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Personal Loan

Flexi Personal Loans vs. Term Loans: Which is Right for You?

A loan can help you meet large financial requirements even if you don’t currently have the required sums. However, there are multiple types of loans, and not all will suit you correctly. Moreover, taking the wrong type of loan can cause significant financial loss and inconvenience. So, we will cover the two most popular types of loans and help you make a wise choice. These are flexi personal loans and term loans. Both of these options will help you fulfill your financial needs, but multiple factors set them apart. These include their purpose, interest rate, repayment mode, tenure, and more. So, let us go ahead and compare both types of loans in detail to help you decide which one you should go for. Let’s start! [B-01] What are Flexi Personal Loans? Flexi personal loans are great for people who need to take out a loan for a one-time expense and pay it over time with flexibility. They can be paid back in any amount over up to 24 months. So, Flexi loans are the best option if you’re not sure when you’ll have the money. You can also withdraw sums as per your requirements and pay interest only on the drawn amount instead of the entire sanctioned sum. Notably, you need to repay the principal amount at the end of the term. But you can also make a partial or full repayment at any time in between, depending on the availability of funds. Pros and Cons of Flexi Personal Loans Flexi personal loans offer several benefits over term loans. It is generally a better option unless you prefer scheduled payments. Pros of Flexi Personal LoansCons of Flexi Personal LoansHigher liquidityNot ideal if you prefer planned and scheduled paymentsThe flexibility of prepaying your loanMay get cumbersome if the lender’s systems are inefficientMinimal or no documentation is requiredNot ideal for long-term loans or large amountsThe interest rate is charged daily and is payable every month Hassle-free transactions Low renewal fees Lower interest and EMI amounts What are Term Loans? A term loan generally comes with a fixed tenure and EMI. Term loans are suitable for those who want to borrow money for an ongoing expense, like paying off their car or mortgage. Term loans are usually paid back over a year or two with fixed monthly payments. So, they’re better if you know exactly when you’ll have the money at your disposal. For example, suppose you take a Rs. 1 lakh term loan from the bank at 11% p.a. for one year. The EMI for the loan comes to around Rs 8838 with a fixed one-year tenure. Pros and Cons of Term Loans Pros of Term LoansCons of Term LoansA predictable payment scheduleRequires collateralEarly loan repayment is possibleStringent eligibility requirementsLower interest ratesSlow funding timeHigher loan amount and duration Helps to achieve long-term goals Difference Between Flexi Personal Loan Vs. Term Loan Term loans and flexi loans differ in their payment flexibility, interest amounts, approval times, and various other factors. And you must understand their differences to select the right type of loan for your purpose. So, let’s check out the differences between the two loan types with this simple comparison table: Flexi LoanTerm LoanFlexi loans allow you to withdraw only the amount required from your bank account. You need to stay within your sanctioned loan limit.A term loan gets approved by the lenders for lump-sum use. Your sanctioned amount will be disbursed into your bank account after your loan is approved.Flexi loans give you instant approval and disbursal within 24 hours. Most lenders also provide online approval and disbursal of your loan.Term loans are approved after verification of your documents, which can take several days.Interest on the Flexi loan will be applied only to the amount withdrawn, not the entire sanctioned amount.Interest is applied to the entire sanctioned amount.It is generally between 12 to 60 months period.A term loan’s tenure can vary from 1 year to 10 or 30 years.Flexi personal loans offer flexibility in their repayment periods.Term loans have a fixed payment schedule. Frequently Asked Questions Here are some common questions related to Flexi loans and term loans and their answers: Where to use a flexi personal loan?Flexi personal loans generally come with flexible end-usage. So they can be taken and used to meet various personal financial needs of a person. Can you pay a Flexi loan early?Yes, you can repay your flexi personal loan early as the payment schedule is flexible. You can time your payments to match the availability of funds. What is the maximum tenure of a flexi loan?The loan tenure of a flexi personal loan varies across different lenders. But it is generally between 12 to 60 months period. What is the maximum tenure of a term loan?A term loan’s tenure can vary from 1 year to 10 or 30 years. You should use it for large expenses that you plan to repay in the long run. What is the maximum amount of a loan I can avail of?You get a pre-approved loan limit for any loan that is based on your credit profile. [B-02] Key Takeaways The main differences between the two types of loans are the tenure, interest amounts, purpose, liquidity, approval times, and repayment method flexibility. If you want a quick personal loan for the short term that you can pay back at your convenience, you should go for a flexi personal loan. However, a term loan is better if you want a large loan that you pay back in the long run in a scheduled manner. So, go for flexi personal loans if you need money quickly for daily requirements and prefer flexibility. And take a term loan if you want to make a big expenditure and repay it in a planned manner in the long run. Such an expense can be buying a car, a house, or making a large investment.
08-11-2023
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Personal Loan

How Can You Improve Your CIBIL Score To Become Eligible For Personal Loans?

