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Do You Know These Things About Personal Loan

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Do You Know These Things About Personal Loan

Financial institutions offer a variety of financial products. One of these is personal loan. Banks give two types of loans. First is secured loan and second is unsecured loan. Banks usually take a guarantee in secured loans.

Home loans and auto loans come under the category of secured loans. While no guarantee is taken in unsecured loan. This is given after looking at the loan repayment capacity of the customer. Personal loans come under the unsecured loan category. Let us know some important things about it.

1. Banks and non-banking financial companies (NBFCs) offer personal loans for a variety of needs. These needs include weddings, home repairs, vacations, etc.

2. Personal loans are given without any guarantee. This means that banks do not ask you to pledge any asset in return. In this way, the hands of the banks are tied in their recovery. This is the reason that the rate of interest is higher in these as compared to other secured loans.

3. Banks have set very strict criteria in giving personal loans. In these, the income, credit and employment history of the customer and the ability to repay the loan are seen. The loan is approved only after reviewing all these aspects.

4. Apart from interest, customers also have to pay loan processing fees. Bank or NBFC can charge prepayment penalty if they want. However, most banks do not levy prepayment penalty. Paying off the loan ahead of time is called prepayment.

5. Many times banks provide pre-approved loan facility based on the financial history of the customer. In this, not only affordable interest rates are offered, but there is not much paperwork involved in giving the loan. In this type of loan, money is added to the customer’s account in three to four days.