An Overview of Personal Loan Terms and Conditions

Personal loans have grown in popularity because they can be used for almost any purpose. They are very easy to get and require a few documents. Many institutions give personal loans via online or offline means.

The personal loan application forms come with a document stating the personal loan’s terms and conditions. You should keep this document for future reference. It contains vital information regarding the loan you have obtained. If you have a question, there is a strong chance the terms and conditions will have the answer.

What is a Personal Loan?

Personal loans are mostly unsecured loans. This means they have no collateral. As a result, they have higher interest rates than secured loans. Banks, lenders, and credit unions offer this type of loan. They are very flexible and can be used for a variety of things. Depending on the lender, one may be able to borrow a substantial amount. 

Personal loans usually have short or mid-term payment terms. One’s credit score, credit history, and income are all factors that affect how much one can get and the interest rate one pays.

Personal Loan Terms and Conditions

Here are some personal loan terms and conditions that you should be aware of:

The Credibility of the Lender

Many monetary firms give personal loans at fair rates. Some make enticing offers and force people to accept them right away. It is very useful to sign a contract using the phone. But, you must be extra careful about who is offering to lend. Read the fine print to make sure the lenders you are trusting are not scamming you.

Be Aware of The Interest Rate 

This section covers the amount of interest you will pay on your loan. It contains data on the interest rate as well as the Annual Percentage Rate (APR). The interest rate is included in the annual percentage rate. But, it also contains lender fees and other charges. 

When it comes to personal loans, the interest rate is always the appealing factor. But, the flat rate that is given to you might be tricky. This is due to the chance of hidden fees in the offer. It would raise the interest rate.

Prepayment Details

Personal loans have prepayment fees. It is also known as foreclosure fees. Lenders will charge you this fee if you pay off your loan early. If you are planning to use this option to pay off your loan early or expect to be able to pay off the entire amount after a specific event occurs, you will have to incur a penalty.

In this case, you will need to fully grasp the penalty charges. You should choose a lender with low or no foreclosure fees. Prepayment is a positive step toward paying off a loan But, be aware that most lenders will not provide this option until a certain number of EMIs have been paid.

Hidden Fees 

Personal loans have extra charges apart from the rate of interest. There is a processing fee, insurance fee, service fee, and other miscellaneous charges that are not usually explained. It’s also critical to check these charges. After your loan is approved, most lenders debit the processing fee from the loan amount. They deposit the rest of the money into your bank account.

Also, the final monthly EMI might include extra charges. These charges are usually explained in the personal loan terms and conditions. You will also find various penalty fees you might incur and when. Make sure you understand all the charges you will have to bear.

Loan Usage

You should check to see if the loan agreement states what you can and cannot do with the personal loan. Generally, it should state that one may use it for any legal reason without restriction. However, if it states that it cannot be used in some cases, the person should be aware of this before signing.

Say No To Faulty EMI Schemes

There are some eye-catching zero-interest EMI schemes. These are very popular among people. People believe they will not have to pay any interest on the product they buy. This is a very well-thought-out scheme that has puzzled many. They are unaware that they are being fooled into taking out what appears to be an interest-free loan. 

Such products have high processing fees, flat fees, administrative costs and so on. People should go over the loan agreement with a fine-tooth comb. They should ensure that they fully grasp the terms and conditions before signing.

Personal Loan Documents

A lender will need KYC (Know Your Customer) documents. It includes a driver’s licence, voter ID, Aadhar card, and so on. Aside from that, salary slips and bank statements would be needed. As a result, when applying for a personal loan, you must have these documents on hand.

Conclusion

A personal loan can now be obtained quickly and easily. The loan application process can be done online from the comfort of your home or office. Most loans can be availed within minutes of being approved. 

Checking all personal loan terms and conditions thoroughly may be time-consuming and stressful. But, it is a valuable practice that will benefit the person in the long run. Be sure to properly read the fine print before signing the document.

One can visit the Piramal Finance website for more details related to a personal loan’s terms and conditions. They can also explore their products and services.