For most of us, the idea of applying for a personal loan is a scary one. Most of us would think of any and every reason to avoid availing a personal loan. However, a loan is not the enemy when you are in dire need of funds. Be it for medical emergencies or for future education, a personal loan can be the anchor for you during your troubling times.

Now, think about it. What would you do if are in such a situation? If it is a smaller amount, you would consider borrowing it from family or friends. However, what would you do if the amount exceeds beyond expectation?

Not to fret, because you are like thousands of people who find themselves in the same situation. Thankfully, you need not worry too much because there are banks and NBFCs such as Tata Capital that extend short-term loans personal loans.

There was a time, when applying for a personal loan was an extremely tedious process. As things have changed, you can apply a personal loan quite easily as terms and conditions are fairly simple and easy to satisfy. All you need is a reasonable credit score, documented source of minimum yearly income and proper KYC documents. If you have a past good relationship with the lender, that much better because you can get relaxations in terms including a lower rate of interest. 

Now, don’t jump into taking a personal loan simply because it is easily available. Before you apply for a personal loan you must consider how you are going to repay your personal loan as the loan comes with an additional outflow cost including interest and other costs such as processing fees and prepayment charges if you want to repay the personal loan before the end of tenure. Thus, you must take all factors into consideration especially the repayment carefully so as not to jeopardize your other financial commitments.

You can check with your lender for the repayment terms and carefully choose the one that suits you. You should consider the following

Repayment options

Repaying your personal loan is not a tedious task. Before you apply for personal loans, always use the EMI calculator to get an idea what your interest and your EMI on the personal loan along with the tenure, would be. Once you avail personal loans, you have multitudes of repayment options:

  • Step-Up EMI – you can pay lower EMI in the initial specified period of your loan and increase it thereafter. If you are in a job where you stand to increase your salary periodically you can choose this option
  • Step Down EMI – you can pay higher EMI in the initial specified period and decrease it thereafter. If you have a higher disposable income you can choose this option
  • Bullet Flexi EMI – you can pay principal along with EMI’s which can help you repay the personal loan faster. If you are in a position to receive lump sum amounts in the future you can choose this option. This helps you to repay your loan faster

Prepayment options and charges

Imagine getting a big bonus at work as congratulatory ‘job well done’. What would you do with that money? Buy something new for your family, head out for a celebratory dinner or maybe repay your personal loan? Yes, NBFC’s like Tata Capital give you a prepayment of personal loan option as well.

However, before you jump to this option, know that you can either prepay partially or fully with the following conditions

  • Partial prepayment – you can prepay after a cooling off period of 6 months or so. You can make prepayment of up to 25 per cent of principal outstanding without any charges and up to 50 per cent with 2 per cent on the principal outstanding as charges

 Full prepayment – you can fully prepay the loan with applicable charges which are typically 2 per cent on principal outstanding