What is Personal Loan? Apply Loan

Personal loan is an unsecured loan, which means the borrower does not need to give any guarantee/security or pledge anything. The repayment tenure of this loan is usually between 12 to 60 months. Unlike a home loan or card loan, this loan can be used to meet any kind of requirement like medical emergency, study expenses, travel, wedding and more.

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Factors Affecting Personal Loan Interest Rates

 Given below are the factors based on which the bank decides the personal loan interest rates:

your credit score

The credit score reflects the riskiness involved in giving a personal loan to an individual. So if you have a low credit score, the bank will also apply higher interest rates to the loan as a countermeasure to taking more risk. Hence, it is always advisable to maintain a credit score of 750 or above.

your monthly income

Banks assume that the applicant whose income is high will be able to pay the loan on time. Hence, people who have high income can get personal loans faster and at lower rates.

where do you work

While deciding the personal loan interest rates, it is also considered where you work and what work you do. Individuals working in reputed institutions get loans relatively quickly and at better interest rates. People doing government jobs also get better interest rates personal loans because of their job security.

your relationship with the bank

If you have a good and old relationship with any bank and you have already paid the loan on time, then the bank can give you loan on easy terms and low interest rates as compared to others. Existing customers of the bank can also get pre-approved loan offers.

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Also read: What should be the credit score for personal loan?

Personal Loan Types

wedding loan

The cost of weddings in India is often very high and it is not wise to spend all your savings on a wedding. Hence, you can take a wedding loan for marriage, which is a variant of the loan itself.

Higher Education Loan

You can take this personal loan for yourself, your children or your spouse to study abroad. You can use this loan for college fees, flight tickets, visa, living expenses and more.

medical loan

If suddenly a medical emergency strikes and you or your family does not have medical insurance, you can take a personal loan for medical expenses.

Home Renovation Loan

People keep making changes in their homes for their convenience and need and there is no limit on the expenditure. You can take a personal loan for home renovation and improve your home.

travel loan

You can take a personal loan for vacations with your family or traveling abroad. You can also take this loan for traveling anywhere in your country or for honeymoon or cruise.

debt consolidation loan

If you are paying several small EMIs, you can take a Debt Consolidation Loan to pay off all those loans and then pay only one EMI of this personal loan.

Personal loan eligibility conditions

To avail a personal loan, you need to fulfill the following key conditions:

  • Age: Applicant’s minimum age should be 18 years and maximum 60 years
  •  Credit score:  750 or higher
  • Salary:  The minimum salary of the salaried people is Rs 15000. should be per month
  • Stable employment:  2 years total work experience out of which 1 year should be in same profession and self-employed persons should be in same profession for minimum 2 years
  • Job Type:  Individuals working in reputed Institutions, MNCs, Private and Public Limited Companies, Government Institutions, PSUs    

*The eligibility conditions mentioned above are general for personal loan, these terms may change/extend depending on the bank/loan institution.

Role of credit score in taking personal loan

Since you do not pledge anything with the bank for a personal loan, the bank has a comparatively higher risk in granting a personal loan. To reduce their risk, banks prefer to offer personal loans to the same applicants. Maintain a credit score of 750 or above to increase your chances of getting your personal loan application approved.

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Personal Loan: Documents Required

Most of the banks and NBFCs ask for almost identical documents as the required documents . The details of such documents are given in the table below:

identity card PAN Card / Voter ID / Aadhar Card / Passport / Driving License
address certificate Bank Account Statement / Aadhar Card / Property Purchase Agreement / Utility Bill (not older than last 3 months) / Passport / Driving License
Certificate of Income For Salaried : Salary Slip/ Bank Account Statement/ Form 16
For Self Employed  Last year Income Tax Return/ Personal Loan Statement and Balance Sheet/ Bank Account Statement
proof of business Certificate of Practice/Partnership Agreement/GST Registration and Filling Documents/MOA and AOA/Shop License

Apart from this, banks can also ask for other documents.

Also Read: Complete List of Documents Required for Personal Loan

How to reduce the chances of personal loan rejection?

  • Maintain a credit score of 750 or higher
  • Check your credit report from time to time and report any incorrect information to the credit report so that it can be rectified. Incorrect information in the report can lower your credit score
  • Compare personal loan offers from various banks and NBFCs and choose the one that best suits you
  • Apply to those banks and NBFCs where you are more likely to get a loan
  • Keep your credit utilization ratio below 30%
  • Do not apply for loan multiple times in a short span of time
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Personal Loan: Fees and Charges

Apart from the interest rates, other fees and charges are also applicable on personal loan. Some of the main fees and charges are:

  • Processing Fees:  These fees are for administrative fees related to the personal loan process. Generally, the processing fee ranges from 1 to 3% of the loan amount.
  • Pre-payment and fore-closure fees:  When you pay more than the EMI amount fixed for the loan, it is called prepayment. When you pay off your loan before the stipulated time, it is called fore-closure. Banks often levy fees for both pre-payment or fore-closure. These fees range from 0 to 5% of the principal amount deposited plus additional tax applicable.
  • Late Payment Fee:  This fee is levied by the bank when you are not able to pay your EMI on time. This fee has to be paid along with the outstanding EMI.
  • Check Bounce Fee: Check bounce fee  is charged in the bank account from which the EMI amount is deducted, if the amount at the time of EMI payment is less than the EMI amount or not. It is usually Rs.500. + There is GST.

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