A personal loan is given by a bank or an NBFC to an individual to meet any personal needs like funding a marriage, home renovation, vacation, etc.
2. Higher interest rate
Since personal loans are not secured against any asset, the lender cannot recover the funds by selling anything. Hence, the rate of interest is higher than other secured loans.
3. Eligibility criteria
Banks and NBFCs have set strict eligibility criteria concerning income, credit and employment history and past repayment capacity for availing personal loans.
4. Fee and other charges
A loan processing fee has to be paid besides interest and lenders can charge a prepayment penalty.
5. Pre-approved loan facility
Sometimes, based on the relationship with the lender and financial history, the customer is given the facility of a pre-approved loan limit.
News Source: Economic Times, Url: https://bit.ly/2PY1nyK