A personal loan is an unsecured loan sanctioned by banks and other lending institutions to eligible borrowers. It has become a popular form of credit among individuals looking to finance their personal needs. Being an unsecured loan, there is no need for collateral. Also, the funds can be used to fulfill all kinds of requirements such as paying for a home renovation, or wedding expenses, or making a big purchase, etc.
The number of individuals opting for personal loans as a means of financing today is persistently increasing. According to a credit bureau CRIF High Mark report, the loan disbursement of small ticket personal loan (STPL) has gone up five times in the last two years. From 2017 to 2018, only 12.9% of those disbursed fall under the personal loan category, which soared up to 60% by March 2020. Based on the CRIF India report, borrowers and families with low income opt for personal loans for consumption rather than using them for emergency requirements.
The report also mentioned that more than 50 percent of the volume share in small loans is Rs. 5,000 or less, which means that the checkout finance and payday loans are catching up. The CRIF report also states that the demand for personal loans is largely being driven by millennials and young borrowers between the ages of 18 to 30 years, with an increase in share from 27 percent to 41 percent.
Why Have Personal Loans Become Popular?
There are numerous reasons for the increasing popularity of personal loans. They are as follows:
Numerous banks and financial institutions offer personal loans at affordable rates with additional benefits and discounts. The financial marketplace is more competitive for personal loans than other loans, such as a car loan or a home loan. Hence, it is much easier to avail instant personal loans for your financial requirements, especially in an emergency.
No Collateral Required
As personal loans are unsecured in nature, you do not require any collateral as security. However, it would help if you had a good credit score to prove your creditworthiness, as it will help you get approved for an unsecured loan with ease.
No Restriction on End-Usage
Unlike most other loans that can only be used for a specific purpose, personal loans are not restricted in any way. You can utilize the funds to finance your child’s tuition fees, cover travel expenses, debt consolidation, etc.
Flexible Loan Repayment
The loan repayment tenure for a personal loan usually ranges between 1 to 5 years, and the borrower is free to choose the loan tenure as per their convenience. The interest rate on loans with a longer tenure is much higher than that on loans with shorter tenures. So, keep this in mind while setting the tenure for your loan.
The following are the basic loan eligibility criteria for salaried as well as self-employed individuals.
For Salaried Individuals
- The applicant must be between the ages of 21 and 60 years.
- Only Indian residents are eligible for the loan.
- You must be an MNC, private, or a public limited company with a work experience of at least 2 years.
For Self-Employed Individuals
- The applicant must be an Indian resident to qualify for the loan.
- The age of the applicant must be between 22 to 65 years.
- Eligible applicants must have a business vintage of at least 4 years.
Given below is the list of documents required for an instant personal loan.
- Identity Proof: PAN card/voter ID/Aadhaar card/passport/driving license.
- Proof of Residence: Voter ID/Aadhaar card/passport/driving license/electricity bill, etc.
- The applicant’s bank statements and/or salary slips for the last six and three months, respectively.
- Passport-size photographs of the applicant.
Personal loans are useful if you use them aptly. If you’re considering getting one, you can use a personal loan eligibility calculator to check whether you qualify for the loan. At Finserv MARKETS, you can avail of a personal loan of up to Rs. 25 lakh online. The eligibility and document requirements are minimal, and you can get an instant loan online effortlessly through the Finserv MARKETS app.
You can also use the personal loan EMI calculator to estimate the loan repayment amount to be paid every month and manage your finances accordingly. At Finserv MARKETS, you also get access to services like a free CIBIL score check and a Financial Health Check Report (FCHR) to get insight into your finances and tips to boost your creditworthiness. Get a personal loan now!