Personal loans are needed for many reasons. These include debt repayment, medical emergencies, financial problem mitigation, and so on. Although personal loans can be used for anything, the chances of getting them approved are slim. Several factors govern the approval rate of personal loans. One of the most important factors is your CIBIL score for personal loan. Many people are unaware of the importance of a CIBIL score for personal loan. They don’t know their minimum CIBIL score for personal loan. As a result, they either get behind in improving their score or fail to pay attention to them. This results in their loan application being rejected. Read further if you do not want such things to happen with your loan application. In this article, we have described the ways to improve your overall CIBIL score for personal loan, and increase your chances of loan approval [B-01] Ways to Improve Your CIBIL Score for Personal Loan Let’s look at some ways to improve your CIBIL score for personal loan: Timely repayment of credit card dues. No matter how much credit you have on your card, always pay on time. If you convert the total outstanding into monthly EMI, the credit statement generated will have a due date for that particular month. Try to pay the debt amount as soon as possible. Missed payments, late payments, and so on will negatively impact your CIBIL score for personal loan. Therefore, you must pay attention to the deadline you have been given for repayment of the credit. It would be best if you kept the unbilled transaction at zero. This will help you avoid any penalty charges or interest on the overall outstanding amount for the particular month. Limit credit use. You can use a credit card to purchase anything when you don’t have the required funds. Your credit card can also be used to meet emergencies when you are not eligible for a loan. However, relying entirely on the credit amount granted on the card may negatively affect your CIBIL score for personal loan. Using a credit card or overspending means that you cannot fulfil the usual purchases, let alone repay debts. If you continue to make purchases on your credit card, the outstanding amount will increase. As a result, the overall interest charge will skyrocket. Therefore, you should limit your credit card usage to improve your CIBIL score. Try to use upfront money as much as possible. Use your credit card only when it is indispensable or you don’t have enough to pay upfront. Getting more credit cards after careful studies. Getting new credit cards can also help you increase your CIBIL score for personal loan between 700 and 900. When you have multiple credit cards under your name, you can use them to purchase things without overspending on a single card. As a result, the interest charged on a particular card will be within the nominal rate, which can help you improve your overall credit score. However, it would help if you went through the terms and conditions, policies, and other details of the credit card and the creditor. This is important, especially if you are looking to improve your CIBIL score for personal loan. Always keep an eye on the credit report. You must pay special attention to your credit report to understand whether your efforts are making any difference. You may not be able to see the results immediately, but continuing to apply these strategies will yield results in a couple of months. As you continue to use your credit card or get new credit lines, it will increase your CIBIL score for personal loan. Keeping an eye on your credit score will help you assess whether everything is under control. At first, it might not sound easy. With practice, you will undoubtedly be able to increase your overall credit score and get your loan application approved. Be patient and consistent with the process. Last but not least, you have to be consistent in your efforts to increase your overall credit score. Do not expect to reach your goal after only a couple of days. It will take time to build the credit score. If you give up on your efforts after a couple of weeks of not seeing any results, the chances of your loan application getting approved will never increase. Always track and monitor your credit score. It helps you understand if the efforts you have put into improving it are working or not. Moreover, this can ensure your CIBIL score reaches above 700 and remains within the higher limit. Do not forget that credit history is equally important as the CIBIL score for personal loan approval. [B-02] To summarise In this article, we have walked you through improving the overall CIBIL score for personal loan and increasing the chances of getting your loan approved. Try to keep the score above 700 to ensure your loan application never gets rejected. There will be several other roadblocks, but you can easily maintain a high score with a consistent approach. For more articles related to personal loans and other options, check out the Piramal Finance website today.
08-11-2023
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Personal Loan

What is a Moratorium Period in Personal Loans and Should You Go For It? 

