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Personal Loan Guide: Steps to Choose the Best Personal Loan

Personal Loan Guide

Last Updated 28th Feb 2021

  • CIBIL score of more than 700 are considered good.
  • Check the processing fee payable while taking a personal loan.
  • Check the insurance premium payable with the loan.
  • Ensure that total EMI on all your loans is not more than 50-60% of your net monthly income.
  • Generally personal loans are used for home renovation, travel, wedding, meeting emergency expenses and more.
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Guide For Personal Loan

Do you wish to handpick the personal loan scheme that suits your requirements perfectly? Want to get a detailed view of interest rates, loan amount eligibility, processing fees, pre-payment, foreclosure provisions and charges? If yes, here is an interesting read for you:-

Bridge the Gap Between your EMI & Monthly Income

  • Before applying for any personal loan, make sure that you are capable of paying the EMI in a timely manner. Thus, apply for an amount which can be easily serviced by your net monthly income
  • Check your maximum eligibility as per each bank and apply for a loan amount that is easily manageable and doesn't affect your financial health.
  • Ensure that the total EMI on all your loans is not more than 50 - 60 percent of your monthly income
  • If you already taken many loans, try and consolidate them into a single loan

CIBIL Score for personal Loan

  • Your credit score and past repayment track is something which every bank checks before sanctioning any loan. It is a fact that banks totally avoid providing unsecured personal loans to people with a poor credit history
  • In order to attain a good credit score, pay your EMI on time
  • Do not apply for fresh personal loans if you have a CIBIL score less than 700 or have defaulted on loans in the recent past
  • If you are not sure about your credit rating, please check the same from CIBIL before applying for a personal loan

Personal loan for salaried employees

  • Banks prefer providing loan to people who work with well recognized and reputed companies. Also, they track your payment behaviour before approving the loan application
  • Banks avoid customers who stay in certain areas that have reported higher than average default rates
  • Check the comparison of personal loan interest rates applicable for your company before applying for loan
  • If you are a married couple and need money for family requirements, it may be beneficial to apply in the name of the spouse who works in a company with a bigger setup. This way, you will be saving money for the family as opposed to paying higher interest to the bank

Usage of personal loan

  • Banks usually provide personal loans for purposes like home renovation, travel, wedding, meeting emergency expenses and more. Make sure you are applying for the similar tenacities mentioned above
  • Select a loan tenure that suits your purpose and comes at lower interest rates
  • Do not apply for personal loan for uses that are not eligible, as this will lead to rejection of your application and affect your CIBIL score adversely

Processing fee, prepayment and foreclosure charges

  • Check the processing fee payable on each personal loan scheme you are evaluating.
  • Evaluate whether you may need to prepay the loan either partially or fully
  • Carefully check whether partial prepayment and foreclosure is available with the scheme chosen by you.
  • In case prepayment is allowed, check the applicable charges and restrictions

Life Insurance with Personal Loan

  • Check the insurance premium payable with the loan. This may range from 1% to 5% of the loan amount depending on type of cover, amount, age of borrower and other factors as determined by the insurance provider
  • By availing funding of the premium through loan amount, not only will you have to pay back the premium but also interest on the premium amount at same interest rate as the personal loan
  • Share the insurance details with your family and keep the insurance papers with the loan documents.
  • In case of an unfortunate incident, some policies may some amount to the family in addition to paying back the outstanding loan to the bank

So, now you know the various eligibility factors and comparison parameters for applying for a personal loan in an informed manner.

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Personal Loan News - Feb 2021
  • 2021-02-26 : IRDAI gives approval for Axis Entities-Max Life Insurance deal
    The Insurance Regulatory and Development Authority of India has given its approval to acquire up to 12% stake in Max Life Insurance by Axis Bank and its subsidiaries, Axis Capital and Axis Securities. The IRDAI approval was an important venture transaction that was first announced in April 2020
  • 2021-02-26 : IndusInd Bank to grow loan book by 15-18%
    IndusInd Bank is expecting to grow its loan portfolio by 15-18% year-on-year for the next two financial years under its fifth planning cycle.The Bank’s year-on-year growth in advances which include home, personal, LAP, two-wheeler car and gold loan along with business and mudra loan was flat at Rs 2.07 trillion until December 2020. Its deposits which include fixed and recurring deposits, grew by 10% to Rs 2.39 trillion.
  • 2021-02-26 : Canara Bank organized Mega Retail Expo in Mumbai
    Canara bank organized a mega retail expo camp at Gala Auditorium, Patuck Campus in Santacruz (East). The retailers present at the expo displayed salient features of their products which include home, personal, LAP, two-wheeler car and gold loan along with business and mudra loan. A total loan amount of Rs. 224.30 Crores were sanctioned through the expo.
  • 2021-02-23 : SBI launched YONO Merchant app
    SBI Payments launched YONO Merchant App to expand the digitisation of merchant payments in the country. The Bank is aiming to create a Payments Infrastructure Development Fund (PIDF) to encourage acquirers to deploy Point of Sale (PoS) infrastructure in lesser penetrated areas of the country.
  • 2021-02-23 : Tata Capital launched a campaign to introduce Shubharambh loan
    Tata Capital joined hands with Zee Cinema to launch a campaign to introduce the Shubharambh loan. Shubharambh Loans are available across Business, Personal Two-wheeler, Used Car, Loan Against Property and Home Loans. Each product has special features that aims to benefit customers across categories.
*Terms and conditions apply. Credit at sole discretion of lender subject to credit appraisal, eligibility check, rates, charges and terms. Information displayed is indicative and from collected from public sources. Read More
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