Get rid of all hassles in your way of taking a loan. Here we bring to you all some important details that will guide you on how to take a loan from a bank. You can also take loans from a certified NBFCNon- Banking Financial Company. Check out the various types of loans and how to apply for them.
What is a Loan?
A loan is a sum of money that one can borrow from a company or any person. You are bound to pay back that money with interest in a said period of time. So, a loan consists of three main components – a principal amount or the borrowed sum of money, rate of interest and the time (duration for which the loan is taken).
Types of Loans
Loans can be broadly classified into 2 categories
SECURED LOANS UNSECURED LOAN
The one who borrows money pledges some asset/collateral. This acts as a security for the loan. No collateral/ asset is pledged. It is easily approved. The approval process can be difficult. This loan has a longer repayment term. This loan usually has a shorter repayment term. The interest rates are lower. Higher interest rates. Furthermore, on the basis of the repayment period, loans are of the following types
REVOLVING LOAN TERM LOAN
In this type of loans, you can spend the money, repay it, and spend the amount again as long as you do not surpass the limit. You have to pay back the loan every month in definite equal monthly instalments (EMI). This is decided at the time of taking a loan. Example- Credit Card Example- Car Loan Interest rates are higher. Interest rates are lower
Some common types of loans are
1. Personal Loan
2. Car Loan
3. Home Loan
4. Business Loan
5. Gold Loan
6. Education Loan
Some Important Terms Involved in Loan Taking
Principal- This is the amount of money you borrow at the time of taking a loan. i.e., the money before interest. Tenure- It is the time in which you are supposed to pay back the loan. Rate of Interest- It is the rate at which interest is charged on your loan. It is calculated on the principal amount.
EMI- EMI stands for Equated Monthly Instalments. It is the money that you pay every month towards the loan you opted for. This amount includes some principal + interest Down Payment- This is the money that a person has to pay by himself i.e., from his/her pocket when purchasing something expensive. For instance- you are buying a flat worth Rs.80 lac, the bank agrees to give you 70 lacs, the remaining 10 lacs is the amount you pay from your side. This is called a Down payment. Penalty Fee- A bank charges a penalty fee when a borrower fails to deposit your monthly instalments timely.
How to Take Loan in 4 Easy Steps
It is much simpler to take a loan from a bank now. Here we bring to you a few important factors that you must consider before applying for a loan-
Research on the Interest Rates offered- You must inquire and compare interest rates. In addition to this, the tenure, EMI, and other charges charged by a bank or NBFC are important to know beforehand. Choose the plan that best suit you. Look for lower rates of interest. Click on the link 🡪online EMI calculator . This will help you calculate your instalments.
Credit Score- One must have a clean background when applying for a loan. A pending loan can lead to problems in your fresh loan taking process. Moreover, if you have some other loan linked to yourself as well, your record of repayment is also checked. Timely repayments add to your credit score. A score of 750 is a must.
Weigh Your Financial Status- Be well aware of your financial situation. It is better to take loans that suit your current financial status. Such loans are easy to pay back. Once you are clear with all the terms and plans, it is time to apply for a loan. Follow the below-mentioned steps to take a loan and it will be easier than ever.
Determine your Loan Value
The first thing that one has to decide on is what type of loan he/she requires and how much. For instance- you have to buy a flat worth Rs. 80 lacs. Now plan on how much you need to borrow from the bank or NBFC. Suppose you have 10 lacs with you. You can use this Rs.10 lac as a down payment. Now you require a loan of Rs. 70 lacs from the bank or loan-giving company.
When you have decided on how much money you need in the form of a loan, you must know about the eligibility criteria.
Age 23 years to 58 years 28 years to 65 years Income Rs.25,000 Minimum turnover of Rs.40 lakhs Credit score Above 750 Above 750
Reach Out to the Bank
Once you know that you are eligible you can reach out to the banks. For this, you can visit the bank branch or the company branch. You can also apply for a loan online. Get a clear idea of the EMI, rate of interests, and tenure to match your monthly financial income.
Submit Documents and Finalize
Lastly, you are supposed to submit the document. Given below is a list of important documents for taking a loan. Submit the documents and finalize the deal
Application form with recent passport size photograph. Application form with recent passport size photograph. A self-certified copy of your Identity proof and Address proof A certified copy of your Identity and Address proof Bank statements of last 6 months Bank statements of last 6 months A cheque of the Processing fee Processing fee chequee A copy of the Latest Salary Slip A copy of the Business proof Form 16 Last 3 years Income Tax returns (self and business) as well as 3 years Profit/Loss and Balance Sheet.