What are the Different Ways to Get a Personal Loan in India?
A Personal Loan can be applied for any purpose – be it a home renovation, a wedding, buying a gadget or going for that holiday. Your lender does not restrict the usage of funds in any form.
Besides your bank, you can avail loan from other banks, NBFCs, financial institutions, etc. Let’s explore in this article different ways of Availing a Personal Loan in India. We will also discuss variants such as secured loans.
1. Personal Loan from a Bank
Of course, this might be the first option that comes to your mind when you think of a Personal Loan. Banks are your go-to lenders when you need some extra cash. Not only is this the easiest (less documentation and easy to apply, thanks to the internet) to get the required amount, but it is also the quickest (with the correct documentation and the right relationship with the bank, you can get the loan amount in as quickly as three hours!).
Interest rate: Personal loans have a slightly higher rate of interest due to their flexibility, but it is considered one of the easier ways to get a Personal Loan
Benefits: You can borrow the money from your own bank, really quickly.
Disadvantages: The rate of interest, processing fee, and penalties can be high. There’s a price tag associated with each entity, and none of them come cheap!
2. Personal Loan from your Employer
Another quick way to receive a Personal Loan is to ask from an employer. Most of the reputed employers give you the option of an advance, interest-free loans in case of emergency. This is known as advance salary, can be as much as your 1-6 months’ takeaway, and will be deducted from your salary with a convenient tenure. Some companies even give the employee a chance to choose their own tenure to return the loan amount.
Interest rate: Usually it is 5-8%, but it could also be interest-free.
Benefits: This sort of loan is effortless to customize, and you can ask your employer to credit the money in your account as quickly as possible. This is possible because the employer already has all the details about you.
Disadvantages: This loan amount is a taxable amount as part of your salary. It will be tax exempt only if the funds are used for medical treatment or in case, the amount borrowed is less than Rs. 20,000.
3. Personal Loan Against Securities
If you have shares, mutual funds, and FDs, you can pledge these assets as collateral or security and take money from the bank. Allahabad Bank Personal Loan offers such options to individuals. When you have mutual funds and shares, the bank will loan you up to 50% of their value. In case of a Fixed Deposit (FD), the bank will loan you almost 75% of this amount. The loan amount is transferred to your current bank account, and you can access the money from here.
Interest rate: Usually the interest rate fluctuates between 9-15%.
Benefits: The interest rates are slightly lower, and the amount is disbursed pretty quickly to your account.
Disadvantages: In a situation where the portfolio value decreases, you will require to cover the gap by pledging in more shares or funds.
4. Top-up Loan
This is a type of loan that is offered by certain banks. A good example isof Central Bank of India Personal Loan. In this case, you can take a top-up loan of about Rs. 50 Lakhfor a maximum of 20 years or until you reach the balance tenure of your original home. This option is viable only when you have repaid the original loan.
Interest rate: The interest rate varies between 9-13%.
Benefits: This loan is disbursed in a very short amount of time since the bank has already verified your documents and has all of them in the safe custody of the bank.
Disadvantages: Any defaults while paying the loan could come with a hefty price tag, and you may have to pay a lot of penalties.
5. Loan Against A Property
This loan is especially recommended when you want a large sum of money. This loan is taken against your property and depending on its value; you could either get Rs. 5 Lakh or Rs. 1 crore as your loan amount. The loan has to be repaid within 15 years and the minimum time to return it is just 2 years!
For loan against property, you can use a residential property or even commercial property. The amount that you will receive from the bank varies, but mostly it is 65% of the value of your property. It is also important that for the LAP, the property must be insured.
Interest rate: 9.5-13% p.a.
Benefits: You can get much larger loans, and the interest rate is slightly lower than other types of loans
The process of getting the loan is fairly long, and it could take from 3-10 days for the loan amount to be disbursed to the account.
Each of these loaning methods has their own pros and cons, and we hope that you are now better informed about them to choose the way that works best for you.
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