Delhi is either the most or the second most productive metro city in India, according to the recent estimates of the metro economy. It is India’s largest Metropolitan city, and according to the estimates of UN World Population Prospects, it accommodates nearly 30.7 million people who have migrated from all over the country, leaving their home towns attracted by the plethora of jobs created by Delhi’s service sector, owing to its service sector, which is the most important part of Delhi’s economy.
These migrants, who often work from paycheck to paycheck, find themselves in a fix if they encounter sudden, unplanned, or emergency expenses in which they might need considerably more money. In such situations, taking a personal loan might be considered.
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What is a Personal Loan?
It is a specific amount of money that an individual borrows at a specific Interest Rate and is bound to return within a given period. Many banks and Non-Banking Financial Organizations (NBFs) provide personal loans, giving the borrowers a wide range of options to compare. One factor that makes applying for personal loans much easier is that there is no need to offer any collateral to avail of such a loan. The borrower’s creditworthiness and repayment ability are the key factors that lenders look at when you apply for a personal loan.
How do Personal Loans work?
Personal loans have the same procedure as other types of loans. You apply for a loan, submit the documentation required, and then the bank checks your creditworthiness based on your Credit Score and makes an offer of the amount and the rate at which it will be provided. If you agree to the loan amount at the given interest rate, the funds are transferred to your bank account.
The repayment of Personal Loans is to be done as Equated Monthly Installments (EMI), the amount for which is pre-decided.
Factors affecting Personal Loan
Personal loan eligibility criteria such as the loan amount, interest rate, repayment tenure, and monthly installment are not the same for every individual. They vary from person to person based on many factors such as one’s credit score and debt history, to name a few.
- Credit Score: It is a three-digit number designed to measure your credibility in the eyes of lenders. It is a crucial feature that lenders take into account before providing loans. A score of 700+ is considered an ideal Credit Score. It is one of the most important personal loan eligibility criteria.
- Your Level of Income: Income level has an inverse effect on the interest rate. The higher the income, the lower the interest rate. People with high-income levels seem more credible to lenders as they are less likely to be unable to pay their bills on time. For instance, your income is 50,000 per month, and you’re getting a loan at an interest of 14% per annum. But, if your salary was 75,000, you might get the same loan amount even at 12%!
- Repayment History: Lenders even might check your repayment history, such as credit card bills, house loans, etc., to check if you are regular with your payments. Hence, one should always try to pay their bills on time as failure in doing so might become a factor in getting your loan application rejected.
- Credit Card Defaults: A credit card default is a condition that occurs if a credit card holder fails to make payments against the outstanding bill of the credit card for a long period. A default condition can occur if your payments are pending for about 6 months. Lenders might check default history for up to 12 months. Credit card defaults might decrease your chances of getting a loan.
- Your Organization’s Reputation: The organization you are associated with is also an important factor that plays a role in the loan process. Suppose you work for a well-reputed organization, and your chance of getting a loan increases. This indicates that your income is more stable.
Top 5 reasons to apply for a Personal Loan
Personal loans can be availed for basically any reason. There is no specification on that part. Following are 5 most common reasons for which people apply for personal loans:
- Business Expansion: The entire country, including Delhi, witnessed an entrepreneurship wave in recent years. Hence, more and more entrepreneurs apply for a personal loan in Delhi for business expansion purposes.
- Funds for Higher Education: Higher Education can cost anywhere near 18 – 20 lakhs, a considerably large amount of money for many middle-class families in Delhi. But that does not mean compromising your child’s education. The higher education expenses can be covered by applying for a personal loan in Delhi.
- Funds for Home Renovation: If you wish to change the look of the house or get it repainted for an upcoming family function but cannot arrange a large sum of money, apply for a personal loan in Delhi. This way, you can cover the expenses in small monthly installments rather than all at once.
- Loan for a Wedding: In Indian culture, a wedding is no less than a grand festival. Everything has to be perfect at the big fat Indian wedding. And in Delhi, it’s even more of a deal with everyone wanting a picture-perfect, dream wedding. This, too, is one of the wide variety of expenses that can be covered by applying for a personal loan in Delhi.
- Loan for the dream holiday: You don’t have to have a sudden emergency or an unexpected event to get funded. Even if it’s your dream holiday, you’ve wanted to go for so long but couldn’t stop thinking about the expenses. Personal loans got you covered. You can go on your dream holiday without spending a large sum of your savings.
These days, applying for personal loans has become almost like child’s play. You can now apply for personal loans without physically visiting the bank. Most banks provide home banking services, including personal loans, where you can get a personal loan almost instantly within the comfort of your home.
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