What do you do if you are facing a lack of funds and don’t have collateral? Yes, the time-tested step here is to take a personal loan. But there’s a catch! Personal loans typically have high interest rates. And as soon as you get the loan money, you have to start making monthly payments. This can make it tough to manage your expenses despite taking a loan, as the loan itself becomes a large liability! This is where the concept of the Moratorium Period in personal loans comes in. The moratorium period on loans is a temporary break from paying installments. It can help you tide over a serious financial crisis. In fact, this concept was introduced in India to bring financial stability during COVID-19 lockdowns. However, the interest during the break gets accrued and raises the principal after the moratorium! So, what exactly is this double-edged sword, and when can you use it safely? We will address these questions in detail in this blog. Let’s begin! [B-01] What is a Moratorium Period in a Personal Loan? A moratorium period in a personal loan is the time period of a loan tenure during which no interest must be paid by the borrower. It is the amount of time you are allowed to wait before you have to start paying the loan back in equal monthly payments. The loan’s interest will be calculated using simple interest during this time. And the interest amounts will be added to the principal for the new payment schedule and tenure after the moratorium. How Does a Moratorium on Loan Work? The Reserve Bank of India allows 6-month moratoriums on personal loans and term loans, during which a borrower may not make any payments. The move to legalize moratoria was taken by the RBI in 2020 in response to the income uncertainty caused by COVID-19. During the moratorium, the lender computes the loan’s interest for this period by applying simple interest to the offered amount. The interest charged on your loan during the moratorium will be added to the principal amount. After this EMI holiday is over, you must pay your EMIs on the net amount. This amount includes the accumulated interest and the principal amount. Let’s take an example of a loan amount of Rs 1 lakh released with an interest rate of 11% per annum and a 2-year moratorium. In this case, a total interest of Rs 11,000 per annum will be accumulated for two years, creating a total sum of Rs 1,22,000 at the end of the moratorium. The interest and EMIs will be calculated on the basis of this amount, not the original 1 lakh. Benefits of Opting for a Loan Moratorium A loan moratorium offers you a break before you must start paying the EMIs on your personal loan. This makes it perfect if you are currently undergoing financial hardships but need money for a major expense of any type. However, the total amount outstanding will be higher at the end of this break. So, you should be able to pay the larger EMIs eventually. Let’s have a look at the key benefits of a moratorium in further detail: Flexible repayment plan A loan moratorium helps you plan your repayment in a strategic manner as per your expected income and expenses. It can help you accumulate funds and begin repayment in a planned manner. This alleviates financial and mental stress. No negative impacts on borrowing capacity A loan moratorium will not impact your credit score or future borrowing capacity negatively. But you should be able to pay the eventual instalments on time to avoid such negative effects. Helps during a liquidity crisis The most important benefit of a moratorium is that it delays your financial liabilities. So, a temporary loss in income won’t put you in a financial crisis. Drawbacks of Loan Moratoriums on Loans A loan moratorium also has some major limitations and precautions. Here are the main drawbacks of moratoria on personal loans: No waivers An EMI holiday does not lower your liabilities. Instead, it adds up the interest from the break period and increases the total principal. It only helps you temporarily by deferring the installments to a later date. Increased loan tenure The EMI break is temporary and ultimately increases the tenure of your loan. This can lead to a lot of debt in the long run and throw off your plans for the future. The sudden burden of payments The short-term respite from the skipped EMIs ends suddenly when the loan’s moratorium ends. The backlog of interest adds to the burden of heavy payments. And this can land you in serious financial trouble unless you have made perfect plans in advance. Frequently Asked Questions About the Moratorium Period If you still have any doubts about personal loan moratoria, check out these answers to common questions: Will the bank charge late payment charges for the moratorium facility? No. Late payment charges will not be levied on the loan during a moratorium. Which lenders can offer moratorium periods in India? Moratorium periods can be offered by any commercial bank, cooperative bank, or non-banking financial company. Will EMI deferring impact my credit score negatively? No. EMI moratoria will not affect the credit score in any direct manner. Does a moratorium include both the principal and interest amount? Yes, a moratorium includes the interest as well as the principal component of the EMIs. Are credit card payments covered under moratoriums? No. Credit cards come under a revolving credit type. Hence, they are not covered under moratoria. Can I cancel my loan’s moratorium period? Yes. You can easily cancel your EMI moratorium by contacting your bank to start the cancellation process. Are interests during a moratorium waived?No. The moratorium period on loans is a temporary break from paying installments, but interest during that period accrues and gets added to the principal. [B-02] The bottom line A moratorium is your best option if you are seeking temporary relief from financial pressures. But you must make and carry out plans to get money and make payments on time after the moratorium ends. Moreover, moratorium loans may require higher payments than a normal personal loan as the interest during the break is accrued. So, you should go for them only if you are temporarily facing serious financial hardships and have robust plans to bounce back in the future! Are you ready to opt for a moratorium period on your personal loan? You can approach any Indian financial institution and apply as per their procedures. However, the moratorium system can be risky if you don’t plan your finances perfectly. So, you should always prefer an experienced and trustworthy bank or NBFC. An example is Piramal Finance, which helps you get the best moratorium loans with expert help.
08-11-2023
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Personal Loan

Which Fees and Charges Apply To Your Personal Loan?

