What is a Personal Loan?
A personal loan is an unsecured loan, which means you don’t need to pledge any collateral to receive funds. Availing of one is easy – you can apply online as well as offline for a personal loan. As it is of different types, it helps individuals in many personal matters to meet the immediate requirements.
As per a recent report, between FY 2017 and 2021, the personal loans segment in India witnessed a growth of 2.3 and 3.8 times in originations by value and volume, respectively. Additionally, in the small-ticket personal loans segment, the NBFCs dominate the market with a share of 28.8% by value and 65.7% by volume.
However, irrespective of the size of credit, individuals can opt for an NBFC personal loan due to various borrower-friendly facilities. It includes better customer services, prompt loan approval, lenient eligibility parameters, and likes.
However, before opting for this credit from NBFCs, borrowers must check some crucial factors to make the most of this fund.
10 pointers for a personal loan
Following are the crucial aspects that borrowers should consider to streamline the borrowing process of an NBFC personal loan:
1. Loan amount
The first thing individuals should consider is the exact credit requirement. It means they should borrow only the loan amount they can repay comfortably. Selected NBFCs offer a sizable personal loan to eligible applicants.
However, experts suggest that the EMI of personal loans should not exceed 10% of monthly income. Moreover, the monthly outgo of all debts combined should not exceed 50% of the monthly income.
Since repaying the loan on time is mandatory to avoid defaults, individuals must choose a tenor carefully. Most leading NBFCs in India offer a tenor of up to 60 months. Hence, individuals should pick a tenor that matches their repayment capacity.
However, they should know that with a longer tenor, the total interest outgo increases. Moreover, they should also understand how they can use a personal loan calculator for better estimation. This tool also provides a loan amortization schedule which shows the EMI break-ups for the entire tenor.
3. Compare interest rates
One of the primary reasons individuals opt for an NBFC personal loan is to avail competitive interest rates. However, poor credit scores, higher debt-to-income ratio, etc., affect personal loan interest rates.
Moreover, as per a survey, almost 41% of the respondents cited the interest rate. As the main criteria for choosing a lender. Therefore, compare between financiers and find an affordable interest rate.
4. Eligibility criteria
Unlike other financial institutions, personal loans from NBFCs are known for lenient eligibility criteria. Following are some basic parameters that individuals need to fulfill. It includes:
- Age should be from 20 to 60 years old
- Applicants must be salaried individuals, employed at an MNC or public or private company
- Must be residing citizens of India
- Should hold a credit score of 750 and more
Nonetheless, these criteria will alter from one lender to another, so check specific requirements before applying.
Besides meeting eligibility, intending borrowers also need to submit documents to avail of the desired loan amount. It includes the applicant’s identity and address proof, employment and income proof, details of bank account statements.
6. Loan processing timing
Most borrowers turn to NBFC personal loans due to its fast approval and disbursal process. While several lenders have instant loan app for borrowers to access quick cash, selected ones also provide doorstep services for paperwork and likes.
Hence, with this loan, individuals can address any sudden financial requirements with ease.
7. Pre-approved offers
NBFCs like Bajaj Finserv extend pre-approved offers to their existing customers. Such offers make loan processing quick and straightforward. Besides personal loans, such offers are also available on many financial products like business loans, credit cards, etc.
All individuals have to do is enter their name and contact number to check their pre-approved offer online.
8. Availability of online services
Besides online loan app, leading NBFCs also offer a dedicated customer portal. Individuals can access loan details, pay EMIs, etc., anytime, anywhere.
9. Additional charges
Facilities like part-prepayment, loan foreclosure, etc., may attract additional charges. Besides, almost all lenders charge processing fees which can go up to 2% of the total sanctioned amount. Hence, you should know about the charges applicable to your personal loan before applying.
10. Check the fine print
Thoroughly reading and understanding the fine loan print is necessary to avoid any misunderstanding later. Thus, borrowers should read the agreement papers carefully before signing them. They can also seek help from company representatives to understand the legalese better.
After checking the top 10 pointers mentioned above, individuals can ensure a hassle-free borrowing experience. Moreover, they can also look out for festive and seasonal offers to secure the best NBFC personal loan in India.