Different Types of Personal Loans

Personal Loans

Personal loans are easy solutions to all your money-related problems, which can unknowingly occur in any individual’s life at any point in their life. It can be a health emergency, marriage expenses, a fancy vacation, higher education loan, debt consolidation loan and small personal loan. Though, an interesting fact about a personal loan is that, unlike specific loans like a home loan or a student loan, these are best personal loans and can be used for anything. Sometime it is little difficult to get the personal loan because it does not define our need to the lender. That’s why rate of interest is higher in personal loan from any other type of loan. 

Moreover, when you are availing from an instant personal loan approval app, they will provide you with zero or very minimal collateral security requirements. In India, personal loans vary comprehensively.

 You all must be knowing, several new and modified forms of availing personal loans have emerged as the fintech landscape evolves. Today an individual can get a personal loan for various purposes instantly without any hassle. The nature and formalities of the personal loan vary according to the need of the individual. 

Mostly, all the banks and financial institutions offer various types of personal loans depending upon what are the customer needs and requirements and also depending upon the credit score of the individual. 

Here are some popular categories of personal loans:

  1. Based on Collateral or security requirements 

The personal loan can be categorized into two types based on the requirements of collateral or security, in the form of your car or home loan:

Unsecured personal loan

An unsecured personal loan is when an individual borrows money from an institution without offering collateral or security to the lender. In unsecured personal loan, lender check your credit score to ensure that you have a good repayment history. Borrower need to maintain 750 credit score to apply for unsecured personal loan. There are two type of unsecured loan is

  1. Business loan 
  2. Personal loan

Secured personal loan 

A secured personal loan is when an individual borrows money from an institution by offering collateral or security to the lender.

Usually, the unsecured loan is quite difficult to get and has a higher rate of interest owing to the higher risk to the lending organization, whereas the secured loan is mostly available at a lesser rate of interest. 

Different type of Secured Personal loan are mortgage loan, gold loan, loan against fixed deposits and loan against securities. 

  1. Based on specific objective or needs of the Individuals
  • Due to the Covid-19 pandemic, mostly both Covid-19 patients as well as the other individuals are seeking healthcare centers, are they are to their limit, and the ones who are there are so expensive.
  • In this kind of situation, it is important to have a medical loan, and in many institutions, it’s offered as a personal loan.
  • There is a vast scope of applications for a personal loan; many other types of “specific” loans are also available.
    • Here are some types of personal loans:
      • Medical Loans,
      • Shopping Loans,
      • Travel Loans,
      • Wedding Loans.

These loans are available at every institution, and you can get these without any hassle as compared to the other personal loans.

  1. Based on the Employment Status of a Customer
  • Based on the nature of employment, a personal loan and the rate of interest can vary. For example, the changes in terms and conditions and demarcations might be based on salaried professionals and government employees.
  • It may differ in terms of the interest rate, the maximum amount of disbursal, documentation required, etc.

Cosigned loans

A cosigned loan is a loan that has more than one party guaranteeing repayment. Lender may ask you to have a cosigner if you have bad repayment history to assume that cosigner will pay the loan if you default. For the lender, a consigner is a form of insurance.

Debt consolidation loans

A debt consolidation loan combines multiple loans into a single loan with a single monthly EMI. It also help you to reduce your overall monthly burden into one affordable Payment. 

  1. Documents required for salaried Applicants
  • Photo identity Proof- Passport, Pan card, Aadhaar card, driving license, Voter’s ID card [ Anyone].
  • Address Proof- Passport, Utility bill [ less than two months old], Aadhaar card, Driving license, Ration card [Anyone].
  • Income Proof- Salary slips [ last 3 months], bank statements from last 3 to 6 months [ showing salary credit].
  • Tax Paid- IT returns [ for 2 years], from 16 [ Anyone].
  • Residence Ownership Proof- Property documents, maintenance bill, Electricity bill [ Anyone].
  • Proof of job Continuity- Current employment certificate, current job appointment letter, experience certificate [ Anyone].
  • Proof of Investment [ if any]- Fixed assets, fixed deposit, shares, etc.
  • Existing Loans [ if any]- payment track record and sanction letter.
  • Photograph- one colored passport size photograph.
  1. Documents required for NRI Applicants
  • Identity Proof- a copy of the passport, copy of the visa.
  • Employment Proof- letter of appointment, job contract, labor/identity card [ if applicable], official email id, or HR’s ID.
  • Income Proof- last 6 month’s bank statements, last 6 month’s salary slips, or salary certificate.
  • Photographs- passport size photograph.

There are many more categories of applicants available; you can check them on policybaazar.com.

Rate of interest calculated on Personal loan

Interest rate on personal loan is calculated based on various factors such as your repayment history, monthly income, the amount being borrowed. Lenders usually prefer the clients who have good repayment history and have low credit risk – those who have repaid their previous loans or bills on time. 

Conclusion

As we all know, there are various personal loans available in the market that fill in an individual’s requirements and basics needs. Even there are many apps which have their tie-ups with brands like Myntra, Amazon, Flipkart, Makemytrip, etc. By opting for these, you can enjoy additional benefits and discounts with a loan ranging up to 2 lacs without any kind of paperwork.

Hope this information was useful, and you got clarity with the types of personal loans available in the market. An individual can get a personal loan of their choice based on their requirements and needs, whether it be a secured loan or an unsecured loan.