Personal loans are a great way to consolidate debt, make home repairs or renovations, pay for college, or start a new business. But it also comes with some extra fees and charges that you should know about before you apply. Some lenders are upfront about personal loan charges and how they are added to your account, while others are not. You should ask your lender about any of these charges to decide whether they’re right for you. [B-01] What is a personal loan? A personal loan is an unsecured loan. This means that the lender has no collateral in case you default on your payments. Personal loans are used by people to pay for a variety of things, such as education, home improvement, and debt consolidation. These loans usually have more competitive interest rates than other loans because they’re considered high-risk credit that doesn’t involve any collateral from the borrower. However, some lenders will offer lower rates if you have a good credit score or other factors showing that you can afford to pay back your debt on time. Processing Fee for Personal Loan Processing fees are the personal loan charges associated with applying for a loan, such as the credit check and other associated expenses incurred for processing your loan application. The cost of these processing charges can range from 0.5% to 3% of the loan amount, but as a general rule, it’s best to expect anything between 1% and 2% on top of your initial loan amount to get your money released. The processing fee for a personal loan is usually charged at the time of loan approval, meaning that you’ll only have to pay this fee once instead of each time a new payment is made. Verification Charges A bank needs to verify your identity because, if something goes wrong, it will be much easier for them to recover their money from you if they have proof that it was indeed you who took out the loan and not someone else using your name. The amount should be paid when you apply for your loan. If there is any delay in paying these personal loan charges, then chances are that it might result in delays in getting approved as well. Prepayment Fees If you pay off your loan before the end of its term, you may be charged a prepayment fee. The amount of the prepayment fee and when it can be applied will depend on the lender and the time of loan closure. These personal loan charges are usually calculated as a percentage of what you’re paying back early, so if it’s only a few thousand rupees that you want to get rid of early, then it won’t cost much. Though some banks don’t charge prepayment fees to their customers. Duplicate Statement Fee By default, the lending financial institute sends its borrower a statement with all details of the EMI, interest rate, loan amount, loan account number, etc. The borrower should keep this statement carefully for further reference. If the borrower misplaces it, the lender may charge a fee to provide a duplicate statement. Sometimes, applicants need a statement of EMI break-up for taxation purposes, which may or may not be charged by lenders. Penalty Charges or Bounce Charges These personal loan charges accrue when your cheque is returned by the bank and the lender does not receive the EMI. The most common reason for a bounced payment is that you don’t have enough money in your account to cover the cost of the repayment EMI. A penalty charge is a fee or surcharge you can be charged for late repayment of your loan. In India, penalties are fixed as well as a percentage depending on the outstanding amount. The way these personal loan charges are calculated varies from lender to lender, so it’s important to check with your bank before signing up for anything that might cause you financial pain down the track. Foreclosure Charges A foreclosure charge is a fee charged by most lenders if the borrower does not pay back the loan according to the terms and conditions. These personal loan charges are usually calculated as a percentage of your outstanding balance. There is not much difference between prepayment and foreclosure charges. Swapping of Repayment Mode Charges If you wish to change your repayment mode or change the bank from which your EMI is deducted, the bank may charge you a fee. The fee ranges between Rs 500 and Rs 2,000, depending on the bank you are switching to. These personal loan charges may apply in the event of a change of mandate as well. This is the fee that you need to pay if you only want to change your repayment mode. Loan cancellation charges If, after processing the application and sanctioning the loan, you decide not to take it, the lender may impose a nominal fee for loan cancellation. It is irreversible if the loan amount is credited to your bank account. The amount of such personal loan charges may vary from bank to bank. It is usually around Rs. 500 to Rs. 1000. Duplicate No Due Certificate Charge The No Objection Certificate (NOC) is a certificate issued by the bank to confirm that the loan amount has been repaid. The lender issues this certificate without initially charging any fee. But if the borrower misplaces it and demands a duplicate NOC, a lender may ask for an extra fee of around Rs. 500 to accomplish that. GST Charges GST charges apply to all types of charges, according to the guidelines. A penalty or fee charged to you by your lender may be considered a taxable service and, thus, will attract GST. GST is 18% of the total amount you have to pay, which includes any processing fees or other costs you may have to pay for your personal loan. [B-02] Conclusion Remember, personal loans are a popular way to borrow money, and they can be a great option if you have low credit. But you must understand the fees and personal loan charges before signing up for one. The last thing you want is an unexpected fee or surprise charge on top of everything else in life!
08-11-2023
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Personal Loan

How To Get A Personal Loan Without Security?

