A Personal Loan is a form of unsecured loan availed by individuals on the basis of specific criteria, such as level of income, employment history, credit score, and scope for repayment. The loan is usually taken for the fulfillment of personal needs from a banking institution or a non-banking financial company (NBFC).
Why choose a Personal Loan?
A temporary financial crisis can happen to anyone irrespective of his or her overall financial status. Personal loan is a great way to offset any such temporary financial crisis as it allows the users to avail a loan without any preconditions on the usage of funds.
- Easy Availability: Easy availability is one of the biggest advantages of a personal loan. Almost all banks and on banking financial companies offer personal loans for its customers. Personal loans are not very expensive and are available at reasonable interest rates making them a lucrative option to overcome any immediate financial need.
- Minimal Documentation: Getting a personal loan does not warrant any long process of asset verification and require minimal documentation. Personal loans are quickly disbursed due to the fact that they seek minimal documentation for loan approval.
- Quick Loan Approval: Personal loans today come with a quick loan approval mechanism. Loans are approved almost instantly for online personal loan requests. Users requesting for a personal loan can expect a loan disbursal within one or two working days making the whole loan process swift and hassle-free.
Personal Loan Interest Rates
Personal Loan Details
| Interest Rate (Monthly reducing balance) | 10.85% – 37.00% |
| Processing Fees | Varies with a bank |
| Loan Tenure | 1 year to 5 years |
| Pre-closure Charges | Varies with a bank |
| Guarantor Requirement | Varies with a bank |
Compare Personal Loan from different banks
| Bank/NBFC | Rate of Interest | Loan Processing Charges | Prepayment/ Foreclosure Charges | Cheque Bounce Charges |
| Axis Bank | 15.50% to 24% | 1.50% to 2.00% + GST as applicable | Nil | Rs. 500 per cheque bounce + GST as applicable |
| SBI | Personal Loans Scheme (SBI Saral): 8. 50% above Base Rate floating | 2.02%-3.03% of the loan amount. | Nil | NA |
| HDFC Bank | 15.75% to 20% | Up to 2.50% of the loan amount subject to a minimum of Rs. 1,000/- & Maximum of Rs. 25000/- for Salaried Customers. | Salaried – 13-24 Months – 4% of Principal Outstanding, 25-36 Months – 2% of Principal Outstanding >36 Months – NIL | NA |
| Bajaj Finserv | 16% | 2% – 3% of the loan amount | Nil | Rs. 1,000 for every bounce |
| ICICI Bank | 13.99% to 18.00% | Up to 2.25% of loan amount plus GST | The lower of the two amounts given below: 1) 5% of principal outstanding or 2) Interest outstanding for the unexpired period of the loan. | NA |
Features and Benefits of Personal Loan
- Flexibility to Use Funds: Unlike other loan options, the funds raised through a personal loan can be used freely as per the needs of the individual borrower. 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 without any preconditions.
- No Security: Personal loans are approved based on the income details and financial history of the borrower and not over any fixed asset as security or collateral. Since personal loans do not require any collateral or security to be mortgaged with the bank for loan approval, they are easy to use for a vast majority of people.
- Flexible Quantum of Loan: Based on the borrower’s financial history and credit report, personal loans are available for requirements as low as Rs. 10,000 to as high as Rs. 15 Lakhs or 20 lakhs, depending on the bank or NBFC concerned.
- Flexible Tenure: The tenure of a personal loan is also quite broad depending on the bank and the loan amount. Personal loans are available for a tenure period ranging from 12 months to 60 months, making it an ideal financial instrument compared to other options like credit card loan or gold loan.
Personal Loan Eligibility:
Various banks and NBFC’s offer personal loans to all applicants fulfilling their basic eligibility criteria. While different banks have different minimum eligibility criteria, the criteria common for most banks and NBFCs for individuals requesting a personal loan include:
Personal Loan Eligibility Details
| Particulars | Salaried | Self-Employed |
| Age(Min-Max) | 23 years to 58 years | 28 years to 65 years (25 years for doctors) |
| Income | Rs.17,000 (Rs.25,000 for metro cities) |
|
| CIBIL Score | Above 750 | Above 750 |
| Minimum Loan Amount | Rs.75,000 | Rs.75,000 |
| Maximum Loan Amount | Rs.20,00,000 | Rs.15,00,000 |
Documentation needed to apply for a personal loan:
Different banks and NBFCs have different minimum documentation requirement for personal loans. The common documents required by most banks and NBFCs for individuals requesting a personal loan include :
Documents for Salaried Individuals:
- Proof of Identity: Passport, Driving License, Voters ID or PAN Card
- Proof of Residence:-Passport or utility bills
- Latest 3 months Bank Statement of Salary Account
- Salary slips for last 3 months.
Documents for Self-Employed:
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- Proof of Identity: Passport, Driving License, Voters ID or PAN Card
- Proof of Residence:-Passport or utility bills
- Income proof: Audited financials for the last two years.
- Last 6 months Bank statement.
- Office address proof.
