Important Personal Loan Terms One Must Know

A personal loan is like an ally during financial emergencies. Be it medical expenses, wedding expenditures, or home repairs, a personal loan can offer financial assistance in such dire times. When the process has gone easier, there is a high possibility of borrowers getting lost in the personal loan terms mentioned during the process.Here's a complete guide to the common personal loan terms and what their definition means in lending terms.

Repayment history is the past record of your loan payments. It is one of the most important factors when assessing your creditworthiness and influences your credit score. The repayment history reflects the frequency of your payment.

One of the most common personal loan terms, the interest rate is the amount charged by financial institutions in lieu of lending the amount. It is defined as the proportion of the loan amount but is expressed as an annual percentage.

Disbursal amount is the final amount that is transferred to your bank account. It is only after the disbursal of this amount that your loan can be accessed for usage. The amount is decided mutually by borrower and lender before disbursal.

In the process of lending, the loan approval process is the time taken to get approvals for the loan . The lesser the time is taken, the faster the loan approval process would be.

There are certain guidelines stated in the lending industry on who can or cannot borrow a personal loan. This is one of the personal loan terms that vary depending on the lender.

When an individual wants to repay the loan amount before the term of the loan period, the banks charge a percentage of the remaining loan amount as prepayment fees.

One of the most common personal loan terms, the processing fee is an amount charged by the lender related to process the loan application. This is related to administration and is a one-time charge. This amount is not deductible from the loan amount, and therefore must be paid by the borrower separately.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.