5. Simple documentation
With minimal eligibility and nil collateral requirements, the personal loans from banks in India require minimal documentation. A proof of identity, income proof and residence proof will suffice in most cases.
6. Big loan amounts
Depending on a borrower's repayment capacity, banks in India are willing to give a personal loan ranging from Rs. 25000 to Rs. 2000000. This makes a personal loan an ideal choice to meet big budget requirements.
Drawbacks of Personal Loans in India
1. High interest rates
Personal loans are unsecured loans. In most of the cases banks won't ask for a collateral, security or guarantee before issuing any personal loan, so it becomes a risky proposition for banks. To offset this risk, banks provide personal loans at higher interest rates. Secondly, personal loan interest rates also vary from person to person. How much of a risk banks consider you will determine the terms and interest rates on your personal loan. A person with good existing loan repayment record, serving in a reputed public sector, government, MNC, or blue chip company is more likely to get a low interest rate personal loan than one who deviates from the standard norms. A low risk borrower can get a personal loan at 16% interest rates while it can climb up 30% or more for others.
2. Not available to everyone
Banks enforce strict employment, income and residence criteria before issuing any personal loan. They'll only put their money where they find that the risk involved is minimal. So, a larger percentage of applicants are rejected in case of personal loans.
3. No part prepayments
Prepayment of personal loan can be done as a whole. Banks in India generally do not allow part prepayment of any personal loan. Moreover, there is a prepayment penalty of 2-5 percent on the outstanding amount, which has to be paid to the bank while making any prepayments.