Personal loan interest is charged on a person which is to be paid by an individual. A personal loan is a source of external money that can be taken for many purposes as well as it is the most common route for the people to resolve their financial issues. However, a personal loan can be taken by:

  • A bank, or
  • Non-banking financial company (NBFC)

There are various banks and Non-banking Financial Companies which offer it to an applicant, only the condition is that the applicant must fulfill the criteria of the bank or Non-banking Financial Companies. You can get a Personal Loan in just 10 minutes.

Every bank has its own different criteria such as:

  • Income level
  • Credit history
  • Repayment capacity
  • Employment history, and
  • Other relevant factors that tend to vary from one to another.

The personal loan is also known as a signature loan and it is extended to the self-employed and salaried individuals:

  • Based on the judgment call made by the loan sanctioning officer.
  • Based on the documentation submitted by the applicant.

It is an unsecured loan and there is no need to put up collateral such as:

  • Property, or
  • Gold to avail it.

In case of default the lender can not put up anything which is owned by the borrower for auction, where the fact is defaulting is really not a good idea for future aspects as it would show up on your credit report and can put you in trouble when you attempt to apply for credit cards or any other loan in future. The interest rate is higher as compared to the home loan, car loan, or gold loan. It is easy to get a personal loan sanctioned without any asset to get approved for it.

How can a personal loan be helpful?

It can be used for almost every type of expense from home renovation and big-ticket appliance purchase to debt consolidation and luxury vacations and can be useful in other cases also such as:

  • Payment of unexpected medical bills
  • Wedding
  • Vacations
  • Furnishing a new house
  • Investment in business
  • Fixing your car, and
  • Down payment of a new house, etc.

Key tips for choosing a personal loan

The following tips are given below for choosing a personal loan:

  • Check your credit score for a personal loan before applying for it.
  • Before applying for such a loan plan check your budget.
  • Do not borrow the excess amount.
  • Find out the Annual Percentage Rate (interest on the loan)
  • Need to understand all charges associated with the loan such as:
    • Repayment
    • Interest rate
    • Penalty, etc.

Personal Loan interest rates and some leading banks

Sr. No. Bank Name Interest Rate
1 State Bank of India 12.5% onwards
2 Axis Bank 15.50% onwards
3 ICICI Bank 11.59% onwards
4 Punjab National Bank 11.49% onwards
5 UCO Bank 1yr MCLR + 2.15% onwards
6 HDFC 15.75% onwards
7 IDBI 12.49% onwards
8 Standard Chartered Bank 11.99% onwards
9 Andhra Bank Base Rate + 3.50% onwards
10 Oriental bank 11.20% onwards


The above-given rates are subject to periodic change.

Facts which should be known by the borrower before taking the personal loan

What is the minimum personal loan amount?

The minimum amount in every financial institution varies from one institution to another. However, most of the lenders set their minimum principal amount at INR 30,00/-

How is the maximum loan amount is decided?

While calculating the maximum amount the thing to keep in mind is that the EMI does not exceed 30% to 40% of the applicant’s salary especially in the case of salaried people. An existing loan that is being paid by an applicant should be considered while calculating the amount.

The loan value is determined based on the profit earned as per the recent profit and loss statement in the case of a self-employed applicant.

Tenure of personal loan

Personal loan feature tenure:

  • 1 to 5 years, or
  • 12 to 60 months

Although in some cases the longer or shorter tenure may be allowed.

Documents required when applying for a personal loan

  1. Income proof (in case of a salaried applicant, salary slip is required; recent acknowledged ITR if the applicant is self-employed)
  2. Address Proof
  3. Identity proof
  4. Certified copy of license (in case of a self-employed professional)

Different ways to pay off the loan

Basically, there are two ways in which you can repay your loan:

  1. Debt Snowball Method, and
  2. The Stake Method

Debt snowball method

Under this method initially, you have to pay the smaller amount of a loan and gradually it will increase to the highest amount for paying off the loan.

Order of Repayment Loan type Interest Rate (%) Loan Amount
1 Credit card loan 24% INR 2 lakh
2 Personal loan 18% INR 5 lakh
3 Car loan 11% INR 4 lakh
4 Home loan 11% INR 20 lakh

The Stake Method

Under this method you will pay a higher rate of interest initially and gradually it will reduce to the lower rate of interest. It is a faster way of repaying the loan.

Order of Repayment Loan type Interest Rate (%) Loan Amount
1 Home loan 11% INR 20 lakh
2 Personal loan 18% INR 5 lakh
3 Car loan 11% INR 4 lakh
4 Credit card loan 24% INR 2 lakh

Apply for a personal loan jointly

The applicant can apply for the loan on his individual name or also he can apply for it jointly but the co-applicant needs to be a family member. In a joint personal loan, the applicant will proceed in a higher income bracket and enables you to avail of the larger loan amount.

How the personal loan can fulfill your desire

There are numerous benefits of personal loan in which it can fulfill your desire such as:

For expanding the business

If you are a business owner and wants to expand your business and current operations then a personal loan in the form of a business loan can help you out in a more fruitful way, also for starting up your own business you can get this loan and all you need to submit the required documents and a business plan.

Down-payment of a home loan

A personal loan also helps in making a down payment. It helps reduce the other loan burden also it ensures that your dream home is not far away.

Vacations

It can be utilized on traveling and you can plan a better vacation also you can turn your dream holiday into a reality as it is easy to get and not that difficult to pay off. A personal loan is helpful for vacation purposes, you can go ahead for such a loan.

For purchasing a household appliance

A personal loan can be taken for various household appliances such as Television, AC, refrigerator, etc. The purchase of furnishing and consumer durable is among the leading uses of personal loans.

Family function and marriages

A wedding is a special occasion in everyone’s life. A radiant and expensive venue can prove to be a more cost consuming, for big occasions like family functions and marriages as well as marriage loans are offered by many many banks under the bracket of personal loans.