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Personal Loan Guide: Steps to Choose the Best Personal Loan

Personal Loan Guide

Last Updated 29th Jul 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.

FAQs

How do I choose personal loans?

Below-mentioned are some tips to choose the best personal loan:

  • Compare personal loan interest rates and other charges like processing fees, foreclosure & prepayment charges of top banks.
  • Check the eligibility for a personal loan to repay the personal loan EMI on time.
  • Always clear your dues and other obligations to maintain a good CIBIL Score.
  • If you have already taken many loans, try and consolidate them into a single loan.

What is the best personal loan?

A personal loan that offers the best deals at the lowest interest rates and charges based on your loan eligibility like CIBIL, monthly income, profession etc., is the best personal loan. As per the current rates, HDFC Bank offers the lowest rate starting at 10.25% on personal loan and is the leading institution for the best personal loan.

What CIBIL Score do I require to get the best personal loan?

Your credit score is something that every bank checks before sanctioning any loan. To get the best offers on a personal loan, you must have a CIBIL Score of 700 or above. If you have a low CIBIL score, you can apply for a personal loan with a co-applicant.


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Personal Loan News - Jul 2021
  • 2021-07-16 : Amalgamation of Bank of Baroda, erstwhile Vijaya Bank and erstwhile Dena Bank
    Bank of Baroda, on its website, stated that the IFSC codes of the erstwhile Vijaya Bank and Dena Bank were discontinued on March 1, 2021. Customers have been asked to apply for cheque books with the new MICR code at the earliest.
  • 2021-07-16 : UBI update on change in IFSC code for merged banks - Andhra Bank and Corporation Bank
    Union Bank of India (UBI) on Friday said the IFSC codes of the erstwhile e-Andhra Bank and e-Corporation Bank branches will change with effect from July 1, 2021. Customers of the erstwhile banks will have to get new cheque books with changed IFSC and MICR codes
  • 2021-07-16 : Bandhan Bank total loans rise 8% to ₹80,128 crore in Q1, deposits up 28%
    Bandhan Bank witnessed an 8% rise in its loans and advances to ₹80,128 crores in the June quarter this fiscal. The loans and advances during the same period of 2020 stood at ₹74,331 crore. Compared sequentially, it was down by 8% from ₹87,043 crores in the March quarter. Total deposits grew by 28% year-on-year to ₹77,336 crores, while the CASA (current account and savings account) deposits jumped by 48% to ₹33,197 crores in the first quarter of 2021-22.
  • 2021-07-15 : Indian Bank merger with Allahabad Bank - Change in IFSC
    The Indian Bank, which has merged with the Allahabad Bank, carried out a software migration over the weekend. As the merger got completed, new rules had been issued by the bank with regard to its services. Existing customers were asked on July 1 to get a new IFSC code to carry out online transactions smoothly.
  • 2021-07-15 : OBC & UBI merged with PNB
    After the merger of OBC and UBI with PNB in April 2020, PNB has now updated the IFSC codes of all the branches of PNB and UBI. New IFSC codes have come into effect from July 1, 2021.
*Terms and conditions apply. Credit at sole discretion of lender, which is subject to credit appraisal, eligibility check, rates, charges and terms. Information displayed is indicative and collected from public sources. Read More
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