When a person borrows money from banks, online lenders, credit unions, etc. for personal reasons, it is considered a personal loan. Personal loans can cover several expenses.
It has to be repaid over time with some interest (and maybe a fee, too, if applicable).
It is also considered an instalment debt, providing a lump sum of funding.
Possible uses of personal loans
- Wedding plans
- Moving settlements
- Getting the house interiors done
- Unexpected expenses, such as funerals
- Expensive purchases, etc.
Types of personal loans
- Secured personal loans: This requires some type of collateral or security for borrowing money.
- Unsecured Personal Loans: This does not require any type of collateral or security for borrowing money.
Most banks, online lenders, and credit unions offer both of these personal loans.
The difference between a personal loan and a personal line of credit
A personal loan directly gives you money to be used in any way you wish. Still, in the case of a personal line of credit, the functionality is more like that of a credit card or bonus points: you get credits that can be spent by you, and they reduce with each use and can be recharged by putting money on them.
Online personal loans
Slowly and steadily, India is whetting its appetite for digitalisation in the banking sector. Digitalization in online lending and loan systems is in its evolving phase in India now, and online personal loans are a crucial part of this transformation. In recent years, a high proportion of lending has taken place online.
Reasons for this rapid movement of personal loans online include:
- Highly competitive lending market and the environment: there is a rise in demand for personal loans or any other lending facility in general. Not everyone has sufficient time to go to an actual bank or lender to get the formalities done. Hence, banks, lenders, and credit unions are now providing online provisions for their customers to apply for personal loans. If these lenders do not come up with these online alternatives, customers won’t hesitate to replace them.
- The digital life: from placing a pizza order to applying for universities abroad, everything is now digital. Millennials are dependent on digital mode for literally everything, so why not for personal loans?
Money lenders and their customers both value time and convenience. Digitalisation just makes it easier for these needs to be met. With the recent pandemic, which led to the elimination of personal contacts, online loans caught a good amount of momentum because of that as well.
- Flexibility in EMIs and repayments: Banks in India convert high-value transactions into flexible and suitable EMIs on their banking systems. Customers are drawn to online personal loans because of their flexible repayment options.
- Attractive Interest Rates: One of the strong strategies used by online money lending franchises is offering great interest rates, low fees, and bigger benefits to attract more new customers and keep the old ones loyal. Online banks, lenders, and credit unions provide many facilities that make customers go to them immediately.
- Online credit scoring system: A credit score is something that the credit bureau in your country calculates considering factors like repayments, credit history, etc. An online personal loan lets a person be entitled to a good credit score, a good loan amount, fewer interest rates, a choice of the period in which you want to repay the loan, and some other benefits the individual can enjoy. This is a good criterion for grabbing more and more customers.
- Easy Approvals: People get quick and easy approval on their loans in online mode.
- Quick Disbursal: Online platforms provide quick disbursals. You are eligible to go ahead with the rest of the steps of your online loan process in a couple of minutes.
- Minimal Documentation: The best part about digitalisation is that it eliminates all the paperwork and work that can be very easily done with minimal documentation requirements, making it super convenient.
- Association of Online Lending Portals: Many online portals offer customer service by partnering with a website or brand so that customers can buy directly from their portal and then get attractive monthly payments (EMIs).
These are a few of the reasons why people in India are moving quickly toward online banking and online personal loans.
How to Apply for a Personal Loan Online
Step 1- Download or log in to the online app or platform from where you are ready to take a personal loan.
Step 2- Opt for a personal online loan
Step 3- Read the eligibility criteria carefully
Step 4- Proceed with the steps if you are eligible
Step 5- Upload the required documents and fill in the important details
Step 6- Verify your identity using the suggested method by the online merchant
Step 7- Disbursal of the online loan in a short period, with the amount being transferred to your account.
Dos and Don’ts While Applying for a Personal Loan Online
- Go through the eligibility criteria.
- Make sure the website you are using to apply for a personal loan online is real.
- Pay attention to any additional or hidden charges or fees.
- Make sure to make a comparison between different banks, lenders, etc.
- Look for benefits, interest rates, etc.
- Don’t forget to check your credit score and the amount.
- Don’t fall for too-good-to-be-true offers online. They could be fraudulent.
- Don’t miss out on knowledge; do your research before applying.
- Don’t just proceed with the application without calculating for yourself.
As the Indian economy is proceeding to be a world leader in different sectors, we have seen growth in the banking and BFSI sectors. People are taking advantage of the low cost and easy availability of credit. There are several market leaders and experts such as Piramal Finances, and you would find more information and guidance for finance and Personal banking related topics at https://www.piramalfinance.com/personal-loan