Most Indian households opt for personal loans when faced with a financial emergency.
These loans are commonly used for purposes such as building a house, buying a vehicle, funding children’s higher education, or covering medical expenses.
With the rising cost of living, an increasing number of consumers are also using personal loans for big-ticket purchases and converting them into equated monthly instalments (EMIs) to manage their cash flow better.
Personal loans serve as a reliable financial tool to bridge any shortfall, ensuring households can meet important life goals without delay.
KYC and Income Documents required for Personal Loan
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Interest Rate: 10.49%
Interest Rate: 10.49%
Interest Rate: 10.99%
Interest Rate: 9.60%
Ans. A personal loan is an unsecured loan offered by a bank or NBFC to meet your personal financial needs. It is approved based on factors like income, credit history, employment status, and repayment capacity. Unlike home or car loans, no collateral is required. However, this also means interest rates are higher. Missing EMIs or defaulting can hurt your credit score and affect future loan or credit card approvals.
Ans. You can use it for any personal expense, such as:
Banks do not monitor how you use the loan amount.
Ans. Eligibility varies by bank but generally depends on:
Ans. Most personal loans are disbursed within 7 working days after approval.
The money is either:
The amount depends on your income and existing EMIs:
Ans. Yes. Most banks have a minimum loan amount of ₹30,000 (varies by institution).
Ans. Compare different lenders based on:
Ans. Banks consider:
A high credit score and lower outstanding debts increase your eligibility and loan amount.
Ans. Not always.
A lower EMI often means a longer tenure, which increases total interest paid.
Use an EMI calculator to check your interest outgo before deciding.
Ans. Personal loans have higher rates compared to secured loans.
Currently, leading banks offer rates starting at 10.50% p.a.
Your exact rate depends on:
Ans. Yes, there are some common charges applicable on personal loans. Lenders usually charge a Yes, there are some common charges applicable on personal loans. Lenders usually charge a processing fee ranging from 1–2% of the loan amount, which may sometimes be waived for existing customers. Additionally, if you choose to repay your loan early, prepayment or foreclosure charges are applied, typically between 1–5% of the outstanding loan amount. ranging from 1–2% of the loan amount, which may sometimes be waived for existing customers. Additionally, if you choose to repay your loan early, prepayment or foreclosure charges are applied, typically between 1–5% of the outstanding loan amount.
Ans. The difference between fixed and floating interest rates lies in how your EMIs are calculated. With a fixed interest rate, your EMI amount remains the same throughout the entire loan tenure, making it predictable and easy to plan your finances. In contrast, a floating interest rate follows the reducing balance method, meaning your EMIs gradually decrease over time as interest is charged only on the outstanding principal amount.
Ans. The difference between reducing and flat interest rates is in how the interest is calculated. Under the reducing balance method, interest is charged only on the outstanding principal amount, which decreases as you repay the loan, helping you save money over time. In contrast, a flat interest rate charges interest on the entire loan amount for the full tenure, making it more expensive as the interest payable does not reduce even after partial repayments.
Ans. Yes, you can apply for a personal loan jointly with a spouse or parent. Applying jointly increases your combined eligibility, which can help you qualify for a higher loan amount. However, if either applicant has a poor credit history, it may reduce the chances of loan approval.Yes, there are some common charges applicable on personal loans. Lenders usually charge a processing fee ranging from 1–2% of the loan amount, which may sometimes be waived for existing customers. Additionally, if you choose to repay your loan early, prepayment or foreclosure charges are applied, typically between 1–5% of the outstanding loan amount. ranging from 1–2% of the loan amount, which may sometimes be waived for existing customers. Additionally, if you choose to repay your loan early, prepayment or foreclosure charges are applied, typically between 1–5% of the outstanding loan amount.
Ans. Yes, most banks allow prepayment after a minimum number of EMIs. Some may not allow partial prepayment. Prepayment charges may apply.
Ans. While documentation requirements may vary by lender, you will generally need:
Ans. Loans are typically repaid through EMIs. You can pay via post-dated cheques (PDC) or provide a mandate for automatic payment through the Electronic Clearing Services (ECS) system.
