Personal loans are a type of unsecured loan that is sanctioned by banks and other financial institutions to individuals who are looking for financing for their personal needs. The primary basis for determining an individual’s personal loan eligibility is usually their credit score, monthly income, and repayment history.
Over the past few years, the number of individuals opting for personal loans as a means of financing their personal requirements has been on a steady rise. According to statistics by the Reserve Bank of India (RBI), nearly 96% of incremental non-food credit for the year 2018 was accounted for by personal loans. In the past year, there was a 26.9% increase in the number of personal loans.
There are a number of factors that can be attributed to why personal loans have been growing in popularity. Some of them are as follows:
Applying for a personal loan is now much easier. A number of banks now offer personal loans to prospective borrowers at attractive rates and, in many situations, also provide a few perks and discounts. When compared to home loans and car loans, personal loans are far more convenient to obtain.
Personal loans are unsecured loans, which means that the borrower does not need to provide any collateral for the amount borrowed. This is not the case with secured loans that have been taken for a specific big purchase. The only factor that is taken into account is the borrower’s ability to repay the loan within the specified tenure.
The processing time for personal loans is comparatively shorter than those of home loans and auto loans. Since the loans are unsecured and do not require any collateral, once the documents have been submitted the loan is disbursed within 24 to 48 hours.
Since personal loans are unsecured loans, they do not require the submission of many documents. Banks and financial lending institutions do not require any verification of assets for personal loans as they do for home loans. Applicants are only required to submit proof of address, proof of identification, and proof of income in order to avail a personal loan.
A number of banks permit borrowers to apply for personal loans online. When individuals apply for a loan online, most bank websites provide them with information about the amount that they are eligible to borrow based on their monthly income. Furthermore, applicants can submit their documents online and once the application has been approved, the loan amount is transferred to the individual’s bank account after deduction of the processing fee.
One of the biggest advantages of personal loans is that they can be used to fund purchases of any kind. Unlike car loans and home loans which are intended for a specific purpose, personal loans do not have any such restriction. A number of borrowers use personal loans to fund their travel expenses, buy new furniture and appliances, and renovating their home.
The loan repayment tenure for personal loans ranges between 1 year and 5 years and borrowers are free to choose the tenure that would best suit them. However, the interest rates charged on longer loan tenures tend to be much higher than those charged for a shorter loan tenure.
Another reason why personal loans are a popular option for a number of people is that it can be very helpful with consolidating debt. A number of borrowers apply for personal loans to pay off credit card debt and foreclose other loans and pay off one loan EMI rather than multiple EMIs.
The above-mentioned factors are just a few of many other reasons why personal loans in India are the go-to choice for a number of individuals. Furthermore, personal loans can also be availed by both salaried individuals as well as those who are self-employed.
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