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A Quick Guide for those planning to take a Personal Loan

What is a personal loan?

A personal loan is a form of an unsecured loan which can help you to meet unexpected expenditures such as wedding expenditure, school or college fees, dream vacations, home renovation projects or even for the purchase of consumer durables. This loan doesn’t require any collateral or security. The loan is basically taken for the fulfillment of personal needs from a banking institution or non-banking financial company (NBFCs). These loans can help you overcome a financial crisis as these loans are given on the basis of specific criteria, such as level of income, employment history, credit score, and scope for repayment. These loans are the most availed and the most popular loan amongst the borrowers as there is flexibility for usage and no collateral is required.

Features and Benefits of Personal Loans

  1. No security: Personal loans are approved on the basis of applicant’s income level and financial history and hence no security is required.
  2. The flexibility of usage: There are no restrictions on the usage of the personal loan amount. Personal loans can be used to overcome any financial hardships, marriage or medical related expenses, house renovation or any other financial need of the borrower. The bank will not monitor the usage of funds.
  3. Loan amount: Based on the borrower’s credit history and income details, personal loans are available are available for amount ranging from Rs.25000 to Rs.1500000
  4. Loan tenure: the personal loan is available for a minimum tenure of 1 year and a maximum tenure of 5 years.
  5. Interest rate: Personal loan interest rates of various banks vary from 10.85 to 18.50% depending on the eligibility criteria, the loan amount and the tenure period of the personal loan.
  6. No margin: In a personal loan, there is no margin.
  7. Low processing fee: In personal loans the processing fee is low. It is around 0.5% of the loan amount + service tax
  8. No third party guarantee is required for personal loans.
  9. Quick availability: getting personal loans is easy and fast. In some cases, one can get a personal loan only in 24 hours.
  10. Minimal documentation required: As compared to home loans or car loans, minimal documentation is required in personal loan. And because of this, the processing is fast for these loans.

Drawbacks of Personal Loans

We have seen many benefits of taking a personal loan. But a good thing always carries some drawbacks which are as follows:

  1. High-interest rates: Personal loans are unsecured and due to this high-risk banks charge high rates of interests from the borrowers.
  2. Credit history: To get a personal loan it is important that you have a good credit history and good credit rating or else your application might get rejected. Hence this loan availability is subject to strict eligibility norms based on credit worthiness.
  3. No part payments: The banks do not allow to make part payments for the loan. This means that you will to pay the loan for the entire tenure of the loan. This can make your loan expensive.

Eligibility Criteria

The following people are eligible to apply for a Personal Loan:

  • Salaried individuals, self-employed business, self-employed professionals, CAs, employees of private limited companies, employees from public sector undertakings, including central, state and local bodies
  • Individuals between 21 and 60 years of age
  • Individuals who have had a job for at least 2 years, with a minimum of 1 year with the current employer
  • Those who earn a minimum of Rs.15,000 net income per month (Rs. 20,000 in Mumbai, Delhi, Bengaluru, Chennai, Hyderabad, Pune, Kolkata, Ahmedabad, and Cochin)


List of documents required for Personal Loan are:

Application Form

  • 1 Photograph
  • Identity Proof
  • Residence Proof
  • Age Proof
  • Signature Proof
  • Ownership Proof
  • Income Details
  • Bank Account Statements


There is no margin on personal loans.


No security is required

Third Party Guarantee

No third party guarantee is required.


Maximum repayment tenure is to be the earlier of the following:

  • 5 years
  • One year prior to retirement

Personal Loan EMI Calculator

The Personal Loan EMI Calculator tool allows users the option of changing the loan amount and tenure while calculating the EMI for the personal loan. EMI loan calculator tool is a great option allowing users to see their monthly installment for the loan, helping them to choose the most suitable loan as per their financial budget.

All you have to do is enter some information about the loan amount, loan tenure and the interest rate preferred by you. The calculator will then give you the EMI that you would have to pay.

Pragati Rajoria

Pragati Rajoria

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About Me

I’m a Commerce Graduate & CFP Professional, engaged in blogging since 3 years. I’m not affiliated with any financial product. The purpose of writing blog is to spread financial awareness and help people in achieving excellence for money. Please note that the views expressed on this Blog/Comments are clarifications meant for reference and guidance of the readers to explore further on the topics. These should not be construed as investment advice or legal opinion.

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