Take the kids for a vacation this year. Redo your house with the latest in home décor. Gift your brother a fully paid stay for two at an exotic location on his wedding. Show your sister that you care by buying her the latest handset. Your business is experiencing a bit of turbulence and you need a stopgap until you figure out an alternative. Do you want to do any of this but lack of funds is worrying you? Are you facing any such hiccups? Two words – “personal loan”.

Personal Loan is the hot favourite when one is in a financial fix. It is the first thing that springs to mind when you must fulfil an immediate monetary need. They are easily available, require basic documentation, do not need collateral and all credit institutions deal in this product. So whatever be your purpose, unless speculative, you can easily get yourself a personal loan.

Let us look at the steps involved in taking personal loans in India:

1. Plan and make a budget: Meticulously plan on how much money you need and how do you intend to repay it. Do you have the requisite resources to spare every month to pay for it regularly? If possible, self review your CIBIL score to ensure you eliminate chances of being surprised later. Make a list of all credit institutions near your house or office. Either visit them or call them to gather details on their loan product.

2. Check for eligibility: Check for the amount of loan you would be eligible for and the rate at which you will get it. Then introspect it against your need as per the budget drawn by you in Step #1. You can get a rough idea about your eligibility online or offline. Visit different bank websites to check for eligibility or visit their branch to speak with executives who can give you a fair idea too. If you fear you will not get a loan for low CIBIL score then its best you work upon it to improve your eligibility factor before you apply for a loan.

3. Compare various bank offers: Several websites online allow you to compare various offers from different banks. Use their comparison tool to make sure you are picking a lender who is offering good terms. Select the tenure and amount of loan you wish to take. Calculate using the online EMI calculator. Make sure the EMI thus arrived at is in line with what you have budgeted for. Adjust your loan amount or tenure if it is more than what you can afford to repay every month.

4. Choose the offer that meets your requirement: Pick one based on your comfort in terms of agreement and rate of interest. Remember, every lender has a distinct internal credit policy based on which they assess every applicant individually. Based on their evaluation, they charge a risk premium to their borrowers. This can be the differentiating factor in personal loan interest rates. It is important to understand all the terms before applying for a loan.

5. Submit completed documents: Once you have decided on which credit institution you will be applying to, ask them for a list of documents that they will need. Then get a complete set of documents ready. You can submit these alongwith your application to the branch or if you have applied online then upload a soft copy of all the documents to the bank’s site using login details.

6. Verification process by bank: Often before approving your loan, the bank will send an executive to your house or workplace for field verification of the address given in the documents. Also, the bank will check your CIBIL score and credit report, verify details like your PAN, income and others mentioned in the application form.

7. Loan approved and disbursed: Once the verification process and bank formalities are complete, your loan will be approved and subsequently disbursed. If the bank is not satisfied with the documents or if you fail the verification then it may reject your application for personal loan.

Points to Remember

1. Be sure to find out what is the rate of interest. Currently, it is between 12% and 22%, depending on risk profile. Find out about other charges like processing fees, prepayment penalties etc.

2. Personal loans can be taken for a minimum of 50K to a large amount of say 50 lakhs. It can be taken for anywhere between 1 year and 5 years.

3. Compare personal loans across lenders for the different rates and terms of agreement.

4. Self employed or salaried employees from the public and private sector, public and private limited companies, professionals like CAs and doctors, and other local bodies can apply for a personal loan.

5. You must have a minimum monthly income of Rs. 15, 000/- to 20, 000/- and should be below 60 years of age.

6. Important documents are: Identity proof such as a copy of your Aadhaar Card, PAN Card, Driver’s license, Passport, etc. and valid address proofs like bank statement, utility bills, etc. Make sure your documents are not past expiry. Income proof like salary slip, ITR and bank statements, proof of office address, photographs of all applicants, proof of continuity of business etc.

7. Post sanction and before the loan is disbursed, you must sign the loan agreement and Standing Instruction (SI) or ECS Mandate form so that the EMI can be auto debited from your account every month.

Personal loans are easy, no-questions asked loans that provide quick relief in times of need.

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