Personal loans are the financing arrangements between a borrower and a lender whereby the lender lends a specific sum of money to the borrower, without any security, against consideration in the form of interest. Personal loans can be availed for any reason like paying medical bills, education, house construction, business, debt consolidation, etc. Because of its unsecured nature, personal loan interest rates are usually higher than the secured loans.
If you are looking towards availing a personal loan, you can know the amount of EMI beforehand to plan your budget by using a personal loan EMI calculator. You just need to insert the loan amount, personal loan interest rate, and tenure. The personal loan EMI calculator will also show you the total amount of interest that you will have to pay over the principal amount borrowed.
Expert opinion for your personal loan queries
What are the benefits of personal loans?
Personal loans carry the following benefits:
- They are unsecured, and thus, no security is required to obtain a personal loan. Therefore, you don’t need to worry about losing a home or a car in case of non-repayment.
- Funds obtained can be used for any purpose by the borrower.
- Personal loans don’t require much documentation and are easy to process.
- They are instantly disbursed.
- Lower interest rates than other unsecured lending arrangements. For instance, if personal loan interest rates are compared with credit card interest rates, then it is pertinent to note that while personal loan charges interest at the rate of 15%-18% per annum, credit card companies charge a whopping 2%-3.5% per month.
Does CIBIL Score matter for availing of personal loans?
Yes. CIBIL Score matters for availing of personal loans. CIBIL score is an indicator of the creditworthiness of the borrower. Therefore, a good CIBIL score increases the chances of getting loan approval for the borrower. Also, it can help in reducing the interest rates. If you are regular with your payments, personal loans can be really helpful in improving your credit score.
Do personal loan interest offer tax benefits?
Loans such as home and business loans make most borrowers wonder whether the interest on the loan also offers tax benefits. The answer may disappoint you. Interest paid on personal loans is not deductible from your income, and hence, no taxation benefits are available.
What are the eligibility criteria for availing of a personal loan?
A personal loan may be subject to the following eligibility criteria, varying across different banks:
- Minimum Income: Certain levels of minimum income shall be earned by the applicant to get loan approval.
- Age Criteria: The age of the applicant should be between 22-58 years.
- Work Experience: The applicant must have work experience specified by the bank.
- Documentation: Personal loans don’t require hefty documentation. The required documentation may include:
- ID proof (KYC Documents)
- Proof of Residence
- Income documents (Income Tax Returns)
- Bank statements (for last 6 months)
- Employment Certificate (for employed person, stating one year of continuous employment)
Personal loans are unsecured, and therefore don’t need collateral. They are also useful for debt consolidation, whereby you can repay your multiple debts using a personal loan and then focus on single loan repayment. Moreover, personal loans get disbursed relatively quicker and don’t require much documentation, making it ideal for your sudden fund needs. If you’re looking for a personal loan, check the eligibility criteria here.