For various reasons, there are times when you need emergency funds. These could be a medical requirement or planning for a holiday or a marriage or a home renovation. There are two ways to tackle the problem, either dig into your savings or take advantage of a personal loan.
Several things are involved in getting a personal loan. Read to know more:
Requires minimal documentation
The documents needed to obtain a personal loan are relatively simple. You need proof of identity, address and income in your KYC documents. You must also fill out a request form. This is pretty much that.
Does not require any security
Like a home loan or a car loan, where the collateral is the purchased asset, no guarantee is required from a personal loan. You need a regular income. So, if you have a steady income, you can quickly get a personal loan from a financial institution or a bank.
Easy approval and disbursal
Once all of the papers are sent, the loan is accepted within 48-72 hours. If you are a pre-existing customer with a bank, you can get a personal loan approval in less than 30 minutes. Disbursement of the loan will take place in another day or two. The period will vary from bank to bank and rely on factors such as your credit score and eligibility as well. You can use a personal loan emi calculator to know how much loan you are eligible for.
Even with all these benefits, however, certain personal loan features work against it.
High rate of interests
They come with very high-interest rates because personal loans are unsecured. Their interest rates vary from 10.50 per cent and can rise to 23 per cent. The interest rate that applies to you will depend on several factors such as your credit score, your ability to repay loans, the ratio of debt to income, and so on. If you have an existing bank partnership, you can negotiate a better interest rate. High-interest rates mean, however, that you end up paying high interest.
Other additional costs
Personal loans are subject to a processing fee. It is usually up to 2.5 per cent of the unpaid amount or fixed amount of INR 750 or INR 999, whichever is higher. There may be a case in which you have extra cash and want a personal loan foreclosed. There are, however, other provisions and charges for foreclosing a personal mortgage. You cannot foreclose a loan in most cases until you’ve finished paying 12 monthly instalments. Personal loans also charge a processing fee, which could amount to about 2- 4.5 per cent of the outstanding amount. Pre-payment rates are more for a shorter term and vice versa.
Therefore, you should always carefully evaluate your cash flow before you take out a personal loan. If you have other loan commitments, factor those in before your EMI commitment is decided. To get the lowest interest rates, shop around. The personal loan EMI calculator will help you with the same.
All About Bank And Loans in India 