Personal Loan: Expectations Vs Reality

You all need money for general purpose at any point of time without wasting time and with attractive rates of interest. Personal Loan is the easiest way to do it. Its swift, hassle free and collateral free. Hence, most of us go for it for instant money. However, you have some beliefs about Personal Loan which are real but some of your beliefs are beyond reality. Today, you will learn as to what do you expect out of lenders that is banks and NBFCs and what does really happen in the entire process of loan till disbursal of loan amount.

Personal Loan: Expectations Vs Reality

CIBIL Score may not be checked for my Personal Loan Request.

Expectation:

Many of you think that banks and NBFCs do not know about your transactions, assets and liabilities. Hence you generally apply for the loan amount which, most of the times, is beyond your repayment capacity.

Reality:

Banks and NBFCs inquire about your credit behaviour by obtaining your CIBIL Score report. Report gives all the information about your all kind of loans from banks and NBFCs, bank accounts, credit cards and its transaction history. CIBIL score from zero to 900 is given to you on the basis of your credit behaviour.

Even if you borrow money from your friends or relatives, bankers may scrutiny your bank statement randomly to check your average bank balance and may find out about your such liabilities.

Hence, you must inform your banker about all your liabilities and give your net income figure that really is. It will help you avail your loan speedily and your loan amount applied will be more likely to be sanctioned.

Instant Personal Loan or Personal Loan in 24 Hours

Expectation:

Many of you would have come across the ad on your mobile and laptop etc claiming that they will provide you Personal Loan in 24 hours or instant approval will be done. This ad is partly true and partly intriguing.

Reality:

There is laid down process of sanction of Personal loan. There are following stages for availing Personal Loan:

Lead Generation

It is that stage when Bank or NBFCs contact potential customers via many types of ad, calls or personal visit to customers. Then customer is acquired and collection of documentation begins.

Collection and scrutiny of documents

In this stage representatives of Banksand NBFCs collect the documents from customers and scrutiny it within the parameters of lenders policy and RBU Guidelines. Once he qualifies to avail loan, customer profile is prepared so that the best lender is chosen based on Credit score of customers.

Login of documents in to bank/ NBFC system

Once it’s found ok, documents are uploaded in the system and underwriting is performed. Credit managers prepare credit report and sanction loan amount.

Disbursal of Loan

Once Credit manager approves the above, loan is disbursed to your account. Before disbursal, lenders obtain your consent on various aspects of loan like Loan amount, rate of interest, tenure of loan, processing fees, prepayment penalty, insurance of loan and moratorium period, if any.

Note- There are some lenders, who rely heavily on the latest fintech companies, track your credit behaviour regularly and maintain your account,can disburse your loan within a few hours. However, most of the time, loan amount will be comparatively smaller in such cases.

Types of Personal Loan which can be availed by me.

Expectation:

You generally think that there is only one type of personal loan that is lent to salaried persons. It falls under the category of unsecured loans.

Reality:

Personal loan is meant for salaried persons and there is another category of it which is Personal Loan Over Draft (PLOD). It is the product which is extended to salaried persons. Its tenure is generally up to 7 years. PLOD is secured and unsecured both. When the amount is more, lenders prefer collateral for PLOD. Its rate of interest is generally higher than personal loan. PLOD should be availed by you when there is a requirement of money frequently for a smaller period of tenure.

Interest Rate for my Personal Loan.

Expectation:

Generally, you have an impression that you will avail Personal Loan with the rate of interest which is shown in the commercial ads. That is generally the lowest. So that lenders could attract a maximum number of customers.

Reality

In reality, very few of you will avail the best rate of interest on your Personal Loan because rate of interest depends largely upon your profile and credit score. Also, smaller amount of personal loan attracts higher interest rate vis-à-vis bigger amount of personal loan. If your credit score is Excellent, most of lenders will offer you best rate of interest.

CIBIL CatCIBIL Range
Poor300 to 579
Fair580 to 669 
Good670 to 739
Very Good740 to 799
Excellentabove 800
the category of CIBIL Scores:

Am I eligible to avail Personal Loan?

Expectation:

Generally you think that you are eligible to avail Personal loan in case you have regular income source and you have repayment capacity for sanctioned amount. Also, your expected loan amount is generally higher than sanctioned loan amount.

Reality

In fact, there are a few parameters which make you eligible or ineligible for Personal Loan. These aspects are elaborated below:

Repayment Capacity

Generally permanent govt and private sector persons are eligible for personal loan. Very few lenders include contractual employees in their eligibility. Also, your repayment depends on your net salary. Your net salary is the amount which is balance after all your monthly or other liabilities are paid. Liabilities also include the borrowings from friends and families.

Tenure and retirement age:

When you are applying for personal loan for 5 years then your residual service before retirement should be more than 5 years. Generally, you have a better chance to avail desired amount of loan in the early age.

Tenure and retirement age:

Many of you think that you need Personal to spend on your business. If you are earning by your business then you need to avail business loan. Personal loan is available only to you when you are earning your livelihood by monthly salary.

Conclusion

If you have above knowledge in your considerations the you will be in better position to crack the best deal in Personal Loan and your process will be swiftly with desired amount of loan with best rate of interest.



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