Blog #Personal Loan

With most banks offering “personal loan apply online” features, you can avail of a personal loan from the comfort of your homes. Personal loans are unsecured loans that are easier to obtain because they need less paperwork and do not require a guarantee or guarantor. Some of the most common reasons for taking out a personal loan are repaying old debts, weddings or social gatherings, medical emergencies, clearing credit card bills, paying for holidays and so on. So, whatever your reason for looking for a personal loan online.

Here are some pointers to help you find the right bank for you:-

1) Compare interest rates offered by various banks: Perhaps a bank approaches you with an offer of "just 14% per annum" for a personal loan. Or you go to the bank where you have your savings account and discover that the interest rate is "just 16%". Regardless of how appealing the bank's offer seems to you, researching the personal loan terms of various banks and comparing interest rates is a vital move before deciding which bank to take a loan from. There are many ways to do this: you can do your research by visiting the websites of various banks and determining their interest rates, or you can see financial websites, which will provide you with all of the necessary details based on the criteria you enter.

2) Compare charges the bank levies: Interest rates are not the only things you need to compare when choosing a personal loan. You need to look at the various fees charged by banks while researching loans. The fees generally associated with a personal loan are processing charges, late payment charges, cheque bouncing charges, charges for loan cancellation before term and service tax for each service provided by the bank. The most important is the processing fee, which usually ranges from 1% to 3%.

3) Check for repayment facilities: The majority of personal loan products have complete and partial prepayment fees. This means that if you want to pay off the balance of your loan before the term is out, you'll have to pay a small fee. Few banks do not charge foreclosure fees, but most banks, like ING Vysya Bank personal loan, charge between 2% and 5% of the balance. This will help you minimize your total debt burden because potential interest payments are deducted, but it still costs you Rs. 10,000 to Rs. 25,000 on a loan of Rs. 5 lakhs.

4) Settle for an affordable EMI: Before you take out a loan, you must be sure that you will be able to make daily repayments to close the loan on time and without penalty. You will need an estimation of the equated monthly instalment (EMI) that you will have to pay on the sum borrowed for this. When you use an EMI calculator, you can quickly determine your estimated EMI. You can use any online EMI calculator to find loan sum, tenure, interest rate, processing charge, and prepayment options.

5) Check all available loan options: A personal loan is not always the only option for getting through an emergency. Approach friends and family to see if they can lend you money, especially if the amount is small. This way, you will avoid the hassle of paying additional fees to a bank. However, you should be aware that having monetary transactions can often destroy relationships. So, if you take out an interest-free loan from a family member, make sure you pay it back on time to prevent strain in your relationship.

Aside from the above factors, you will also want to understand the penalty for late EMI payment, the reputation of the bank from which you are borrowing, the bank's customer service, and the loan's tenure. Whatever decision you make, keep your financial goals and capabilities in mind. No matter how bad the emergency seems, it is not smart to give way to another crisis while getting out of one.

Also read this: Alternatives for non-payment of personal loan 

Personal loan sanctions one to borrow money to finance personal expenses and then return that amount over a period of time. Personal loans are a type of instalment debt that allows you to obtain a lump sum capital. For example, one might use a personal loan to pay for - Moving costs, Debt repayment, Medical bills, Marriage expenses, Home renovations, Funeral expenses, Vacation expenses, Unexpected costs, etc.

These loans are unlike other instalment loans—such as student loans, car loans, and mortgage loans—that are used to fund specific expenses (i.e. education, car purchase, and home purchase)A salary slip is a document delivered by an employer to an employee. It holds a comprehensive account of the employee’s remuneration elements such as house rent allowance (HRA), leave travel allowance (LTA), bonus paid, etc., and withdrawals for a stated period, usually a month. 

It could be issued on paper or mailed to the employee. Employers are legally required to give salary slips to their employees periodically, as evidence of salary settlements to employees and withdrawal made.

For the purpose of measuring one’s repayment capabilities, money lenders look into one’s financial profile before sanctioning a loan. Part of this involves checking one’s income and validating it through their salary slips. That being said, it is possible for one to get a personal loan without salary slips, too, especially if one is self-employed. At times the procedure involves exhibiting alternate sources of income and sometimes establishing a rapport with their lender and maintaining a high credit score.

Six recommendations to obtain a Personal Loan without a salary slip are - 

Produce an alternative origin of income

If one is self-employed. A freelancer earning in cash or working on a contract; then one can seek a personal loan without a salary slip. In synch a scenario, one needs to show other financial statements to verify their income; it can be in a bank statement, income certificate, form 16, or ITR. A stable source of income reassures the bank of one’s repayments capabilities and helps one obtain a personal loan.

Maintaining a high credit score 

When one is self-employed or facing unemployment for a period of time, it is crucial to maintaining a good credit score. This number reflects one’s repayment history, credit handling capabilities, and debt status. It serves as evidence of one’s creditworthiness in front of the money lenders. It indicates the approach adopted by one towards debts. Maintaining a credit score of 750 or above displays creditworthiness.

