What Is Personal Loan?

  • A personal loan is an unsecured loan which helps to meet person’s current financial needs.
  • Unsecured loans without collateral.
  • The personal loan provides you with the opportunity to use the funds as per your convenience and need.
  • Personal Loan acts as an instant solution for cash and can be used to meet wedding, traveling, home renovation, medical emergency expenses etc.
  • To avail Personal Loan, you need to first check the eligibility criteria. For this, you can visit your nearest bank  or financial institution for personal loan to apply for a personal loan to finance your needs.
  • To calculate the EMIs for personal loan make sure that you maintain a good credit score to secure a personal loan without any difficulties.
  • There is flexibility while seeking the personal loans as a person can use the loan amount according to his convenience.
  • For e.g., if a person takes a home loan, he can use the amount only to buy his first house, and the amount cannot be used for attaining other personal purposes. But if a person applies for the personal loan, he can use the personal loan for fulfilling any purpose be it wedding expenses, buying a house or a car or even for buying groceries or paying bills etc.

Purpose of using personal loan

Personal loans can be availed for any financial purpose. Even the banks which provide personal loans will not go on to monitoring its use. A personal loan can be used for various purposes like:

  • Buying furniture for decorating your home
  • Marriage purposes
  • Children’s education fee
  • Purchasing any phone or any other electronic gadgets or
  • For paying off medical expenses and for various other personal needs.
  • Buying a new car or paying car’s EMIs
  • Investing in a new business
  • Investing in share market
  • Paying house-related expenses, etc.

Eligibility criteria to avail personal loan

Although it varies from bank to bank, the eligibility criteria include

  • Occupation of the borrower
  • Income from the occupation
  • Capacity to repay the loan on time
  • Age, and
  • Place of residence

Although eligibility criteria also vary from bank to bank and for knowing more about eligibility criteria of different banks you can visit your nearest banks which offers personal loans.

 General eligibility criteria for availing personal loan

  • A person should be self-employed or a salaried individual or a professional.
  • A person should have a regular income for any business or salary to repay the loan.
  • His employment with the company he is working with.
  • The credit history of the person with the banks, etc.

The eligibility for the salaried individuals

The age must be between 23 to 58 years for a salaried individual. However, the different banks have their own criteria which are more or less the same in all the banks. The person should have a net salary of rupees 3,50,000  per annum while their total time in the job must be between 1 to 2 year.

The eligibility criteria for self-employed individuals

For the self-employed individuals, their age must be between 28 to 65 years. Having the net salary of INR 4,80,000 and above per annum while their total time in business must be between 4 to 5 years.

Documents required to be furnished

Salaried Individuals

  • Bank Account Statement
  • Electricity Bill
  • Telephone Bill
  • Credit Card Bill
  • Employers letter certifying current mailing address.
  • Passport
  • Existing Registered House Lease.
  • Government I-card with a photograph.

Self-Employed Individuals

  • Bank Account Statement
  • Electricity Bill
  • Telephone Bill
  • Credit Card Bill
  • Employers letter certifying current mailing address.
  • Passport

Different types of personal loans

There are different types of personal loans and some of them are

Festival Loans

  • India has various states and people from different religion, different caste who speak different languages and also celebrate different festivals.
  • India is rich in its cultural heritage and traditions.
  • Every person celebrates festivals in his own way according to his/her own culture and practices.
  • The celebrations a festival in a good way money is needed.
  • To avoid any kind of inconvenience regarding the money you can opt for festival loans.
  • You can take a festival loan from the bank and pay it back in easy EMIs.

Home Renovation Loan

  • If you want to renovate or upgrade your house, a huge amount of money will be needed.
  • Designing your house the way you want it to be may put you under financial burdens.
  • To avoid this burden you can apply for home renovation loan from the nearest bank.

Wedding Loan

For conducting a wedding huge amount of money is needed. You need to choose good options among venues, invitation cards, jewelry, etc.  if you need the financial help you can plan a wedding loan for yourself to get the best things you always wanted to have in your wedding.

