The finance ministry of India has made several changes to improve the banking systems with more transparency and easy taxation. The demonetization effects have also given banks opportunities to make a huge collection on liquid cash, which can be invested in loans.
Scenario of Personal Loan Given by Banks
Banks are lending loans to people who have maintained better credit scores to avail benefits like low-interest rates personal loans, and other loans. Banks have a lot of offers in terms of loans, due to an overload of cash in the bank’s accounts; and banks are looking for an opportunity to help the people who are in need of cash and have a capacity of pay it off with reasonable interest.
Especially the private banks have offered plenty of unsecured loans on a reasonable rate of interest. The banks are also offering credit cards to earning people whose credit score is in place and can pay their bills on time. Moreover, paying your outstanding on your credit card bills on time will help you improve your credit scores and help you to avail other loan benefits.
Secured Personal Loans
The personal loan is normally of two types; one is the secured loan in which the borrower has to put collateral against his loan. In a secured loan you have the collateral as say a house; fixed deposit or gold etc. In such a scenario, the banks usually offer loans very quickly.
The lender has a right of seizing your collateral if you are unable to pay off the loan outstanding, even if the remaining outstanding is less than the collateral, and then only the outstanding is taken by the bank and remaining is paid back to the beneficiary. In terms of house and gold, it is first converted into cash and then settled. The benefit of getting a secured loan is that the interest rate is lower in comparison to an unsecured loan.
Unsecured Personal Loans
In an unsecured loan, there is no collateral involved; and the risk for the lender is high. Therefore, the rate of interest is very high in this situation. The lender has nothing to recover the amount if in case you are unable to pay, hence they keep a high rate of interest that helps them recover most of the amount from you.
But in any case, the interest rate on a personal loan depends on your credit scores. Also, there is no tax exemption on a personal loan.
Normally the documents for any personal loan can be minimal. The list mentioned will only give you an idea of what all documents you need to keep in mind in order to get a loan:
●Complete application form with on passport size photograph
●Proof of Identity
●Proof of Present Residential Address
●Proof of age
●Financial/Income documents required for resident Indian
Also, we can all be in an emergency situation wherein we need cash immediately. While you may have an option for breaking a Fixed Deposit, but the best move will be to get personal Loan against your Fixed Deposit with the bank.
The bank that keeps your fixed deposit will definitely be able to assist you with this without any trouble. Moreover, personal loans against fixed deposit come with a lower interest rate as compared to unsecured personal loans.
Thus personal loans can really prove to be of help. But it certainly is important that you take one only after making a detailed comparison of what different banks are offering and accordingly choose what best suits your needs.