Offer to pledge an asset as collateral

In the event one lacks the financial strength at present, enquire if the moneylender sanctions asset-backed loans. Good securities such as high-value FDs, mutual funds, or gold gives one something other than just their financial profile. They were offering to pledge an asset as security improves the chances of obtaining a personal loan without a salary slip.

Enlist for the loan with a co-applicant

Signing up for a personal loan with a co-applicant with a high credit score can play a crucial role in obtaining a personal loan without one’s salary slip. This is because it will increase the lender’s trust and confidence in one’s repayments abilities. The co-applicant serves as a secondary source of repayment. Therefore if one fails to make the repayment, the lender can bank on the co-applicant to repay the amount.

Find a moneylender with easy conditions 

When trying to obtain a personal loan without a salary slip, it is vital to find a moneylender who maintains simple criteria. This will allow one to get a hassle-free application, verification, and approval. A lender that offers simple eligibility terms is Axis Bank Personal Loan.

Establish a good relationship with your bank

By being loyal to it for all financial and non-financial services. This helps in maintaining trust with the bank, which then decides one’s loan competence as well as one’s repayment capacity. If one is applying for a personal loan at the same bank, where one’s current account or savings account is located, it becomes easier for the bank to consider them competent for a personal loan. As the bank is fully aware of all the transactions being made on their account, it helps them assess one’s creditworthiness.
Must Read:- REPAYMENT OF PERSONAL LOAN 

Banks are enormous lenders when it comes to loans, as they hold the capacity to lend and provide benefits to their customers. They work in a cyclic way wherein they lend the money that people deposit and make profits by charging more interest on loans, paying less interest on deposits, and providing other benefits of security and online services, making their work extremely powerful and coherent.

To apply for a loan, the borrower should either go to the bank for a meeting or must call the people from the bank to their place. He must know the bank branch details of the bank where he is applying for a loan. Details like the bank account number, government identification number, age, IFSC Code, amount of the loan should be precisely checked before submitting the final application.

Talking about loans, the different kinds of loans are:

Personal loans- Personal loans are unsecured loans in which the banks offer money to borrowers to meet their unique financial obligations. To apply for a personal loan, the borrower must provide the bank with proof of income and meet the eligibility criteria. Because the tenure of personal loans is usually short, the interest rates are more.

Home loans- A home loan acts as significant support for buying or constructing a home. For borrowers, it is advised to pay a handsome down payment (which should be a minimum of 20% of the house’s value, as banks pay upto 80%) because the rate of interest highly depends on the same. Talking about the loan tenure, it is also dependent on the down payment the borrower makes.

A borrower must choose the loan tenure based upon the logic that the higher the interest rate, the lower the tenure, and vice versa.

Car loans- Car loans are secured loans that hold the car as collateral. Lending institutions provide the facility of availing a car loan with a good credit report of the borrower. The borrower must have a high credit score to get a car loan application granted, portraying the repayment capacity. Having a good credit score increases the bank’s trust in the borrower, leading to a lower rate of interest.

Two-wheeler loans- Two-wheelers are found in nearly every household. They include scooters and bikes. Two-wheelers are usually inexpensive when compared to cars. To get this mode of conveyance, people can apply for a two-wheeler loan. It is easy to get a two-wheeler loan considering the borrower meets the minimum eligibility requirements. Now due to comparatively low prices of two-wheelers, the loan tenure is also short.
Even in this case, the two-wheeler would act as collateral and would be possessed by the bank if the borrower fails to pay instalments.

Small business loans- These loans are availed by businessmen and entrepreneurs who wish to expand their business or start a new venture. Business activities may also include paying salaries, meeting selling, administrative and general expenses, paying off business debts.

Gold Loan- People usually consider taking a gold loan when they require urgent money for any purpose. It is a secured loan that people think of taking because of its low interest rates. To grant a gold loan, banks do not ask for any reason to grant the loan.
To avail of this kind of loan, the borrowers must meet the eligibility criteria set by the concerned bank. They must prefer pledging gold items only, as other metals and gems are not considered for valuation. The borrower must also know that the bank would only provide a loan of 85% of the value of the gold pledged.

Education Loan- Education loans are sought after by scholars and students who consider going abroad for education or deciding to go to expensive universities in India. An education loan covers the tuition fee and the rest of the expenses incurred while studying/being a student. To avail of an education loan, parents usually co-apply with their children.

Read More:- Features of Vehicle Loan 

Youthful business people frequently get befuddled while picking between a business loan and a personal loan. While there's no basic answer, we assist you with picking the correct loan item by posting the highlights and benefits of both.

Simple Approval -

With regards to business loans, phenomenal credit is the first rule to fit the bill for something very similar. Moneylenders could in some cases request personal just as business FICO assessments. Some online moneylenders may give costly business loans to business people who can only with significant effort coordinate the measures.

Interest Rates -

Personal Loan is planned by monetary establishments to help meet a person's personal requirements like a wedding, home renovation, or other crisis money needs. Personal loans may not be ideal for business visionaries since they could wind up causing the greater expense of assets particularly if their business is in the early stage. This is when business loans can end up being useful for them.

