debt consolidation loan, is specially designed to consolidate debts arising from multiple credit cards. This loan allows you to clear off all the outstanding bills in one go. As credit cards demand a higher interest rate, it is best to clear outstanding dues with the help of this personal loan, which comes at 50% of the interest rates charged on Credit Cards. 

Medical Loan
Most of us know the value of being covered under a Health Insurance plan and we must be well protected too. However, many Health Insurance plans do not cover all the illnesses and hospitals or might even lack complete coverage. A Medical loan helps to meet the financial requirements incurred during a medical emergency especially when your health insurance plan lacks the efficiency.  

Travel Loan
Most of us are certainly ambitious about our travel bucket lists, aren’t we? A Travel loan helps cover all the expenses you would incur while planning a trip with friends or family. Also, we often encounter travel or work trips arising out of our fast paced jobs. To support the expenses arising out of sudden travel for work, a travel loan comes most handy.

Marriage Loan
A Wedding loan is designed keeping in mind the expenses that one incurs during a wedding. Any Indian wedding would cost somewhere between Rs. 5 lakhs to 10 lakhs. A marriage loan helps cover all the expenses arising when planning a wedding like catering, photography, clothing, venue etc; without denting your savings. Additionally, you can check out the flexible repayment plans offered in order to minimize the load of EMIs further.

School Fee Loan
We are well aware that schools demand fees to be paid on a quarterly or a half yearly basis. Paying school fees at one go can literally end up debiting a major chunk from your account, leaving no room for other monthly expenses. Thus, a School fee Loan helps break down these expenses into smaller monthly payouts further relieving some amount to meet other day to day expenses.  

House Owner Loan
We often delay our home renovation or home improvement plans due to the heavy expenses it demands. A house owner loan can come handy when you want to meet the financial requirements arising out of any home improvement projects or renovations. You may also avail this loan if you want to fuel any purchases to refurbish your home. 

Rental deposit Loan
While we all are on the outlook for better career opportunities and are willing to relocate to other cities, the problem of renting accommodation and high security deposits remain at high! Paying high security deposits can really be a difficult situation as a major amount of money gets occupied. Thus, a rental deposit loan helps curb the problem of high security deposits and enable you to relocate to the home of your choice!
At LoanTap, we offer all these personal loans with easy online processes and minimum documentation. We also offer various flexible repayment options that help you reduce the burden of EMIs against the borrowed sum. So if you are in need of an affordable personal loan, you certainly know where to go!