Ans. If you choose to repay your loan before the completion of its tenure, a prepayment/foreclosure fee is charged. This usually ranges between 1–2% of the outstanding principal, though some banks may charge more.
Ans. Yes, you can apply for a personal loan jointly with a spouse or parent. Applying jointly increases your combined eligibility, which can help you qualify for a higher loan amount. However, if either applicant has a poor credit history, it may reduce the chances of loan approval.Yes, there are some common charges applicable on personal loans. Lenders usually charge a processing fee ranging from 1–2% of the loan amount, which may sometimes be waived for existing customers. Additionally, if you choose to repay your loan early, prepayment or foreclosure charges are applied, typically between 1–5% of the outstanding loan amount. ranging from 1–2% of the loan amount, which may sometimes be waived for existing customers. Additionally, if you choose to repay your loan early, prepayment or foreclosure charges are applied, typically between 1–5% of the outstanding loan amount.
Ans. Approval is at the discretion of the bank’s sanctioning officer and depends on the lender’s eligibility criteria. The process usually takes 48 hours to 2 weeks. Once verification is complete and the loan is sanctioned, the amount is generally disbursed within 7 working days.
Ans. If you miss EMIs, the lender will first attempt to recover dues through reminders or recovery agents. Continued non-payment will result in your account being marked as a default, which will negatively impact your credit score and make it difficult to get future loans or credit cards.
Ans. Personal loans usually do not offer tax benefits. However, if the loan is taken for home renovation or down payment, you may claim a tax deduction under Section 24 of the Income Tax Act – but only on the interest component, not the principal. Proper receipts are required.
Ans. A balance transfer lets you shift your outstanding loan amount from your current lender to another lender offering a lower interest rate. The new lender pays off your existing loan, and you repay them under the new terms. Processing fees and transfer charges may apply.
Ans. In the early stages of repayment, a major portion of your EMI goes toward interest, a process known as front-loading. As time passes and the outstanding principal decreases, a larger share of the EMI goes toward repaying the principal.
Ans. A credit card loan is a pre-approved offer available only to specific cardholders and does not require additional documentation. A personal loan, on the other hand, can be applied for with any lender and involves document submission and eligibility checks.
Ans. A credit report is a record of your credit history maintained by agencies like CIBIL TransUnion, Experian, and Equifax. Your credit score (usually on a scale up to 900) reflects your repayment track record. Lenders use it to assess your eligibility for loans.
Ans. A higher credit score (750 or above) improves your chances of loan approval and allows you to negotiate benefits such as lower interest rates, higher loan amounts, and processing fee waivers.
Ans. The basic documents (application form, identity proof, address proof, age proof, and income proof) remain the same across lenders. However, self-employed applicants may also need to submit documents like partnership deed, business registration certificate, and business PAN card as proof of business existence.
Ans. A balance transfer lets you shift your outstanding loan amount from your current lender to another lender offering a lower interest rate. The new lender pays off your existing loan, and you repay them under the new terms. Processing fees and transfer charges may apply.
Ans. The minimum age is 21 years, and the maximum is 65 years at the time of loan maturity.
Ans. Yes, proof of income is mandatory as personal loans are unsecured. Lenders use income documents to assess your repayment capacity and minimize risk.
HDFC Bank launched its special Freedom Dhamaka Offer for government employees, providing personal loans at interest rates starting from 10.25%. This offer was valid until August 15, 2021.
Google directed all personal loan apps operating in India to submit a declaration form confirming that they act as intermediaries for registered NBFCs or banks. These apps were required to submit relevant documentation, including licenses, by September 15, 2021, to remain listed on the Google Play Store.
The Reserve Bank of India (RBI) revised the maximum personal loan limit for board directors and their families, increasing it from ₹25 lakh to ₹5 crore.
Bank of Baroda announced that the IFSC codes of the erstwhile Vijaya Bank and Dena Bank were discontinued from March 1, 2021. Customers were advised to apply for new cheque books with updated MICR codes.
Union Bank of India (UBI) informed customers that the IFSC codes of the merged Andhra Bank and Corporation Bank branches were changed effective July 1, 2021. Customers were asked to obtain new cheque books reflecting the updated IFSC and MICR codes.