Personal loans are available for a lesser amount ranging from Rs 10,000 to Rs 2,00,000 are called short-term or small loans; they are increasingly popular nowadays because of their easy availability. Both salaried employees and self-employed individuals can opt for small personal loans online. Borrowers benefit from the favorable terms and conditions while taking a small personal loan, and it is also available for the borrowers taking loans for the first time. Let’s know a bit about the nature of personal and small personal loans, as they are almost the same.
General information about what is a personal loan and how to get a personal loan?
A personal loan is an installment loan that provides you with a desired and fixed amount of money. You can avail of a lump sum amount ranging from 15,000 to 2,00,000. Personal loans are unsecured, meaning there is no need to provide collateral and guarantors to secure funds. The repayment tenure is usually around one year to ten years. A personal loan is multi-purposeful. You can use it for any reason you want without hesitation, But some lenders might impose restrictions to follow ethics and rules. Your interest rates are determined and fixed; They cannot be changed while repaying the loan.
Applying for a personal loan is almost the same as applying for a credit card. You need to fill in the relevant details of the desired loan, financial information, and your personal information. Before you are lent the approval of the loan, the potential lenders will run a hard check on the credit history and credentials. It would help if you often had a credit score of 600 and above. If you fulfill the mentioned score, you’ll be considered an eligible borrower with good credit scores. The lender will set your loan terms, interest rate, and amount. You can sign in to a Bank rate account to get a pre-qualification for the desired personal loan in just 2 minutes.
You’ll receive the fund instantly and must start paying it back consistently. Your monthly interest is the same amount until you repay the loan ( a portion of interest charges and your principal balance).
Pros and cons of personal loan
Some of the Pros of small personal loans and personal loans are
Flexible and versatile –
Most of the loans are used only for certain purposes. Still, personal or small loans are used for various purposes like buying home appliances, personal gadgets, consolidating debts, paying bills, medical bills, etc.
Lower interest rate and high borrowing limits –
Personal loans charge lower interest rates compared to credit cards. In a report in September 2021, the medium personal loan rates ranged from 10.46 percent, and the credit card medium rate of interest was 16.27 percent. Advantageously a person with good credit history and score can avail of a personal loan with an interest rate ranging from 6 percent to 8 percent.
Easier to manage –
One of the causes for personal loans to be considered is that they can consolidate their debts by maintaining multiple credit card accounts. A personal loan with a monthly fixed interest is much easier to access and manage than other loans and credit cards with high-interest rates. People can choose a personal loan and manage a decent monetary life without money hassles.
Some of the cons of small personal loans and personal loans are:-
Interest rates can be higher in some instances –
Personal loans do not always charge you the lowest rate. It’s true if you have poor credit scores or bad credit history, were not timely in repaying your loans previously, and have many debts. In this situation, you may be charged a higher interest rate than credit cards.
Fees and penalties are charged high –
The borrowing cost could be higher if you’re charged with penalties and fees. Certain loans charge you an origination fee ranging from one to six percent, and the processing fee will either be subtracted from the loan amount or the monthly interest rate charges.
Payment can be higher than credit cards –
Credit cards charge you minimal monthly repayments and no time limit for paying the remaining amount in full. Personal loans charge higher fixed monthly payments in some cases or lesser interest payments depending on credit history, and the loan must be paid back in full by the end of the loan tenure or loan term.
What are the characteristics of small personal loans?
- The amounts availed in small personal loans range from Rs 15,000 to Rs 2,00,000.
- It is the best option for the loan borrower willing to take a loan for the first time. First-timers who have no credit history or are willing to build their credit history.
- The loan tenure of a small personal loan is 12 months to 2 years.
- A small amount of personal loan is cost with a low-interest rate.
- As per the borrower’s credit history experience, Loan EMIs are customizable.
How can you apply for a small personal loan online?
- First, you must choose your desired lender or bank from which you will be borrowing the loan amount.
