In this episode of Dhan ki Baat, Garima Nahar, General Counsel and Chief Anticorruption Officer at IIFL Finance, discusses why you might need a personal loan and how you can avail it.
Personal loans, like the name suggests, are loans granted for personal need. We all have dreams and aspirations and sometimes need some monetary help to achieve them. Also, life can throw difficulties or we overspend our month allowances and some funds are most needed then to ensure smooth living. For instance, maybe you have decided to go back to college but do not have the funds for it. Or maybe, there is any medical exigency and insurance is not enough to cover medical fees. Whatever be the reason, a personal loan may just be the way for you to solve your financial woes. The good news is that personal loans are often unsecured and fairly easy to get. They give you the flexibility to use the funds as per your convenience and provide the perfect solution to receive instant cash.
A personal loan is usually taken for the following purposes:
While a personal loan can assist you in a big way financially, one must understand the commercial terms of such loan in detail to avoid any last moment surprises
Credit cards are used to fulfill your needs for short-term credit and are convenient for recurring expenses, which you can pay off by the due date, like your monthly expenses or fixed utility bills. But they are only a short-term credit tool, the tenure for which is a couple of months. However, it is not suited to many large, ad-hoc expenses like marriage or surgery. If the credit card bills are not paid within the grace period provided, the financing charge are usually very high compared to personal loans.
The interest, in case of personal loans, are calculated on the reducing balance and not on the flat amount which is the case with credit cards. Tenure of the personal loan can be customized up till 5 years whereas credit card dues are forthwith payable upon expiry of grace period.
The requirement of documentation for obtaining a personal loan is straightforward and quick. You just need the following documents to receive a personal loan within 8 hours:
All it takes are these five steps to get an instant personal loan online:
All these steps (in the online application) may be completed within 8 hours if you have complete paperwork.
Ms. Garima Nahar is the General Counsel and Chief Anticorruption Officer at IIFL Finance and has been instrumental in setting up the legal team focusing on NBFC business and strategy. She has been with the group since 2015. She is a legal professional having over 14 years of divergent experience in various banking and financial transactions. She is also a gold medallist, and holds a B.A.LL.B (Hons.) degree from National Law Institute University, Bhopal. She has worked with ICICI Bank and Davis Polk & Wardwell LLP at New York where she extensively worked and focused on capital markets, treasury, derivatives, structured financial products and regulatory practice.
A personal loan is a credit taken to fulfill instant cash needs for a one-off expenditure that must be repaid within a short period to the lender. You do not need to pledge a collateral or a security in exchange of the loan.
Personal loans have many, flexible purposes. You can take a personal loan to cover the expenses of education, marriage, home renovation, vacations or any other personal needs like buying a home appliance, gadget, etc.
Equated Monthly Installment (EMI) is a fixed amount specified in the loan contract that must be paid every month on a specific date. It is paid over a number of years until the loan amount is paid off. The EMI includes a part of principal amount as well as interest.
Personal loans have a tenure of 1 to 5 years. In some cases, a longer or a shorter term for a personal loan may be allowed by a borrower. You can repay your loan by paying monthly EMIs via post-dated cheques. You can also avail the option to prepay the whole loan amount or a part of the loan before the tenure of the loan contract if your creditor gives the facility.
The rate of interest on credit cards is usually higher when compared to a personal loan. You can opt for a longer tenure in a personal loan, while credit cards need to be settled within a month or two. Moreover, credit cards are a solution to regular expenses and cannot be used to finance big life events. Hence, personal loans are more suited to large, one-off expenses.
The documentation for personal loans is very simple and straightforward. You only need to submit the requisite KYC documents, 3-6 months’ bank account statements, a copy of your employer ID and salary slips from the last 3 months.
You can apply for a personal loan both online and offline. However, the online process is much faster than the offline process. You get real-time loan approval within a day,and not having to sign and deliver any physical documents makes the process hassle- free. The verification process is simpler too as it is done via e-mail or mobile OTP.
While the banks’ process includes many complicated steps, taking a personal loan from an NBFC is just a five-step process:
If the personal loan is taken from an NBFC, the entire process of the procuring the loan, including the credit of funds in your bank account - can be completed within one day.
If you have a regular source of income, irrespective of being a salaried, self-employed or a professional, you are eligible to take a personal loan. The company in which you work, your credit history, your residential location and the need for which you are taking a loan also affects your eligibility as per the lender’s criteria.