Security, or collateral, is one of the primary challenges people face while applying for a loan. It guarantees returns on the loan amount if you fail to repay on time. For example, you may want a large personal loan without security. Hence, the bank might ask you to give a certain percentage of your home as an equity mortgage. Similarly, a vehicle loan will have the car under your title as collateral. Thus, a without security loan is often granted based on what you will use as collateral. The lower the risks, the higher the value of your collateral. It can help your loan be approved faster. Moreover, you don’t have to worry about having a bad credit score. However, providing security comes with risks. If you fail to make timely payments, the lender may seize your collateral. Let’s look at some ways in which you can get a personal loan without security. [B-01] Consider Unsecured Loans One of the best ways to get a personal loan without security is to opt for an unsecured loan. As the name suggests, unsecured loans don’t require collateral. All you have to do is show proof of income. Sometimes, you may also have to provide the details of your guarantor. A guarantor is someone who can repay your loan in case you default. For unsecured loans, any missed payment is charged with a late fee. As the outstanding balance on the loan starts increasing, the interest will also increase. Thus, you need to pay more than the initial interest amount. That’s what offers a guarantee to the creditor while issuing unsecured loans. Risks of a Personal Loan Without Security Here are some of the risks associated with a personal loan without security: For unsecured loans, the risks associated with the credit will automatically increase the interest rate. Therefore, you cannot expect the creditor to offer you a loan at a nominal rate because they also need a guarantee for the money they lend you. And a higher interest rate is the way to do so. Not all unsecured loans come with the option of foreclosure or early pay-offs. For instance, you won’t be able to pay 30% of the loan amount during the first few months since foreclosure is often penalised for unsecured loans. You need to pay a considerable fee if you want to pay any amount upfront for a personal loan without security. This is one of the scariest things that could happen if you take out an unsecured loan, especially from a private lender or peer-to-peer lender. When you take a personal payday loan, you need to repay the amount within the first payment cycle of your salary. Failure to do so will incur a significant interest charge on your principal amount, automatically making it more challenging to pay off the debt. With these known risks, you can steer clear of the actions and ensure the total amount due doesn’t increase or the chances of failure are significantly reduced. Get the credit score high Another way to get a personal loan without security is to maintain a high credit score. A credit score is a number assigned to your credit account based on your actions, credit history, etc. Maintaining a credit score above 650 consistently is better to ensure the chances of the loan application being rejected are reduced significantly. However, it is not easy to maintain a high credit score at such a level. For instance, if you use your credit card to purchase something but always make the payment late, after the due date, it will negatively impact your credit score. Similarly, your credit score will decrease if you pay the minimum amount every month instead of the total amount due. The higher the debt, the lower the credit score, significantly reducing the chances of getting the loan application approved. Show substantial and valid income documents Another thing you have to be sure of is your income. You should submit valid and robust proof of a consistent income flow to get a personal loan without security. This will help ensure the creditor that you can quickly repay the loan without making late payments or missing a single payment due to a shortage of funds. If you directly link your salary account with that of the loan account, the EMIs will be deducted automatically, and you won’t even have to worry about missing the payments. Besides, the income proof with pay stubs from the past six months, a letter from your employer, and other such documents will increase the chances of the loan application getting approved. If you fail to provide all these documents, you might not be able to get the loan with the same principal amount you asked for or with a lower average interest rate. Choose a proper creditor Last but not least, you should connect with a proper creditor who is trustworthy and reliable and offers personal loans without security. This way, you won’t have to worry about giving any collateral to take the loan. Check the interest rate being charged, the allowance for foreclosure or upfront payment, and so on. This will help you to avoid any penalty being levied on the loan amount due to a violation of the terms and conditions of the creditor. [B-02] Final Takeaway If you want to know more about “without security loans,” connect with the experts at Piramal Finance today! Find out all the aspects of an unsecured loan and how to reduce the associated risks.
08-11-2023
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Personal Loan

How Do Lenders Decide on Personal Loan Eligibility?

A need for a loan can arise at any point in life. And the reasons for this can be many. From a wedding to debt consolidation or even home renovation. In these needy times, personal loans are your friend. They can be accessed instantly and without collateral. Although it isn’t always so simple to get one. There are certain parameters you need to satisfy for a lender to sanction the loan. Since personal loans are unsecured and lenders’ money is at stake, they have set these parameters to determine if you are worthy of credit. Let’s have a detailed look at how lenders decide on personal loan eligibility. [B-01] Personal Loan Eligibility: How Is It Calculated? Different lenders use different methods to determine personal loan eligibility. However, there are two most common ways to calculate it. Let us take a look at it. Multiplier Method This method uses a basic formula. Loan eligibility = your salary multiplied by a number between 9 and 18. The number may vary based on your credit profile and the company you are employed at. Fixed Obligations to Income Ratio (FOIR) This is one of the most commonly used methods by banks and other financial institutions to calculate personal loan eligibility. Firstly, total monthly debts are taken into account. It includes EMI payments, credit card bills, rent, and other living expenses. This sum is then divided by the total monthly income of the applicant, multiplied by 100. FOIR = (sum of total debt/total monthly income) X 100 An ideal FOIR ranges between 40% and 55%. It is the ratio of your debt to your income. Factors that Determine Personal Loan Eligibility Employment Type Lenders will first check whether you have a stable source of income. This includes salaried individuals, self-employed individuals, and business owners generating consistent income. Checking this is required on the lender’s part to ensure you will be able to repay the loan in time without defaulting. Credit History and Score One of the most important parameters for personal loan eligibility is your credit score. A credit score reflects the borrower’s past credit history. It is an account that has information on your debt accounts, outstanding debts, and repayments of debt in the past. It is a way to ascertain the borrower’s repayment capability. A score above 750 is generally considered a healthy credit score. A lower credit score can get you a loan, but the interest rate charged will be higher. Hence, it is advised to improve your credit score before applying for a loan. This can be easily done by repaying outstanding debts, paying the EMIs on time, and not applying for multiple loans at the same time. You can also check loan eligibility online. Repayment History The next parameter is your repayment history. Meaning, how regular you have been in clearing your debts in the past. This shows your credit management behaviour. Late payments and defaulting leave a bad impression on the lender. This can lead to rejection or make your chances of getting a personal loan a bit more difficult. Work Experience Employment history plays a key role in bank loan eligibility. A lender or a bank will check how long you have been employed. Working with the same employer for a prolonged period or at a multinational or government organisation further improves your creditworthiness. If your work profile reflects stability, the chances are you might get a loan with lower interest rates. Age As they say, “age is just a number,” but not in the case of personal loan eligibility. Your age can give an insight into your financial stability. People who are too young or too old may indicate unstable earning ability. Hence, most lenders prefer people between the ages of 23 and 55. Income A regular inflow of income is a good sign for personal loan eligibility. It assures the lender of your repayment capability. It is best to mention your additional sources of income as well. This can include the spouse’s salary, rent from leased-out properties, business income, etc. Your income also plays a role in determining the amount of loan you can get. [B-02] Conclusion Personal loans are an effective way of dealing with unforeseen emergencies. The above-mentioned points play a major role when applying for a personal loan. Lenders need to know your repayment capabilities before they loan you the amount. The whole process becomes hassle-free if you have a healthy credit history and CIBIL score. Your monthly income and employment history also play a crucial role. Understanding these requirements will not only improve your chances of getting a loan, but it may also help you get better interest rates. For more such blogs and other personal loan-related queries, head over to Piramal Finance.
08-11-2023
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Personal Loan