Holiday Loan

  • Whenever a person plans a holiday with his family or instead of being under the burden of demanding money from a relative or a friend you can simply go for a holiday loan.
  • You can take a holiday loan and go to your favorite destinations and pay the loan in easy EMIs.

Unsecured Business Loans

  • Who doesn’t want to achieve growth for his business? Business loans are the perfect solution for the purpose of developing the business.
  • You can take unsecured loans, and also you do not require any collateral security.
  • These are short-term-loans which have short repayment time but are most suitable for a business person.

Duration of personal loan

  • The maximum duration given for personal loan can be 1 year to 5 years or 12 to 60 months.
  • However, it depends on banks and your previous credit history and your profession according to which longer or shorter tenures may be allowed.
  • For eg, some banks offer it for a maximum of four years for salaried individuals, but doctors and dentists can avail it for five years.

Disbursing money for personal loan

  • Bank disburses the money within 7 working days of the loan application to the lender.
  • Once the bank approves your loan amount, the money could be deposited automatically into your savings account digitally or you may soon receive an account payee cheque or draft equal to the loan amount.
  • Honestly, disbursing of money for the personal loan depends upon the bank in which you apply for loan amount because banks may take time to approve your loan amount depending on your eligibility.

Loan amount

  • Bank in which you apply for the personal loan will see whether you are salaried or self-employed, and will also look into the regular income you generate from your occupation.
  • Therefore, the loan amount will be determined by your income.
  • Generally, the banks will restrict the loan amount so that your EMI is not more than 40-50% of your monthly income.
  • Your previous credit score for repayment of the loan will also be considered while calculating the personal loan amount.
  • For the self-employed applicants, the loan amount is determined on the basis of the profit earned by referring the recent ITRs and business profit and loss statements.
  • Various business proof such as VAT/ Service tax registration, incorporation details in case of companies, business address proof is taken into consideration by the banks for deciding the loan amount.

Benefits of higher credit score

  • A higher score indicates that your track record is good with respect to loans.
  • Banks can grant you the waiver of processing charges.
  • If your credit score for personal loan is higher than 750, your chances of securing a loan are high.
  • You can negotiate with bank officials for lower interest rates.
  • A higher loan amount can be secured by the lending banks.

Minimum loan amount

There is a minimum loan amount for every bank. Though the exact loan amount varies from banks to banks. However, most of the banks have set their minimum personal loan principal amount at rupees 30,000.

Choosing the Bank for loan

Every person before applying for the personal loan should visit various banks to compare the offers and policies of banks. Various Banks like

  • HDFC
  • Axis Bank
  • Citi Bank
  • Industrial Bank
  • Standard Charted Bank provides personal loans to the individuals.

You need to consider some points when deciding on a bank that includes

  • Eligibility criteria
  • Documents required
  • Their policies for repayment of money
  • Interest rates
  • Processing fees, and
  • EMI’s etc.

Short-Term personal loans

There are digital lending apps for a short-term personal loan like

  • CASHe
  • Paysense
  • StashFin
  • Shubh Loan, and
  • Early salary
  1. These platforms provide for the short-term personal loan to the salaried professionals who cannot approach the banks for small-value personal loans.
  2. The rising demand for small value personal loans has led to the creation of these apps.
  3. Such lenders provide instant loans with various attractive repayment schemes.
  4. The advantage of such short-term personal loan from such platforms is their quick disbursal.
  5. The approval and disbursal of the personal loan from a bank would take at least 7  business days to get approved and disbursed.
  6. These apps do not ask for much paperwork and almost 90 percent of process happens through the mobile application.
  7. Only 10 percent paperwork part includes post-dated cheques and physical signatures.

How to get personal loan quickly

Maintain a good credit score

  • In order to get a quick approval for the personal loan, you will have to maintain a good credit score which is based on your credit history.
  • The credit score closer to 900 is excellent and your loan will be approved quickly.
  • The credit score closer to 300 may reduce your chance of getting a personal loan approved.

Choose the appropriate bank

  1. Various banks are providing the personal loan, based on their own policies and more or less similar eligibility criteria.
  2. If a bank provides you a personal loan you need to consider the followings.
  • Personal loan interest rates
  • Loan tenure
  • Loan amount
  • Repayment
  • Foreclosure charges,
  • Processing fees, etc. before you decide on a personal loan offer.

