Why are More People Applying for Personal Loans?

Nidhi and Medha were sisters, looking to set up their own bakery products venture. Their research showed them they could either apply for a business loan or get a Personal Loan to finance their venture. While they would need to furnish their venture details to get a business loan, a Personal Loan needed no such process.
 

Medha was employed as a tax consultant in a brokerage firm. Her monthly earnings averaged close to Rs 85,000. This provided the sisters with a steady cash flow. While Medha would focus on the numbers, Nidhi was free to work on the core business.
 

They realised they only needed a loan of Rs 6-7 lakh initially. A good chunk of this would be used for publicity, renting out space, and setting up logistics. Medha’s income from her job as well as prior savings would be enough to take care of their personal expenses. The overall state of finances was very healthy with a good credit record. So, upon enquiry, their lender offered them an instant loan at a 12% interest rate. This helped them cover the business expenses and kick-start their venture.
 

Medha and Nidhi are not alone. Many people are opening up to the idea of using a Personal Loan to finance their goals. But this gives rise to a question: Why do more people prefer to apply and use a Personal Loan?
 

Why do people prefer Personal Loans
 

There are many factors that make Personal Loans more attractive. 
 

You can even apply for a Personal Loan from the convenience of your home. All you need to do is visit the lender’s website. An application for a Personal Loan from Bajaj Finserv , for instance, usually takes seconds for approval and you can get funds of up to Rs.25 lakh in as little as 72 hours. 

Eligibility criteria for a Personal Loan
 

One of the prime reasons for the preference for a Personal Loan is the easy eligibility. But remember, different lenders have their own eligibility criteria. 
 

For new borrowers, lenders follow these Personal Loan Eligibility Criteria:

You can also use loan eligibility criteria calculators available on the websites of all lenders. Just fill in your name, years of service, salary, and place of residence to find out the loan amount you are eligible for. Alternatively, use these calculators to check what kind of monthly instalments you can expect to pay. 

These tools make it easier to decide how much you can afford to pay every month. You can then select the quantum of loan that meets your needs. 

It’s not just the eligibility. The actual application process is also very easy. 

Things to know before applying for a Personal Loan

1) The interest rates on Personal Loans depend on many factors. Some of these are: 
 

2) You can negotiate the interest rate with the lender. 

3) There is a loan processing charge. This varies with the lender from 1% of the loan amount to 3%. Service taxes are extra. 

4) Employees of central government undertakings and public sector companies are seen as low risk. Some lenders even have a list of eligible companies whose employees are more likely to get loans. 

5) The lender will ask for some documents for processing the Personal Loan application. 

6) Some lenders may have a prepayment charge. This is when you pay a penalty if you pay the loan in advance. That’s not all. There are many other terms and conditions that have a bearing on the cost. 

The bottom line

Personal Loans are popular today, but it is important that you opt for a professional lender to avail financing. Keep the various factors in mind when you apply for a Personal Loan and take the first step towards fulfilling your financial goals.