- Next, go to the decided official lender’s website, then click on the “Apply Now” link.
- You are now on to an application, where you’re supposed to fill in all your necessary details to proceed with the loan application.
- You will specify the amount of loan you’re willing to take and choose loan tenure, after which the lender can set a specific interest rate for the loan after considering all the financial credentials and credit score.
Apart from choosing to apply on official websites, you can also choose to take a loan from a third-party lending institution without any processing fee in some cases. Applying to these aggregators is much easier than other platforms. One of the best baking aggregators is Buddy Loan. They have a support team who will solve all your queries. You can check their website, Buddy Score, to get the best credit scores.
The benefits of applying for small amount personal loans are
- Quick approval – personal loans generally have a quick loan approval You can take advantage of comparing and meeting terms and conditions from various financial companies, NBFCs (Non-banking financial companies), and Banks. You’re less likely to be delayed with the advantage of having multiple financial firms.
- Less cost EMI’s (Equated Monthly Instalment) – You can avail of EMI’s (Equated monthly installments) starting at Rs 1,400 on the loan platforms. The starting range differs for different lenders.
- Flexible repayment option – Personal loan repayment tenure avails you of the range of tenure between three months to five years and is availed with a flexible repayment option.
- Swift and Minimal documentation – Getting approved for a personal loan is much easier when you have the accurate set of documents required. It requires days maximum to get a loan nowadays, and the documents required might vary depending on the lender.
- Customer care team – Personal loan benefits come with a support team that will guide you, give you all the information regarding the loan you desire to take, and clear all the queries. So you can have clarity before you opt for a particular personal loan. They are a pro-active team.
- Simple procedure – It is an easy and accessible loan procedure for every loan borrower.
- Safety and its high rate of approval – Unsecured loans like personal loans in small amounts have a high approval rate. This platform is free from unauthorized and illegal activities and is a safe, authorized loan.
- Competitive interest rate – These loans have a high approval rate in a shorter time. If you’re a person with good credit history reports and a good prestigious place, you’ll be able to avail yourself of a personal loan for a low-interest rate starting from 11.99%.
- 100% transparency – Lenders are true to their terms and conditions; they keep all the information relevant and 100% transparent. The borrowing process is completely transparent, and all the information is given to the borrower. It aggregates details of borrowers and lenders to each other to make it more transparent.
- Collateral free loans – Small amounts of personal loans do not need any collateral, mortgage loan, assets, or guarantor.
- Paperless approvals – There’s no need for paperwork like in traditional times; potential candidates traditionally had to wait almost two weeks to get loan approval and a lot of paperwork.
Who can benefit from taking a small amount of personal loan?
Any citizen who requires a personal loan can apply to fund their personal or professional life needs. A business person can apply for a small personal loan to invest and fund their working capital like cash flow or financial funds in an emergency or shortage. The salaried employees and self employees professionals can apply and avail of small personal loans for any personal and financial purpose like – buying a washing machine, TV, laptop, or any other customer appliances for their daily purpose.
Eligibility criteria for a small personal loan
The potential applicant
- Should be a minimum of 21 years old
- Must be a resident of India
- Should have an excellent credit score to avail of the advantages.
- Must have an account in India from an authorized Bank.
- Should have a minimum earning of Rs 18,000 monthly income.
Important document requirements to apply for small amount personal loans.
- Identity proof – Aadhar card, Pan(Permanent account number) card, voter ID (Identity), Passport.
- Age proof – Aadhar card, driving license, voter ID(identity), Passport.
- Bank statements for the previous six months
- Income proof – (salary slips of the previous three months or the last year, ITR(income tax return), or Income declaration.
- Few passport-size photos
The bottom line
To this, we conclude that Small personal loans are beneficial to many citizens at the time of money required for various purposes according to the individual. Also, small loans are availed for a short time, and the best interest rate depends on the individual. So small personal loans are for everyone.