How to get a personal loan with a PAN card & KYC documents?

Once in your lifetime, you would have come across loan offers, right? But there’s not an offer; instead, a piece of brief information on a personal loan. Do you know what a loan or personal loan is? In the world of finance, the term “loan” means lending money. The loaning process is done by one or more organisations, individuals, or entities to other organisations, individuals, etc. Now that you understand what a loan is, it is also imperative to understand the concept of a personal loan. It is money you borrow from an organisation, an individual, or any other entity to fulfil your requirements. Usually, people take personal loans for reasons like buying a flat, renovating their existing house, getting married, getting an education, and so on. You can seek personal loans from online lenders, banks, or credit unions. Once you take a personal loan, you need to repay it within a fixed time with interest, as mentioned in your agreement. Are you looking for a personal loan? Do you plan to cover debt consolidation, medical bills, moving expenses, or other unexpected expenses? If yes, stick with this blog till the end. You will be able to gather all the important information related to personal loans and how to get them. [B-01] Types of personal loans There are generally two types of personal loans. These are secured and unsecured. So, let us know about these in brief. Secured loan This type of loan requires some collateral. It acts as a condition for borrowing. For example, you visit a bank and ask for a personal loan. If they offer you a secured loan, then you will have to secure your loan with a physical asset. The asset could be a house or a car, or it could be cash, such as a certificate of deposit or a savings account. If you fail to repay the loan, then your collateral will be kept by the loan authority to satisfy the amount of debt. Unsecured loan This kind of loan does not require you to keep any collateral, so an individual can enjoy a personal loan without any risk. But do you know this personal loan asks for higher interest? If you are a person who is not willing to take a risk with their existing savings or property and you can pay more interest for a personal loan, then this type of loan might work for you. Eligibility criteria for a personal loan Now that you have received brief information on a personal loan, it is also important to understand if you fit the eligibility criteria for a personal loan. You should be between the ages of 21 and 60. You should work in local, state, or federal government; public-sector companies; or private businesses. Other requirements vary per your loan requirement and depend on the organisation’s rules. Some might ask for at least two years of job experience; some offer loans only to those with an income of at least Rs. 15,000 to 25,000. What are the personal loan documents required for a personal loan? If you are willing to seek a personal loan, here is a list of personal loan documents you might be asked for. PAN Card: To apply for a personal loan, it is important to have your PAN card ready. Identity proofs: Identity proofs play an essential role in every arena, and when it comes to loaning, they are much more important than anything else. So, you might have to submit copies of your Aadhar card, voter ID card, driving license, or passport. Address proof: For address proof, you can use your passport, Aadhar card, voter ID card, or driving licence (the same personal loan document as ID proof). Bank statements play an important role in loaning, so the authority might ask for your previous 3 to 6 months of statements. Salary slips: Just like your bank statement, the latest salary slips for approximately 2 to 3 months are required. If you can’t submit your salary slip, you can also submit a current-dated salary certificate. Personal loan with PAN card and KYC documents Once you have all the documents you need for a personal loan and know what you need and who you are eligible to borrow from, you can move on to the next step. Nowadays, most organisations offer both online and offline loan methods so that you can choose your preferred option. If you have a valid PAN card, loaning can be much easier and a better experience. With the help of a Pan card, you can lend up to Rs 50 lakh, and the interest rate, loan repayment tenure, and processing fee vary from lender to lender. The process for lending a personal loan might vary a bit from organisation to organisation, but in general, the following are the steps that you should follow. First, fill out the application form for a personal loan, which might ask for your professional and personal details. Then you need to choose a particular amount you want to borrow from the organisation and the tenure of repayment. After that, you’ll need to show all the necessary personal loan documents, such as a PAN card and an Aadhar card, so that they can be checked. If your loan is approved, the loan amount will be transferred to your bank account. If you seek a personal loan with the use of a PAN card, then you might enjoy the following benefits: No need for collateral: You can enjoy the benefits of a personal loan without giving up anything valuable, like a home, savings account, or anything else. Interest rates: The interest rate to acquire a personal loan on a PAN card is very competitive. You might come across various options and offers from different organisations. Disbursement is quick: Even though you’ve applied for a personal loan, the money can be in your account within 24 hours after your application has been approved. If you seek a personal loan with the use of an Aadhar card, then you might enjoy the following benefits: Not much formality is required: If you choose to have a personal loan on your Aadhar card, you might have to submit only a few personal loan documents, like address proofs. Quick transfer: Once your loan is approved, you can receive the money in your account within one or two days. [B-02] Conclusion If you want a personal loan, you can get one with the help of a PAN card and an Aadhar card because the government has made these options a much better and easier way to seek a loan. The process is also very simple, and you can enjoy various benefits like quick transfers, no need for collateral, no need to fulfil several formalities, and much other stuff. Have a look at Piramal Finance for more options.
08-11-2023
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Personal Loan