Carefully decide on the loan amount

  1. Banks take various cautions while approving the loan application of big amount and also banks are careful while giving loans to people who pay multiple EMIs.
  2. Where the bank is willing you to provide a higher loan amount, you need to think carefully about the amount you actually require.

Submit original documents

  1. The personal loan does not require much of documentation but even then, you need to take care that all the documents you attach to your personal loan application.
  2. Documents should be original so that you do not face inconvenience in getting a personal loan from the bank.

Pre-Payment of personal loan

  1. If you want to make full payment of your personal loan before time, then you must do it in earlier stages.
  2. Making payment earlier will be able to save more interest amount.
  3. The earlier you pay, the more you will be able to save on the overall interest payment.
  4. However, most of the banks have a lock-in period of one year, after which you can pay-off the entire outstanding amount.
  5. Do not forget to consider the prepayment charges lived by the banks which varies from bank to bank.

Part Payment of personal loan

  1. If you cannot make full payment of the personal loan, you can use your extra money for part-payment of your personal loan.
  2. It is preferable because the amount you pay off gets directly deducted from the total outstanding principal amount.
  3. Banks charge interest on the outstanding amount and this will help you to make considerable savings when the principal comes down.
  4. Therefore, it is good to make part payment when you have extra money in your pocket because it will help you to save enough.
  5. The important thing about the part-payment is that you can do it many numbers of times.

Top Banks for personal loan

  1. Repayment of Personal loan is usually through fixed EMIs over a fixed term.
  2. However, there is no restriction on the person who gets the personal loan on how to use it.
  3. You can see the list of various leading banks for the personal loan.


  • The bank charges interest rates as low as 11.29%.
  • The bank offers personal loan under three key categories given below
    1. Holiday loan
    2. Wedding loan, and
    3. Home renovation loan
  • The bank offers loan to both salaried and self-employed individuals.
  • Bank has made documentation process very easy and also have simple repayment options.


  • The HDFC bank offers personal loans interest rates starting from as low as 10.99%.
  • Most beneficial for salaried and self-employed individuals.
  • Processing is very quick and has become a top choice among applicants who apply for personal loans in India.
  • HDFC Bank provides special offers on interest rates.
  • In certain cases bank has also waived the loan charges.

State Bank of India

  1. SBI prefers giving out personal loan to a salaried person or self-employed individual.
  2. Personal loans categories under SBI bank are
    1. SBI Xpress Credit loan
    2. SBI Saral Personal loan
    3. Loan to pensioners, and
  3. SBI Festival personal loan for more information on these loans, you can visit SBI website.
  4. SBI is biggest trustworthy bank across the nation and therefore personal loans from SBI can be a right choice.
  5. The maximum loan amount approved under SBI personal loan scheme may go as high as 25 times of the individual’s monthly salary.
  6. The interest rates of SBI personal loans range from 12.45% to 14.95%
  7. SBI bank is suitable bak for the loan as it has many branches across the country.

Punjab National Bank 

  • PNB offers personal loans under two categories: Personal loan for public and personal loan for pensioners.
  • Laon offered by PNB bank is suitable for defense personnel, central/state government employees, and self-employees professionals.
  • Loan amount from the bank ranges from Rs. 25,000 for pensioners and Rs. 50,000 for non-pensioners to Rs. 40 lakhs.
  • PNB offers personal loan at interest rate starting from 11.90%.
  • PNB bank officials may consider the income of the spouse while calculating repayment capacity loan amount approved.
  • For more details, you can visit PNB website:https://www.pnbindia.in/personalloanforpublic.html

CIBIL Defaulter

  • The most common reasons for the denial of personal loan is when the applicant is a CIBIL defaulter.
  • This means that such a person has previously defaulted the loan or delayed the EMIs or have too many loan payments balance resulting in a low CIBIL score.
  • Your CIBIL score shows whether you are creditworthy and eligible for loan or not.
  • The low CIBIL score makes the banking officials think that you are likely to default payment in the future.