A personal loan is a sum of money you borrow from a bank nearby, an online lender. Once you receive the money, you start making payments to the lender according to a plan until the loan is fully repaid.
Financial organizations will offer an unsecured personal loan to you based on your employment history, ability to repay the loan, income level, profession, and credit history.
You can utilize a personal loan, sometimes referred to as a consumer loan, to take care of any of your immediate demands. As an illustration, you could use a personal loan to pay for:-
- the cost of moving
- consolidation of debt
- medical expenses
- wedding costs
- repairs or renovations to a home
- Funeral expenses
- Vacation expenses
- Unforeseen costs
Personal Loan Eligibility
Each lender has a different set of requirements for obtaining a personal loan. Before granting requests for personal loans, every lending institution considers the following typical factors:-
| Age | 16 to 60 years |
| Annual Income | Typically need to have Rs 25,000 per month income |
| Credit Score | 750 or above (Not mandatory) |
| City of Residence | A borrower’s ability to obtain personal loans is also influenced by the region or city in which they reside. The reason for this is that people who reside in Tier I or metropolitan areas typically have greater living costs than people who live in Tier II or Tier III cities. Lenders therefore have various qualifying requirements for persons from various geographical places. |
To know in detail about personal loan eligibility read here.
Personal Loan Interest Rates
The interest rates for top 5 banks of India are:-
| Lenders | Interest Rate (p.a.) | Processing fee (% of loan amount) |
|---|---|---|
| State Bank of India | 9.80% – 13.80% | Up to 1.5% (Maximum Rs 15,000) |
| HDFC Bank | 10.50% onwards | Up to 2.5% (Maximum Rs 25,000) |
| Punjab National Bank | 8.80% – 15.35% | Up to 1% |
| ICICI Bank | 10.50% onwards | Up to 2.5% |
| Bank of Baroda | 9.20% – 16.55% | 2% (Minimum Rs 1,000 and Maximum Rs 10,000) |
Check detailed list of personal loan interest rates of leading banks and NBFCs.
Documents Required For Personal Loan In 2022
Common documents required for Self Employed Individual & Salaried Individual
| Identity Proof | Aadhar Card, Passport, Driving License, Voters ID Card, PAN Card |
| Address Proof | Aadhar Card, Passport, Driving License, Voters ID Card, Lease Agreement, Rent Agreement, Gas pipeline, telephone bill etc |
| Proof of Age | Aadhar Card, Passport, Driving License, |
| Photographs | 2 passport photos |
Income Proof for salaried and self employed
| Salaried | Latest Salary Slip, Form No.16, duly authenticated by employer, 6-month bank statement in which salary is credited, Income Tax Return. Appointment Letter |
| Self Employed | Last three years’ ITRs, 6-month bank account statement of Current account, Audited financial records like Balance Sheet, Profit and Loss account |
Features Of Personal Loan
No Collateral Required
A personal loan is an “unsecured loan,” which means that you are not required to give the lender any security in the shape of money, stocks, or other assets. Some consumers who might not be able to raise the cash needed as collateral may find it more appealing as a result.
Flexible End Use
There are no limitations on how you may use the loan proceeds. Unlike a home loan or auto loan, which can only be used to purchase a home or a car, respectively, You have complete discretion over how you spend the money if you take out a personal loan.
High Hidden Costs
Financial organizations sometimes aggressively market their loan products, but there are also times when they might not fully disclose any additional fees or costs associated with taking out such loans.
As a result, it is crucial to perform your research and gather all the details about the loan before submitting an application. Hidden fees could raise the amount you have to pay out, raising the cost of borrowing.
Quick Disbursal
Pre-approval usually happens quickly.
In order to receive a personal loan quickly, you must meet the qualifying requirements. A strong credit score is unquestionably advantageous.
Disbursal often takes place within 24 hours, or at most 72 hours, depending on the bank or lender. It is therefore your best option in a crisis. If you are already a client of the bank you are applying to, you might even be qualified for immediate online approval.
Fewer Documentation
Only a small amount of documents are needed to have a personal loan approved.
With an online approval, you will be asked to upload scanned copies of your documentation for verification before being approved for the loan in a matter of minutes.
As a result, the process is truly hassle-free, and you can emerge from your current financial difficulty sooner than you might expect.
Attractive Interest Rates
Personal loans have reasonable interest rates, making them accessible to all borrowers.
This guarantees that your EMI will remain constant for the duration of your loan. Thus, the constantly shifting interest rates that are a feature of other types of loans are not a concern.
Benefits Of Personal Loan
Flexibility And Versatility
Only specified uses are permitted for certain loan types. For instance, if you take out a car loan, the only thing you can do with the money is buy a car. Personal loans can be used for a variety of things, including debt consolidation and paying for medical expenses.
A personal loan can be a suitable option if you need to finance a significant purchase but don’t want to be restricted in how you utilize the funds. Before applying, ask your lender what purposes are permitted for the loan.
Easier To Manage
Consolidating debt from various credit card accounts is one reason why some people take out personal loans. Compared to many credit cards with varying interest rates, payment due dates, and other factors, a personal loan with a single fixed-rate monthly payment is simpler to handle.
If they are approved, borrowers can simplify their monthly payments and save money by switching to a personal loan with an interest rate lower than their credit cards.
Builds Credit Score
Getting affordable personal loans and making on-time repayments is a wonderful strategy to raise your credit score if you have bad credit or no credit history.
Your credit score will rise as you make on-time EMI payments with the pre-set interest rate.
However, it’s crucial to only borrow money that you can afford to repay. If not, failing to make EMI payments could harm your credit rating.