What is the Debt-to-Income Ratio?

The debt-to-income ratio (DTI) represents a borrower’s debt repayment capacity in relation to their total monthly income. Meaning, how much of a person’s monthly income goes into paying away their debts. This ratio helps the lender or a financial institution determine the borrower’s ability to repay the loans. A low ratio signifies that the debts are being paid on time. This attracts more lenders, as it shows the borrower doesn’t have too many debts. At the same time, a higher ratio is a sign of below-par financial health. This makes obtaining a loan difficult and expensive. [B-01] Debt-to-income ratio calculator It may sound hard, but calculating DTI is simple. Add all your monthly debt payments and divide them by your monthly gross income. Gross income is the income you earn before paying taxes and other deductions. To calculate your monthly debts, add the following: monthly rent, EMIs, home/auto/medical loan, mortgage, credit card bills, and other debts. For example, suppose your total monthly income is Rs. 1,50,000. Your total debt obligation for the month is 50,000. Then your debt-to-income ratio would be (50000/150000)*100 = 33.33%. This shows 33.33% of your income goes toward the repayment of debts. What is a good debt-to-income ratio? The lower the debt-to-income ratio, the better it is. This shows you have fewer debts to repay. Hence, this makes new loan approvals easier and quicker. However, a good debt-to-income ratio will differ from lender to lender. Generally, a DTI ratio of up to 40% is considered suitable for loan approvals. DTI ratios above 40% may get loans, but the interest charged would be higher. But keep in mind that this is just one of the many parameters for taking a personal loan. What Happens When a Debt-to-Income Ratio is Too High? A higher DTI ratio can impact your financial life in one or more ways. Let’s take a look at how it can affect you. When the DTI ratio is higher, it shows you are spending a larger part of the income paying off debts. This means there are fewer savings and investments. A higher DTI ratio lowers the chances of getting loans. This can be a problem in an emergency. Individuals with a higher DTI ratio can secure a loan, but the interest charged by the lenders is usually on the higher side. How to Lower a Debt-to-Income Ratio Having a good financial plan is important when it comes to lowering the debt-to-income ratio. You also need to be aware of your debts and expenses. A lower DTI ratio ensures that you might secure a loan in the future when it is really important. Some of these steps might help in lowering your debt-to-income ratio and improving your credit score. Postpone a purchase if it isn’t an emergency. This will cut down on credit card bills. When there are fewer purchases on credit, it will lower the debt-to-income ratio of the individual. Stop taking on more debt unless your ratio falls below 40%. Pay off all your debts, if possible. Paying off debts helps improve your credit utilisation rate. This further improves your credit score. Closing previous loans can help as well. Some people combine all their multiple high-interest debts into one and consolidate them by taking a personal loan. Increase EMI payments to finish the debts quickly. This helps in the long run. Find additional sources of income, if possible. Finding a side hustle, taking online classes, or working on weekends can help increase income. Calculate the debt-to-income ratio every month. This helps in monitoring and understanding how the debt is being managed. One can find what is working in their favour to keep the DTI ratio low. It is also motivating to see the debts being managed in an organised way. Why is the debt-to-income ratio important? The DTI ratio helps the lender measure your loan repayment capacity. It tells how much of your monthly income is going toward clearing off debts. This also affects your credit score, which a lender considers while approving loans. A low debt-to-income ratio increases your chances of getting a loan. A good DTI ratio signifies that the borrower’s financial health is in good shape. That means they are in a position to secure a new loan and will be able to repay it without defaulting. Does the debt-to-income ratio impact the credit score? The debt-to-income ratio does have an indirect impact on your credit score. A lender doesn’t know what your gross earnings are. So, they can’t make accurate calculations. But they do look at how much credit you have. They compare your credit card account balances with the sum of all the credit limits on your cards. A lender will be more interested in the debt history of the borrower than their income history. Nonetheless, to secure a loan smoothly, maintaining a healthy DTI ratio is as helpful as a healthy credit score. [B-02] Conclusion To conclude, the debt-to-income ratio can benefit both the lender and the borrower. As it shows the relationship between a person’s income and debts, it can assist the lender in determining the borrower’s repayment capabilities. And as an individual, by calculating DTI, one can see their expenses and work on them. You can review your debts every month and find ways to lower them. This can be done by either managing your expenses or increasing your income. For more finance-related tips, you can go to Piramal Finance and read more blogs.
08-11-2023
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Personal Loan

