What to Look for in a Bank When Applying for a Personal Loan

Personal

5 min read | 5 months ago

A personal loan can be used for a myriad of purposes. The reason why personal loan bank products are popular is that they are disbursed fast and can be used for practically any purpose, ranging from holidays to weddings to debt consolidation.

Understanding Personal Loans

A personal loan is a great way to offset any such temporary financial crisis as it allows the users to avail of a loan without any preconditions on using funds. A personal loan is simply a way of borrowing money you must pay back over an agreed period with interest. Knowing where to get the best deal can be difficult. So, it is important to compare a broad range of personal loans from across the market to find the right fit for you.

Factors to Consider When Choosing a Bank

Here are the factors to consider when choosing a bank to apply for a personal loan.

Loan Amount Planning

It is very important to remember that not all banks offer the same value of loan amounts. So, one of the most important things is considering your estimated expenses to decide on the loan amount. When applying for a personal loan, including an extra 20% to 30% to cover emergencies is better. Once you have an estimate of your loan requirement, enquire with the bank about the viability of loan approval.

Offered Loan Interest

Banks offer two types of interest on personal loans: Fixed and Floating. For a fixed-interest personal loan, banks offer fixed interest rates either for a certain period of the loan repayment tenure or the entire tenure. The floating interest rate loans change with the fluctuations in the market interest rates. When there is a hike in the market rate, there is an increase in the Equated Monthly Installments (EMIs) and vice versa.

Loan Documents Checklist

Each bank has different criteria and document requirements. While some banks may require only basic documentation, others may need other additional supporting documents for approval.

CIBIL Score Requirement

Keeping track of your CIBIL Score online is one of the most important things if you want to apply for immediate loans online. Most banks check your CIBIL Score online as soon as you apply for the loan. In addition, your CIBIL Score provides banks assurance regarding your reliability and stable debt history. The higher your score, the better the chances for loan approval. Most banks require a CIBIL Score of 750 or higher for personal loan approval.

Bring Your Salary Account Into Play

If you are a salaried professional, you can use your salary account to get a better deal on your loan. Getting a loan from the bank where you have your salary account may help. The lender will already have access to your details, and you may get the loan faster. Banks are known to offer more favorable terms to their existing customers, including lower interest rates and processing fees.

Evaluating Your Options

When applying for a personal loan, you should check how much money you can borrow against your income. You can easily find exact figures by using the EMI calculator personal loan or personal loan eligibility calculator. Comparing personal loans is the best personal loan advice anyone can give you. Many banks can offer the same interest rate, but you must find additional hidden charges attached to it. Furthermore, personal loan tenures can range from 12 to 84 months. Therefore, apply for loan tenure that allows you to repay the loan comfortably. Usually, it is recommended to opt for a monthly loan repayment plan that does not exceed 30% of your monthly income.

Before signing any document, it is necessary to read it carefully. Doing this will make you sure of what you are getting into. After all, there are so many document Terms and conditions that you must be careful of hidden charges and plenty of clauses.

Preparing to Apply

Personal loans are easy to apply for both online and offline. Regardless, you must provide appropriate documentation and financial records for the loan approval in both modes. For example, if you want to apply for a personal loan online, apply with the following documents:

Identity proof (Aadhar, Voter ID, passport, etc.)

Address proof (Aadhar, Voter ID, passport, etc.)

Employment Proof/Income Proof of the last three months

Income Tax Return Documents of the previous years

Conclusion

Immediate loans online are a top pick for borrowers in case of urgent expenses. Today, personal loans are among the fastest-growing segments in the Indian retail lending landscape. Apart from banks, Small Finance Banks and NBFCs, a whole host of fintechs are jostling for market share in this segment. However, banks continue to remain the most chosen option when applying for a personal loan securely.

FAQs

1. Is a nationalized bank or private bank better for a personal loan?

Your choice of loan should be based on comparing the loan terms offered by each bank. Compare interest rates, processing charges, and other related fees and charges to decide which bank is the best option for you.

2. What is the most important factor when applying for a personal loan?

One of the most important factors when applying for a personal loan is your CIBIL Score. Apart from that, other factors like income stability and debt-toincome ratio play a crucial role, too.

About Unity Small Finance Bank

Unity Small Finance Bank is committed to making banking simpler and more accessible for everyone. Our services include Savings Account, NRI account, Current Account, Fixed Deposits, and Personal Loans offering flexible tenures and attractive interest rates. We also offer financing options like MSME Loans and Microfinance to support businesses and underserved communities. Learn more about Unity Small Finance Bank here.