Applying For A Personal Loan? Read This To Understand The Details
Personal loans are a viable and adaptable way to borrow money for various needs, from debt consolidation to unanticipated expenses. This article will delve further into personal loans, addressing loan types, eligibility criteria, interest rates, how to calculate personal loan EMI, and more. The best idea for repaying personal loans is via EMI. You can calculate personal loan EMI with a personal loan EMI calculator. For all the information you require, whether you’re thinking about getting a personal loan or want to learn more, this article has all the information you are looking for.
Types of personal loans
There are primarily two types of personal loans which are then sub-categorized into types of personal loans.
- Secured loans
Secured loans require collateral, such as a car or a house, to secure the loan. This implies that the lender will have the authority to seize the collateral if the borrower fails to repay the loan. A secured loan has a lower interest rate than an unsecured loan because it carries less risk for the lender.
Unsecured loans
Unsecured loans don’t require collateral and are chosen by the borrower’s creditworthiness. As the lender is taking a greater risk, unsecured loans frequently have higher interest rates than secured loans.
Eligibility criteria for Personal loans
To apply for a personal loan in India, you must meet the following eligibility criteria.
- You must be an Indian citizen who resides in the lender’s service region to be eligible for a personal loan.
- The age group for eligibility is 21 to 60.
- Applicants must either be salaried employees or self-employed.
- If you are salaried, you must make a minimum monthly income of Rs. 18,000. If you are self-employed, you must make a minimum monthly revenue of Rs. 20,000.
Personal loan interest rates
In India, personal loan interest rates vary from 10% to 24% annually. Knowing personal loan interest rates will help you while you calculate personal loan EMI. Depending on the rules, terms, and circumstances of each bank and other lending institutions may provide different interest rates. The borrower’s credit rating, income, work status, and other characteristics that reflect their capacity to repay the loan may affect the interest rate.
Personal loan EMI
The EMI (Equated Monthly Instalment) for a personal loan depends on three factors: the loan amount, the interest rate, and the loan tenure. We will see the general way to calculate personal loan EMI.
How to calculate personal loan EMI
To calculate personal loan EMI, you can use an online EMI calculator or manually calculate it using the formula:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
Where:
P = Loan amount
R = Monthly interest rate (annual rate of interest divided by 12)
N = Loan tenure in months
Borrowers may schedule their monthly costs and make financial plans by the EMI by understanding it. EMIs are fixed payments, so skipping or defaulting on the loan will negatively impact a borrower’s credit score and result in additional fines and penalties. And also, it is best if you calculate personal loan EMI before picking up the loan. We hope you got a basic idea of how to calculate personal loan EMI.
The documents required for a personal loan
To apply for a personal loan, you will typically need to provide the following documents.
- Proof of Identity – You can provide a copy of your PAN card or Driving License.
- Proof of address – A copy of your AADHAR card or Voter ID.
- Proof of income – A copy of your salary statement for the past 3 months or a copy of your net banking statement.
Conclusion
With a clear and concise approach, this article is aimed to provide everything you need to know about personal loans. Ensure that you go through the personal loan interest rate and calculate personal loan EMI before picking up a personal loan.