Smart things to know about personal loans
A personal loan is given by a bank or an NBFC to an individual to meet any personal needs like funding a marriage, home renovation, vacation etc.
Since personal loans are not secured against any asset, the lender cannot recover the funds by selling anything. Hence, the rate of interest is higher than other secured loans.
2. Higher interest rate
Banks and NBFCs have set strict eligibility criteria concerning income, credit and employment history and past repayment capacity for availing personal loans.
3. Eligibility criteria
A loan processing fee has to be paid besides interest and lenders can charge a prepayment penalty.
4. Fee and other charges
Sometimes, based on the relationship with the lender and financial history, the customer is given the facility of a pre-approved loan limit.
5. Pre-approved loan facility
(This content is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)
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