5 MinsNov 14, 2022
In life, we come across various situations when we are in dire need of money to deal with the curveballs or the surprises life throws at us. These may include medical expenses, home repairs/ renovation, wedding expenses or festival expenses, among
a host of others. In such situations, normally, utilising existing investments meant for important financial goals is not a very wise course of action, and that’s when availing a Personal Loan is a sensible choice; it serves to be a financial lifeline or loan in need.
Benefits of availing a Personal Loan:
1. No need to pledge securities:
You don’t need to mortgage or pledge your existing assets as collateral since Personal Loan is offered as an unsecured loan. Depending on your needs, you may apply for a loan amount ranging from Rs. 50,000 to Rs. 40 lakh and choose the repayment
tenure ranging from 12 months to 60 months.
To know your eligibility, use an online Personal Loan eligibility calculator that considers your current age, net monthly income and expenses before providing a response.
2. Few eligibility requirements:
From an eligibility standpoint, all that the bank requires is for you to be at least 21 years of age, meet the minimum monthly income requirements and have a valid set of documents, viz. Aadhaar, PAN, income statement (to understand your repayment
capacity), know the source of your income (whether salaried or self-employed), bank statement and a few other documents. On scrutinising these documents and fetching your credit report (sourced from credit information companies to judge your
creditworthiness), the bank may grant you a Personal Loan.
3. Paperless process/minimum documentation required:
With minimal documentation (and upon satisfying the eligibility criteria) the loan is usually disbursed within 48 hours post sanction. In certain cases, where you satisfy the eligibility criteria of the bank, Personal Loans are pre-qualified for
you, which come with zero documentation (if you are an existing customer of the bank), by following an online paperless process and the funds get credited to your bank account almost instantly.
[Also Read: Five questions to ask before availing of a personal loan]
To ensure that you get a personal loan application approved, here are a few tips:
- Maintain a healthy credit score (higher the credit score, say, 750 and above, the better it is).
- Do not submit multiple loan applications (it can weigh on your credit score).
- Make sure you have not availed a personal loan in the last six months (as it does not depict a very healthy picture of your personal finances).
- Avoid applying for too many credits and pay all your dues on time.
- Maintain a fair balance between secured and unsecured loans (since it weighs on your credit score) and consolidate debt as far as possible.
As a prudent borrower, when you avail a Personal Loan, consider your ‘need’ and not your eligibility. Simply put, borrow only as much as you need; don’t overshoot just because you are eligible for a higher Personal Loan amount.
Use an online Personal Loan EMI calculator to assess how much your EMI outgo will be and whether you can afford it. Ideally, your EMIs should not exceed 40-50% of your net take-home
The interest rate on personal loan and tenure are two key factors that impact your EMIs. Hence in the interest of your financial well-being, compare Personal Loan interest rates
and delve into the specific charges. Axis Bank offers Personal loans at a very competitive interest rate across tenures.
If you earn a steady income, are a salaried individual, working full-time for an esteemed organisation, or are a self-employed well-qualified professional such as a doctor, lawyer, Chartered Accountant, consulting engineer, architect, management
consultant, etc., and doing well, your credit score is high (750 and above), and/or have a long personal banking relationship with the bank; you could effectually bargain for a lower interest rate for Personal Loan.
Note that, the EMI on a Personal Loan is computed on a reducing balance method. During the initial months of the loan tenure, you pay more towards interest, and gradually, as you repay the loan, a higher portion will be adjusted towards the principal
component. For the amortisation schedule of your Personal Loan, click here.
Also, keep in mind that choosing a higher tenure reduces your EMI outgo, making repayments comfortable; while a lower tenure (of say 2 to 3 years) increases your EMI. So, select a tenure that makes repayments comfortable for you. And whenever
possible, you could also part pre-pay the Personal Loan, whereby you repay the loan sooner.
When you borrow following a sensible approach, it ensures that you don’t run down emotionally and financially in times of need. Last but not the least, when you avail a personal loan, always let your family know––gain their confidence––and
make sure you are optimally insured.