According to a recent financial report, personal loans accounted for over 28% of the total credit as of February 2020. This figure indicates a paradigm shift witnessed in consumer behavior and mindset. Several factors over the years have facilitated this shift in mindset, particularly wide-scale availability of financial services and the internet as well as aggressive strategies observed by financial institutions to convenience the customers. It includes fast personal loans, small-ticket sizes, and enhanced access to credit, especially by non-banking financial companies.
Owing to technological advancements in the Indian financial service sector lately, it is furthermore straightforward and convenient than ever to avail of personal loans. Moreover, there is a flurry of options of this credit facility available for consumers currently in the market. And, it is mainly because of the abundance of options, it is also imperative to gain an idea about this credit facility’s nuances instead of jumping on the bandwagon with limited knowledge.
Things to know about a personal loan
Small to mid-size loans
One of the essential factors that have driven the market for fast personal loans is the provision of a wide range of ticket-sizes. Non-banking financial companies have played a critical role in materializing the possibility of small and even micro-size loans (up to Rs.25,000) available to consumers.
Furthermore, some NBFCs provide fast personal loans of up to Rs.25 lakh; thus, providing a wide range of loans for customers with different financial requirements and affordability.
Flexibility in repayment tenor
Another important feature of personal loans is the flexibility they offer to borrowers in terms of repayment. Individuals can choose any period of up to 60 months for loan repayment. Therefore, they can find ample scope to repay personal loans conveniently without straining their finances.
For instance, borrowers can opt for a longer tenor if they prefer to pay small EMIs. On the other hand, if an individual prefers to minimize the interest outgo, they can opt for a shorter tenor and pay higher EMIs instead.
Individuals, however, must duly consider both these possibilities in the context of their financial standing and monthly disposable income to find the right personal loan tenor. For that purpose, individuals can use a personal loan calculator to simplify the reckoning.
No need for collateral and minimal documentation
Personal loans typically fall in the unsecured credit category. Therefore, prospective borrowers do not need to collateralize any of their assets to avail a personal loan.
- The unsecured lending sector witnessed a 30% increase in 2019.
A primary reason that makes unsecured personal loans popular is that it expedites hassle-free documentation and resultantly the entire process.
Moreover, reputed financial companies such as Bajaj Finserv also bring pre-approved offers that further shortens and simplifies the process to avail of a loan. These offers apply to a host of different unsecured credit facilities such as credit cards and business loans. Individuals can check their pre-approved offers by providing their names and mobile number.
Simple eligibility criteria
Another critical feature that has spurred the popularity of a fast personal loan is the simple eligibility criteria it entails. The standard set of criteria that applicants need to satisfy to avail a personal loan is –
- Applicants must possess a credit score of 750 or above
- Should have a steady and regular stream of income
- Must be in an Indian citizen
Alongside, different financial institutions might also have other criteria in place. However, there are specific ways to increase the chances of availing a personal loan, such as applying with a co-applicant.
A critical thing that prospective borrowers must be vigilant about concerning a personal loan is hidden charges. Specific lenders might lure customers in with a low interest personal loan and then charge substantial hidden costs later during the loan tenor. However, reputed financial institutions typically do not levy any hidden costs and all pertinent charges are disclosed in the loan indenture itself along with lower interest on a personal loan.
Apart from these, leading lenders also provide disbursement within a day or two for fast personal loans. Thereby, borrowers can use this credit device to finance emergency expenses. Moreover, it does not involve any end-use restriction, so that borrowers can utilize the amount to fulfill one or several monetary obligations.