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Personal Loan

What is a Personal Loan?

Personal Loan is a type of unsecured loan that allows individuals to borrow money for various purposes without requiring collateral. Unlike secured loans, which are backed by assets like a house or car, personal loans rely on the borrower’s creditworthiness and ability to repay.

Types of Personal Loans

  1. Unsecured Personal Loans: These loans do not require any collateral. Approval is based on the borrower’s credit score, income, and financial history.
  2. Secured Personal Loans: These require collateral, such as a savings account or a car. They typically offer lower interest rates compared to unsecured loans.

Common Uses for Personal Loans

  • Debt Consolidation: Combining multiple debts into a single loan with a lower interest rate.
  • Home Improvement: Funding renovations or repairs for your home.
  • Medical Expenses: Covering unexpected medical bills or treatments.
  • Education: Paying for tuition or other educational expenses.
  • Major Purchases: Financing large purchases like electronics, appliances, or a vacation.

Documents Needed For Personal Loan

KYC- PAN Card and Aadhar Card

ID Proof

Residence Electricity Bill

Bank Statement of last 6 months

3 Month's Salary Slip

Form 16

FAQ'S Of Personal Loans

A personal loan is an unsecured loan that allows you to borrow money without needing to provide collateral. It can be used for various purposes, including debt consolidation, home improvement, medical expenses, and more.

 

You can apply for a personal loan through a bank, credit union, or online lender. The application process typically involves submitting personal and financial information, such as your income, employment details, and credit history.

 

Eligibility for a personal loan varies by lender, but common criteria include:

  • A good credit score (usually 600 or higher)
  • Stable income and employment history
  • Low debt-to-income ratio
  • Being at least 18 years old and a legal resident of your country

Personal loans can be used for a wide range of purposes, including:

  • Debt consolidation
  • Home renovations
  • Medical expenses
  • Educational costs
  • Major purchases like appliances or vehicles
  • Travel or vacations

Loan terms typically range from 1 to 7 years. The length of the term affects your monthly payments and the total interest you will pay over the life of the loan.

 

Some lenders may charge a prepayment penalty for paying off your loan before the end of the term. Always check the loan agreement to understand any potential fees.

 

Taking out a personal loan can impact your credit score in several ways:

  • Hard Inquiry: Applying for a loan can cause a temporary dip in your credit score due to the hard inquiry.
  • Credit Mix: Adding a personal loan to your credit profile can improve your credit mix, which may positively impact your score.
  • Payment History: Timely payments can boost your credit score, while missed or late payments can harm it.

Commonly required documents include:

  • Proof of identity (e.g., passport, driver’s license)
  • Proof of income (e.g., pay stubs, tax returns)
  • Proof of residence (e.g., utility bill, lease agreement)
  • Employment verification