A Beginner’s Guide to What is a Personal Loan and How it Works

Do you want to apply for a personal loan but are unsure how to go about it? If you have heard about it but have no idea what it is or how it works, this article is for you. In this article, we will explain everything you need to know about personal loans before applying for them. So, keep reading to get a perfect beginner’s guide on what a personal loan is and how it works. [B-01] What is a personal loan? One-time borrowing from a financial institution or a bank is known as a personal loan. This kind of loan is repaid through EMIs (Equated Monthly Installments). You obtain a personal loan with interest and EMIs. A personal loan falls under the category of an unsecured loan, meaning you do not need to give any collateral for it. It simply means that you do need to place any asset under the bank’s control to obtain it. How does it work? Almost all banks and other financial institutions offer personal loans. You get a lump-sum (one-time) amount in your bank account after it gets approved. You can get your amount disbursed in approximately 7 business days. It can vary according to different banks and your application process. There are also instant loan options available, through which you can get a loan within minutes. As an example, consider a personal loan. The monthly EMI, for instance, would be Rs. 4,758 for a personal loan of Rs. 2 lakh with a duration of five years and an interest rate of 15%. The consumer would have paid Rs. 29,039 for the premium and Rs. 28,057 for interest after the first year. The consumer would pay Rs. 57,422 less in interest if he chose to prepay the entire amount today. For what purpose can you get a personal loan? You can get a personal loan for literally anything. The best part about them is that there is no specific purpose or use tied to them. Banks do not track for what purpose you are using the money. Generally, people get a personal loan for the following purposes. To cover wedding expenses Travel expenses For medical needs Children’s higher education To afford any expensive purchase To renovate their houses For any emergency, etc. Benefits of getting a personal loan There are lots of benefits to getting a personal loan. For example, Personal loans do not require any collateral. You do not require a lot of documents. That means the documentation process is less complex compared to other loan options. The disbursal of the amount is also very quick compared to other loan options. The interest rate remains fixed over the whole term of the personal loan. The time period for which you can avail yourself of a personal loan is very flexible. You can select a time period according to your payment capacity. You can use the amount for any purpose according to your needs. There is no specific purpose when it comes to personal loans. Documents needed for a personal loan The list of common documents that will be required at the time of applying for the personal loan is as follows. Address proof Identity proof Age Proof Salary slips or any other income proof Bank statement or passbook Income tax return How do I choose a personal loan? While choosing a personal loan, you should keep the following points in mind. You should give priority to the points according to your requirements. Interest rate: The interest rate is the most important aspect that you should consider while choosing a personal loan. Personal loans are the easiest and quickest to get, but their interest rates are also among the highest. If your other requirements are fulfilled, then you should go for the lowest interest rate. Disbursal of amount: If there is an emergency, you can choose the personal loan, which disburses in a few hours. Fees and charges: Always double-check all fees and charges associated with personal loans. Tenure: Choose the personal loan according to the tenure that suits your repaying capacity. Generally, it ranges between 1 and 5 years. EMIs are completely dependent on the tenure of the loan. The shorter the tenure, the bigger the EMI, and vice versa. Credit scores: Choose the personal loan according to your credit scores. If your credit scores are not good, choose the one that gives little importance to them. Documentation: If possible, try to look for less complex documentation and application processes for personal loans. How do I apply for a personal loan? You can apply for a personal loan by following the steps given below. Firstly, check your credit score. You can do that online by using any credit score checker. Some of them are available for free. The next step is to check your eligibility to get a personal loan. For that, too, different calculators are available online. Now, research and compare different financial institutions’ interest rates, terms and conditions, tenure, time taken to disburse the amount, etc. Choose the lender according to your requirements. Get your required documents ready. Fill out the application for the loan as accurately as possible, as misinformation or any mistake can lead to loan rejection. Then, submit the application with the documents. Keep patience while your financial institution processes your application and disburses the amount. Finally, after getting the loan amount, you are free to use it any way you want. [B-02] Conclusion Personal loans have become a go-to solution for any financial issue. This is mainly because of the emergence of many fintech companies that provide easy and quick personal loans. As easy as it sounds to get them, you also need to keep in mind not to take on too many loans at once. Because if you fail to repay them, it will negatively affect your credit scores, which creates problems in the future when you try to get other loans and credit cards. We hope that you are now clear about how personal loans work and how to apply for them. If you want to talk to someone about them or anything else related to money, you could contact Piramal Finance.
08-11-2023
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