Making large expenses from savings may not always be possible. Wedding expenses, funding your child’s higher education or even renovating your home, are some such large expenses that you may not be able to cover with your savings. To ease the financial stress of such heavy expenses, one can always take out a loan. Let us understand the meaning of loans and how they work.
What is a loan?
A loan is an arrangement between a lender and a borrower in which the borrower agrees to pay back the borrowed sum in equated monthly instalments (EMIs) with an additional interest within a pre-set tenure. It is a short-term infusion of cash that must be repaid later, usually the principal and the interest payable. Know more about our personal loan
Understanding loan with an example
Borrower took a personal loan of Rs. 1,00,000 at 11% interest for 3 years, his total repayment will be of 1,17,859. The principal is Rs. 1,00,000, and interest amounts to Rs. 17,859.
What are the uses of loan?
Personal loans are versatile financial tools. They address immediate needs like medical emergencies, home repairs, and streamlining payments. They support major life events like weddings, offering timely funds. Personal loans enable education pursuits, covering tuition and materials. Moreover, they aid in improving credit scores when repaid responsibly. However, their convenience should be balanced with interest rates and repayment terms. Wisely allocate personal loans for essential, productive, or transformative purposes that align with financial goals, avoiding unnecessary debt and ensuring a stable financial footing.
What are the factors affecting loan eligibility?
Personal loan eligibility is determined by factors like credit score, income, employment stability, and existing debt. Lenders assess the borrower's ability to repay the loan. A higher credit score enhances eligibility, showcasing responsible credit behaviour. A stable income and employment history indicate repayment capacity. Lenders might consider the debt-to-income ratio to ensure the borrower's financial stability. Age, citizenship, and location can also impact eligibility. Meeting these criteria increases the likelihood of loan approval. However, borrowers should evaluate their financial situation, borrow responsibly, and consider the loan's purpose, terms, and interest rates before applying.
How to improve your loan eligibility?
Check credit score: Maintain a good credit score for higher eligibility.
Clear outstanding debts: Reduce existing debts to improve your debt-to-income ratio.
Stable employment: Lenders prefer stable employment; avoid frequent job changes.
Income proof: Provide accurate and updated income documents.
Lower credit utilisation: Aim for lower credit card balances compared to the credit limit.
Timely bill payments: Ensure timely payment of bills to establish reliability.
What is the loan process?
The loan process typically involves several steps. Firstly, individuals must submit a loan application to a lender, either through a physical form or an online platform. This application includes personal and financial information, such as income, credit history, and purpose of the loan. The lender then assesses the applicant's creditworthiness, considering factors like credit score and debt-to-income ratio. Based on this evaluation, the lender approves or denies the loan.
What Is a loan EMI?
EMI stands for equated monthly instalments. It is a fixed amount of money that borrowers need to pay to the lender every month, to repay their loan. EMIs help borrowers to repay their debt in a systematic and structured manner over a specific loan period.
How is an EMI calculated?
You can compute your monthly payments using a mathematical formula as follows:
E = P*r*(1+r) ^n/((1+r)^n-1) where,
- E is EMI
- P is the principal loan amount,
- r is the rate of interest calculated monthly, and
- n is the tenure/ duration in months
What are the factors that influence your EMI payments?
The following are the factors that can influence your EMI:
Principal borrowed: This is the total loan amount that the borrower has taken out.
Loan interest rate: This is the interest rate applied to the amount borrowed.
Tenure: The length of the loan, or the tenure, is determined by the borrower and the lender.
What are the types of loans offered by Bajaj Finance?
Bajaj Finance offers a diverse range of unsecured loans including personal loan, Insta Personal Loan, gold loan, business loan, doctor loan, and more. We also have a portfolio of automotive loans such as two-wheeler finance and used car finance.
Personal loan is one of the most popular products offered by Bajaj Finance. These loans are unsecured, which means customers do not need to pledge any collateral or need a guarantor to avail of one. Additionally, our personal loans come with no restriction on end-usage. Borrowers can get Bajaj Finserv Personal Loan of up to Rs. 40 lakh with minimal paperwork and quick approval. These loans have a flexible repayment term ranging from 6 months to 96 months. Bajaj Finance offers personal loans with 3 unique variants to its customers, including:
- Term loan: A term loan, is a regular personal loan, where you borrow an amount for a fixed period and repay it with fixed EMIs every month.
Know more about term loans
- Flexi Term Loan: With a Flexi Term Loan, you can borrow the amount from a sanctioned loan limit as many times as you need. Additionally, you pay interest only on the amount that you have utilised, and not the entire sanctioned limit.
Know more about our Flexi Term Loan - Flexi Hybrid Loan: This variant of a personal loan functions just like the Flexi Term Loan. The only distinction is that your EMI will be only of the interest amount during the initial tenure.
How to calculate personal loan EMIs online?
You can use the personal loan EMI calculator to compute your EMI payments. It is an online tool that helps you figure out your monthly payments without having to do the complicated calculations manually. By using this calculator, you can plan your finances effectively in advance.
Use Bajaj Finserv Personal Loan EMI Calculator to compute your EMIs instantly without any hassle.
