Sign In
By signing in or creating an account, you agree with Associated Broadcasting Company's Terms & Conditions and Privacy Policy.
By signing in or creating an account, you agree with Associated Broadcasting Company's Terms & Conditions and Privacy Policy.
Kolkata: Consumption is the lifeline of the Indian economy with about 60% of the GDP being attributed to private consumption. At a retail level, much of the consumption is fuelled by personal loans. That AI-equipped smartphone, or latest laptop, or big-screen TV set, or refrigerator, or 2 tonne AC set or latest generation washing machine -- anything that you desire to possess can be quickly obtained with a personal loan. One can also reach out for a personal loan not only for impulse purchases but also for emergency situations such as a surgery or even going on a honeymoon, or footing the bill for a wedding or admission fees in an educational institution.
As the name implies, it is given to a person and not for any specific purpose like a home loan or a vehicle loan. If your application for a personal loan is approved, the amount is transferred to the bank account of the applicant. Moreover, a personal loan is an unsecured loan -- one for which the borrower doesn't have to pledge any collateral asset. The implication is clear: a personal loan is more risky for a lender compared to a secured loan such as home loan and vehicle loan.
The interest rates of a personal loan is higher than secured loans -- a fact attributable to the higher risk to the lender. Almost all banks and NBFCs offer personal loans. The interest rate of a personal loan is only lower than those applicable to a credit card. It automatically follows from this feature that one should apply for the base minimum that one needs as personal loan since you have to repay every rupee at a comparatively high rate of interest.
Banks and NBFCs are always prompt to process personal loans. The loan application process is typically quick and can even be over in a few hours. It is common experience for one to go to a store, select a product and then a loan is approved at the spot over a few phone calls and submission of documents and you can walk out with the product of your choice.
Some of the documents commonly needed to apply for a personal loan are documents to establish identity (such as Aadhaar card, passport, voters identity card, driver's license etc), proofs of address (may be an electricity bill or agreement of rent or deed of hour -- Aadhaar/passport also suffices) proofs of income (such as salary slips, bank statements etc), identity card from office, and income tax payment proof (income tax returns for the preceding two years).
The most common factors that can make or mar your application for a personal loan are: Credit score, income and whether you are already repaying any other loan. Since it is an unsecured loan, the credit score perhaps becomes more important is evaluating your application. Credit score reflects your past credit behaviour -- whether you have paid earlier EMIs on time etc -- and is extremely significant to decide your application. If you are already servicing a debt, your chances of securing an approval for a new loan goes down. If you have enough salary from which you can easily pay off your EMI, it becomes easier for you to secure an approval.
One essential thing to bear in mind is that a personal loan should not be taken in a hurry, or indiscriminately. Since a personal loan is expensive, it is advisable that one should try to raise the amount, or at least part of the required amount, from relatives. friends, associates before applying for a personal loan. It could well be the last recourse. It also follows that if a borrower has the option of raising a secured loan -- he/she has an asset to pledge -- it is always advisable to go for a secured loan since the interest rates will be far lower.
On a macro-level, personal loans are a great enabler of consumption. Millions take personal loans to buy a whole range of goods and services, from white goods (AC, fridge, washing machines) to consumer electronic items (TV sets, phones), take a vacation or even go on honeymoon. Since there are no conditions on the end-use of the money taken as a personal loan, it can be spent on virtually anything -- from meeting hospital bills to footing admission fees in a school or college. Therefore, it boost consumption and can be a healthy trigger for the economy within certain parameters.
