Personal loan – A consumer credit that is granted for personal use; usually unsecured and based on the borrower’s integrity and ability to pay. As defined by the dictionary.com
It is the most common type of consumer loan. It is designed for people in paid employment/self employed with proven ability to pay and to assist them meet personal finance. Amount eligible to largely depend on salary or amount earned on regular basis. This is so because the debt service ratio like with other consumer loan is 1:3 in most banks meaning you can only use 1/3 of your income to service the loan.
1. Flexible Repayment Structure
Personal loan offers you a stretched repayment tenure without stress. You can have up to 60 months repayment option subject to retirement age of 60 years. The loan is deductible from your regular income over a period of time so you won’t have difficulties in paying your other bills. The loan can be taken even when you are close to retirement as long as repayment period fall within your working life.
2. No security/guarantor:
The loan is one of the unsecured loan type that you don’t need security or guarantor to get. All you need is evidence of being in paid employment or regular income as a self employed individual. Your employer will however commit to continually pay you salary to the bank that granted the facility and to inform the bank if you exit their employment before the loan is paid off. Some lender (especially micro finance banks) will take your post dated Cheques for loan repayment.
3. Faster Processing:
It is the consumer loan that is one of the fastest loans to get from most banks. It comes with minimal documentations and can be obtained within hours of request.
4. No equity contribution:
You will not need to provide equity contribution to obtain Personal loan. Your bank or lender may not be interested in the purpose for which the loan is required. Once you are able to meet the conditions, the loan is processed and disbursed to your account.
5. Competitive Rates:
Although the rates for personal loan as it is the case for all unsecured loan may be a bit higher compared to mortgage facility and other secured loans. The rate is very competitive as most lender use rate to compete for your patronage.
6. Loan Purpose Not Needed:
Your bank may not need to know the reason you are taking personal loan. The purpose can vary from payment of bills, finance home equity, buy home appliances, pay down other debts to finance vacation, buy home appliances, pay rents, pay hospital bills, pay children school fees, finance weddings, birthdays and lots more.
7. Loan Top Up:
Additional Loan can be taken while one is still being paid. It may however not be availed immediately, most banks will advise customers to wait for a minimum period of 6 months after the initial one was availed. This is called Personal Loan Top Up. Once you have paid the existing loan down to a limit, your bank can avail you additional loan to take care of personal needs once you have the capacity to pay and you have maintained clean record of your dealings with the banks
8. You can get up to 30 million or more without collateral
Obligor limits varies from one bank to another, but most bank will avail you up to 30 million or more once you have proving ability to pay and you have maintained good credit records. Some of the criteria used includes Debt Service Ratio (DSR), Type of employer and Good credit record.
9. Your Personal Loans Is Insured
Most banks/lenders charge you additional 1% to provide insurance for you personal loan. This is called credit insurance. The credit insurance covers lost of job that is due to lay off of the loan beneficiary. It also covers demise of the loan beneficiary.
In the event of loss of job, the insurance company services the loan (Principal and interest) for a period of 6 month within which it is expected that the obligor should have been able to secure another job and continue to service the loan. In the event of demise of beneficiary, the insurance company pays off the balance on the loan so the relative of the deceased does not need to bother about loan obligations left by the deceased.
The conditions and benefits may however varies from one bank or lender to another. You may need to approach your bank for details of what they offer
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