More limited Tenure -

A personal loan accompanies more limited tenure all things considered. Business people may need to pay more cash as EMIs each month while selecting a personal loan. This could affect the income of the business and harm its development in the beginning phase.

Future Lending Conditions -

This is the reason most entrepreneurs think that it's difficult to set up validity and get better loaning terms in personal loans. This demonstrates that entrepreneurs are in an ideal situation with business loans.

Use of Funds -

In the event that entrepreneurs get a personal loan, they may wind up utilizing it for a personal crisis. This could show an absence of order and abuse of existing assets particularly when they are being utilized for circumstances that are not related to driving business development. A business loan can ensure that business visionaries don't need to manage such issues.

Utilizing Government Schemes for Business Growth -

For organizations that meet all requirements for the public authority's credit ensure plans, they can undoubtedly get sans collateral assets of greatest Rs. 1 Crore. Along these lines, a business loan with a superior interest rate can suit the requirements of a business better when contrasted with a personal loan. A personal loan of Rs. 1 Crore could end up being hazardous for a business that is simply firing up.

Reason for Loan -

The reason for a loan and its desperation can impact the dynamic while picking a business loan or personal loan. In the event that the loan necessity is too high however the business is performing admirably, there are better odds of getting a business loan at sensible interest. Nonetheless, in the event that it is a crisis of monetary need, a personal loan can be effectively available when contrasted with a business loan. Contingent upon the need and the quantum of need, business visionaries can settle on the decision between the two available loan classifications.

Available to salaried corporate and government representatives just as independently employed people/experts, the Central Bank of India Personal Loan gives modified arrangements intended to satisfy different personal monetary requirements. Some of the banks always present the best unstable personal loans of up to Rs. 20 lakh and this all are guarantees that the personal loan amount is authorized with negligible conventions and bother. The personal loans offered by the Central Bank of India can assist an individual arrangement with different circumstances like health-related crises, home remodel, marriage costs, excursion consumptions, and so on.

Read More:- Benefits Of Personal Loan 

Home loans and personal loans serve entirely different purposes. An individual goes for a home loan when they want to have their own home and goes for a personal loan for meeting any expenditure.

• A home loan can be availed for many purposes such as Home Purchase Loan, Home Construction Loans, Home Improvement Loans, Home Extension Loans, Land-Purchase Loans/Plot Loans, NRI Home Loans.
• A personal loan can be availed for many purposes, such as repaying any existing debts, home repairs, meeting marriage expenses, purchasing any gadgets, meeting any other everyday expenditure.

Banks charge specific interest in both home loans and personal loans. In the case of home loans, banks charge EMI (Equated Monthly Installments), which are to be paid every month, while in the case of a personal loan, the interest is to be paid at fixed intervals.

One of the significant differences between a Home Loan and a personal loan is that a home loan is secured. A home loan is secured against the value of the property, while a personal loan is unsecured. This is the main reason why a personal loan is more expensive than a home loan. Because banks are operating without any collateral in personal loans, they charge a higher interest rate. The lowest interest rates, which are implicated in a home loan, can go to as low as 6.6%, while in the case of personal loans, the interest rates can be as high as 10%. The lenders often offer a lower amount of loan in case of personal loans as it is unsecured, so to get a house, the borrower has to go for a home loan.

One more advantage of a home loan in comparison with a personal loan is tax benefits. A person can claim tax benefits in the form of tax deductions under Section 80 C of the Income Tax while paying the EMI of a home loan. But no such tax deduction is available in personal loan.

The benefit of tenure is made available with a home loan and not with a personal loan. Home loans are generally long-term and may go to as long as 30 years, while personal loans are short terms. The repayment of home loans is a much easier task as the compensation is spread over a long period.

Moreover, it is believed that a home loan is a better way to enhance your credit score than a personal loan. With prompt and timely repayment, an individual can improve their credit score in a better way. But the benefit of such can be seen more in a home loan due to its long tenure and better opportunity to make regular payments over a more extended period to enhance the credit score.

One common feature that is similar between both home loans and personal loans is the ease of availability. With enhanced competition and clutter in the financial markets, banks and other financial institutions are gearing up to attract more and more customers and provide them with many benefits and create dominance in the market.

So many lenders are offering similar services, and the customer has to choose the best amongst them. This calls for an accurate customer analysis of what they have to choose as per their needs and capacity. For example, ICICI Home Loan is known for providing the best in class customer service in the market. There are much more available from which the choice has to be made.

The process of applying for a home loan as well as personal loans has been simplified. Now the customer does not have to stand in enormous queues and wait for their turn. They can avail of any banking services at their fingertips. All the benefits of the banks and other financial institutions, including home loans and personal loans, have been made available on the lender's respective websites, portals, and mobile applications.

Conclusion:

Home loans and personal loans both serve different purposes, and both are pretty essential. Home loans are relatively cheaper and safer than personal loans, while personal loans are easier to avail with less documentation.

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