A loan is when someone gives money to another person on the understanding that they would receive money back from them in the form of principal plus interest at a later date. Loans come in many different forms, but they can be broadly divided into two groups: secured loans and unsecured loans. A collateral or asset must be used as security for a secured loan. As a result, in the event of a repayment default, the lender may rely on your assets to complete the loan. Unsecured loans don’t need to be backed by assets or property. Unsecured loans carry higher interest rates than secured loans because lenders have nowhere to turn in the case of a default.
Unsecured loans include short-term business loans, Flexi loans, education loans and the most popular of them all – personal loans. Read on to know how you can apply online for personal loans and the benefits of online loan applications.
What is a personal loan?
A personal loan is a kind of unsecured loan that allows one to borrow funds for a specific tenure from a bank or non-banking financial company (NBFC). A personal loan is one of the most popular loan types as it is collateral-free. It does not require the pledging of a personal asset like a home, car, or insurance policy to serve as security or guarantee. However, the lender charges higher interest rates on personal loans to cover the increased liability. The general interest rate starts from 10% per annum and can go up to 15% to 20%, depending on the lender. You have to pay the principal amount and the interest charged during the repayment tenure through monthly payments or EMIs. Personal loans have a repayment tenure of 1 to 5 years. The maximum personal loan amount is in the hands of the lender, but general loan sanction amounts range from Rs. 25 lakhs to Rs. 60 lakhs. Most borrowers now apply online for personal loans because of the many benefits of online loan applications.
What are the benefits of online loan applications?
Quick disbursal
When you apply online for personal loans, will your loan application will likely get approved quickly. You can get the loan amount within a matter of a few days or hours as opposed to a few weeks in an offline application. There is also an instant approval/ disbursal feature that ensures your loan gets approved and disbursed to your bank account within the same day and sometimes, within a few hours.
Minimal documentation
One of the core benefits of online loan applications is the minimal documentation required. The entire process becomes hassle-free as the bank or NBFC requires the submission only of a few documents. The documents include:
Identity proof or Know Your Customer (KYC) like Aadhar card/ PAN card.
Address proof like passport, utility bills (gas/ electricity), or rent agreement.
Income proof like salary slips, bank account statements, salary credit statements, and other financial documents as requested.
Employment proof like employment letter, certificate of degree, income tax returns, and other documents as requested.
Easy loan comparisons
Before you apply online for personal loans, you have the liberty to compare various personal loan options from several lenders. You can find a personal loan lender offering you the best, most competitive interest rates. You can also check your loan eligibility or make soft inquiries without hurting your credit score. For any loan, the lender will check your CIBIL score and credit history to see your repayment capacity. Ideally, lenders require a minimum credit score of 750 but some lenders even sanction loans for scores 650 and above.
Saves time
When you apply online for personal loans, you do not have to go down to the bank or NBFC to submit the documents as the entire process from application, verification, and disbursal is paperless. You can visit the lender’s website and fill in the application through step-by-step guidance right from the comfort of your home. One of the best benefits of online loan applications is that it is accessible round the clock.
Convenient online management
Many lenders have their own user-friendly apps or personal loan apps that you can link to your bank account. You can manage every aspect of your account – right from tracking your spending, to paying your monthly EMIs for the loan and accessing dedicated customer support. You can upload documents and receive funds all in a matter of minutes.
Free EMI calculator
A tool you can use before applying for a loan online is the free EMI calculator. An EMI calculator helps you assess how much you must pay towards a loan after considering factors like loan amount, tenure, and interest rate. You can input various loan values into the EMI calculator and ultimately get an accurate personalized quote suited to your budget and needs. You will also get a clear breakup of your EMIs. All you must do is visit the EMI calculator section on the lender’s webpage and enter the desired loan amount, interest rate, and tenure.
What is the eligibility criterion to apply online for personal loans?
Lenders have a general standard when it comes to the eligibility criteria for personal loan applications. These include:
Your age:
Age is the foremost factor considered in loan applications. The starting age for applications is 18 to 21, depending on the lender. The upper limit is generally 60- 65 years, but depending on the lender, you can get it extended. The reason behind the age bracket is that individuals between 21 and 65 years of age are in their prime working years and can repay a loan.
Your work experience:
Work experience is another important factor considered when you apply online for personal loans as the lender checks whether you can repay the loan. Individuals with stable and consistent employment get preference over those just starting at a job or those having a knack for switching multiple jobs. Those with more experience and secure professions get their loans approved quicker.
Your monthly/ annual income:
Despite having a secure and stable job, lenders check how much you earn every month to confirm your repayment abilities. Your EMIs also depend on the income you earn. The minimum income limit per month varies from lender to lender, but the standard minimum income requirement is Rs. 15,000 per month.
Your credit history:
Your credit history is undeniably one of the most crucial factors in personal loan applications. It shows lenders how prompt you were with your past payments and helps them assess your creditworthiness. Lenders will check if you have defaulted in your previous transactions through your credit history. You will need a CIBIL score of 750 or 650 at the least to even consider your personal loan application.
To conclude:
There are no cons to online loan applications, only pros! Applying for a loan online is becoming the golden standard, and it is rare for a lender to not have a digital space for loan applications. At Credit success, you can apply online for a personal loan or any other loan in easy steps and get your funds disbursed to your bank account the same day. You can also get guidance on how to go about the process.
