Thanks to the lockdown-triggered wage cuts and unemployment issues, the demand for emergency personal loans has been rising sharply during the last one year. Personal loans are being availed by most households, especially from the middle-class and lower middle-class ones to either meet any unanticipated financial exigencies such as medical expenses, purchase of household appliances and gadgets or fulfil their long-term goals like children’s wedding, higher education costs, home refurbishment, etc.
Personal Loan vs Other Loans
Personal loans are unsecured loans that do not require the borrower to mortgage any of your assets as collateral or security with the lender. It saves the borrower from the risk of borrowers’ assets being liquidated by the lender.
Unlike personal loans, most other loans like a car loan or a home loan are secured loans that require you to mortgage your assets such as a car or a home with the lender. By mortgaging your asset, you would be providing the lender with the right to liquidate your asset and recover the loan amount in case of a default.
How Much Personal Loan Amount Can You Borrow?
Personal loan amount varies from lender to lender and currently, the maximum loan amount that can be borrowed through personal loans is upto Rs. 50 Lakhs and the exact amount depends on the loan applicant’s financial profile like income, repayment capacity, any other existing loans and liabilities, and credit history.
Interest Rates and EMI
Personal loans being collateral-free loans, their interest rates are slightly higher than those of secured loans. The rate of interest of personal loans offered by most banks and financial institutions ranges between 9.6 percent and 15.65 percent, and the interest rate assigned to a borrower depends on his/her profile, such as income, nature of the occupation, credit history, loan amount and tenure. Along with the interest rates, lenders also charge a one-time processing fee, foreclosure charges, late payment charges, and other miscellaneous charges, if any, post disbursal.
Also, most personal loans in India come with a fixed rate of interest as they are relatively short-tenure loans. So, the EMI also remains constant during the loan tenure. However, under the RBI’s guidelines, the interest calculation for personal loans is done based on the reducing balance rate structure, a more transparent and economical method than a flat-rate structure. The easiest way to calculate personal loan EMI is to use online EMI calculators like the one available on Finserv MARKETS. This shall give you an idea about your financial capacity to repay the EMI on time without any default.
How to Apply for a Personal Loan?
The basic prerequisites to apply for a personal loan are a functional bank account and a steady monthly income that can demonstrate your repayment capacity. However, while looking to apply for a personal loan, do consider factors such as the interest rate, loan amount, and the EMI. Before approaching any lender, do calculate the personal loan EMI for your required loan amount using any online personal loan EMI calculator, so that you can bargain better with the lender.
Applying for a personal loan is now made easier with the introduction of a smooth, online application process by most lenders. With the digital personal loan application process such as the one on Finserv MARKETS, you don’t have to visit a physical branch to submit your personal loan application or even get it processed. Besides, the loan approval and funds disbursal into your bank account happens within a few hours, and not days!
