Data from the RBI reveals an increase in takers of personal loans in India in the last decade. This can be credited to the fact that it is both a collateral-free loan that doesn’t risk your assets, and is offered instantly online by lenders who often disburse funds the same or next day.
RBI guidelines for personal loan
The RBI has issued some personal loan rules and regulations in india to the lenders and borrowers so that process is beneficial for both the parties. Here are some important points from RBI:
- All loan applications must include the required information indicating the fees and other charges. This will help the borrowers to compare and make wise decision while opting for a loan.
- The verification process must be within a specific period. And if additional documents are required, lender must contact the borrower immediately.
- Borrowers must read the loan agreement before signing it.
- Lenders should not discriminate based on caste, religion and gender.
While personal loan rules and regulations in India are usually governed by the RBI and almost identical amongst lenders, it is important you know the more detailed loan terms and conditions set by your specific lender before you sign the dotted line. So, keep the following in mind.
The use of the loan
The terms and conditions of a personal loan specify that it is versatile and you can use it for any legal purpose. You can use it towards personal needs like paying your child’s school or college fees, renovating your home, or even taking an overseas vacation.
Additional Read: Personal Loan Glossary & Terminology
The eligibility criteria to avail of the loan
Since a personal loan is unsecured, lenders require you to meet personal loan eligibility criteria. You can negotiate for better interest rates and other terms with your lender, should you find yourself meeting every criterion listed here.
To avoid hassles, choose a lender like Bajaj Finserv, which offers fast approval based on simple eligibility criteria that are easy to match up to. To be eligible you must:
- Be an Indian resident aged between 21 years to 80 years*
- Be employed in an MNC, public or private organisation
- Meet the minimum salary requirement based on your city of residence
Additional Read: Get a personal loan with low CIBIL score
The repayment of the loan
This will tell you the interest rate applicable on your personal loan and how your loan needs to be paid off. While certain sections specify the type of interest rate and an intimation of charges, other parts may state that your personal loan will need to be repaid in the form of EMIs or in the form of a lump sum. These conditions vary based on the personal loan you are applying for and the lender you are applying with.
For instance, Bajaj Finserv offers a Flexi personal loan where you can choose to pay interest-only EMIs for the initial part of the tenor and repay the principal later. The terms and conditions for this loan will be different compared to those for a regular personal loan.
Foreclosure, prepayment policies and their charges
This section tells you whether you can make part-prepayments and foreclose your loan. It also tells you of the cost involved in doing so. Some personal loans like the Flexi personal loan facility allow you to make part-prepayments and re-withdraw the funds when needed. Here, you can also find lenders specifying how much of a part-prepayment you can make, so it is best for you to pay close attention. Making part-prepayments or a foreclosure can often help you become debt-free faster and save money.
Other charges applicable
The cost of taking a personal loan doesn’t end at interest charges, foreclosure and part-prepayment charges. There are processing charges, penal charges, statement charges, EMI bounce charges, and more. Thus, it is important you read all the personal loan terms and conditions relating to the various charges involved, whether you are likely to incur them or not. It is here that you can spot any unnecessary hidden charges and avoid borrowing from a lender that will make your loan experience an expensive one.
Additional Read: Best personal loan lenders in India
If you are looking for a lender with zero hidden charges, consider Bajaj Finserv. Here, your expenses are kept to a minimum and your repayment is affordable despite the high sanction of up to Rs. 40 lakh. What’s more, you can check your pre-approved offer to enjoy a customised deal that caters to your unique requirements and fiscal potential.
Now that you are aware of the basic loan terms, you are all set to make good borrowing decisions. Just ensure you read the fine print thoroughly before signing the agreement.
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*Terms and conditions apply