What is Personal Loan?

A personal loan is a type of unsecured loan and helps you meet your current financial needs. You don’t usually need to pledge any security or collateral while availing a personal loan and your lender provides you with the flexibility to use the funds as per your need. It can serve as your solution for managing your travel costs and wedding expenses as well as the expenses of a medical emergency, home renovation, debt consolidation and others

Benefits of Personal Loan

• No limitation on end use: – The first and the most important benefit of personal loan is that unlike home loan it can be used for any purpose. There are no limitations on the end use of the personal loan. You have any urgent requirement of funds; personal loan can be one of the easiest ways to get cash.
• Quick disbursal: – If you meet the eligibility criteria and have a good credit score, you can get personal loan in 72 hours’ time. In fact, some of the banks provide the facility of online approval of personal loans for existing customers.
• No collateral required: – You don’t have to arrange for any collateral. It is an unsecured loan. Therefore, it is easy to get it.
• Flexibility to choose the tenure: – The tenure of the loan goes up to 7 years therefore you have the flexibility to choose a tenure which suits you best. Longer tenure means lower EMI and vice versa.
• Fixed rate of interest: – Personal loan is generally available on fixed rate of interest. So, the equated monthly instalments will remain fixed for the entire loan tenure. Therefore, you don’t have to worry about the interest rate changes.
• Tax benefit: – If you use the personal loan for the construction, renovation of house or making down payment for the house, you can avail the tax deduction of up to Rs 2 lakh under Section 24B for the interest part in a financial year. But remember that you will have to provide enough documents to prove that the money has been utilized for that purpose only.

Eligibility for Personal Loan

Banks give personal loan to individual, self-employed professionals and non-professionals, Different banks have different criteria for giving personal loan. Following are the most commonly used criteria by banks for individuals

• Minimum age: – 21 years
• Maximum age: – 60 years
• Minimum monthly income: – Rs 15,000 (banks may have a higher minimum income requirement)
• Total years of job: – at least 2 years
• Year of current residence: – 1 year

Documents Required for Personal Loan

KYC documents such as driving license, Aadhaar card, and voter ID card Last 2 months’ salary slips (for salaried) or income proof (for self-employed) Last 3 months’ bank account statements of your salary account (for salaried) or current account (for self-employed)

Individual residence proof is at times not applicable for all the applicants of the loan especially wherein family members live at the same residence, and the utility bills are in the name of one of the members (for example, the parent or spouse). The company is liable to accept the address proof in the name of the joint applicant subject to the fact that the relationship with the co-applicant is established on the ID documents of the primary applicant.