Top Questions about Personal Loan answered - Personal Loan Blog - Tata Capital

Frequently Asked Questions: Personal Loans

Mar 01, 2017

Availing of a personal finance is a huge decision. Quite often, potential loan seekers have many doubts related to personal borrowing. It is imperative to have adequate knowledge about the various requirements of a loan. You will be able to make a well-informed borrowing decision only if you have researched extensively.

Following are six frequently asked questions (FAQs) about personal finance.

  1. What is the purpose of a personal loan?
    The biggest advantage of a personal loan is that it may be used for any reason as deemed fit by you. The bank does not question the intent of the borrower. Such finance may be used to fund a wedding, home renovation, car purchase, medical emergency, rental deposits, business needs, or an international vacation. Due to its numerous applications, such loans are also known as multi-purpose loans.
  2. Is it important to have a good credit score for availing a loan?
    In one word, yes. Most consumer loans are unsecured loans; therefore, no collateral is kept as a security against the loan. Thus, such loans are provided solely on the creditworthiness of the borrower. Lenders conduct an extensive check on the credit history of the applicant to identify repayment capability and past repayments. The loan application will be approved only when the lender is convinced of the financial stability of the applicant.
  3. Is the rate of interest on personal finance loans high?
    The rate of interest varies from individual to individual. There are many factors that have an impact on interest rates, namely the CIBIL score of the applicant, gross/net salary, and the reputation of the company he is employed with. Additionally, loyal customers who have good relationships with their banks may obtain a lower interest rate.
  4. Which are the various documents to be submitted for loan application?
    The list of documents to be submitted varies from lender to lender. However, the basic documentation requirement remains the same. Salaried individuals have to submit proof of identity, residence proof, bank statements, and income proof in the form of salary slips. Businessmen and self-employed professionals have to submit proof of business continuity like Memorandum of Association, Article of Association, along with Balance Sheet, Profit and Loss account statement, and bank details.
  5. How long does it take for loan disbursement?
    The time taken for loan approval varies from lender to lender. For faster approval, it is recommended to submit all the necessary documents. Once this step is completed, the lender verifies all the provided details. Thereafter, the personal loan approved and consequently disbursed to the applicant.
  6. How does loan repayment take place?
    Borrowers have to repay the principal amount along with interest during a period known as loan tenure. Every month a regular payment has to be made in the form of Equated Monthly Installment (EMI). These installments may be made either through an electronic transfer, post-dated cheque or any other form stated by the applicant. In case payments are not made within the stipulated time, a late payment charge is levied by the lender.

It is important to have knowledge about loan-related details while availing of financial aid. You may visit the lender's branch or the website to obtain such information. Additionally, you may also opt for personal loans online to save time and effort.