A First Timer’s Fact Sheet for Personal Loans



There are few countries in the world where availing of a personal loan is easy and quite straightforward. Banks here do not normally over-commit and under-deliver; stringent background checks are performed, documents are thoroughly vetted and the applicant’s requirements are given due consideration before the loan is granted.

If you’re about to apply for a personal loan for the first time, here’s what you need to do:

1. Do the basics

Calculate how much money you need, evaluate your repayment plan and set realistic targets for yourself. Be aware that the initial EMIs will go towards repaying the interest on the loan, so have a plan to set aside regular lump sum amounts that you will pay periodically to lower the principal amount. Research your options and apply for a personal loan that attracts reasonable interest.

2. Get your documents in order

You will need to submit bank statements and salary slips for at least the last three months from the date of your loan application. Apart from this, the bank will evaluate if you have other sources of income, your salary and increment prospects, your residency status and your credit score. If your company is unlisted, you might have to get an undertaking from the company (the bank will provide the form for this).

3. Understand all costs involved.

Most applicants are unaware that banks charge processing fees, application form charges, foreclosure fees and sometimes, even a small charge for adjusting your interest mode mid-way. Get a written list of all the charges involved.

4. Understand how your interest will be calculated.

The bank will offer you the option of fixed and variable interest rates. In a nutshell, a fixed interest remains constant over the entire principal amount for the duration of the loan. A variable interest is calculated over the remainder of the principal amount. Factor these in before you apply for a personal loan, and whether the bank allows the option of switching from fixed to variable interest at a later stage.

5. Study refinancing options.

It may happen that you require more funds while your personal loan is still being paid. Ask the bank if it allows an extension or a ‘top-up’ on the loan. Some banks allow other banks to buy out the current loan. You can also find out if the bank allows your existing debts to be merged into a single loan.


Vinod Duvasi

The author Vinod Duvasi

Founder of @beingdigitalz | Digital Enthusiast | Social Media | JB-ite | Blogger | Foodie | Search Consultant

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