Personal Loan


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A personal loan is a financial instrument that helps you avail funds for a multitude of uses. Like any regular loan; when opting for a Personal Loan you are advanced a specific amount of funds at a set interest rate and can clear it via a fixed repayment tenure. However, a few aspects of a personal loan may prove more advantageous than other loans.

What is Personal Loan ?
A personal loan is an unsecured loan product which is offered by several lenders including banks, NBFCs and other financial institutions. The borrower can use the loan amount to meet his financial emergencies like funding one’s education, business, medical expenses, vacation, home renovation projects, wedding, consolidating debts etc. The lender doesn’t hold any jurisdiction in how the loan amount will be used. A personal loan can be availed by both the salaried and self-employed individuals.

Features And Benefits Of Personal Loan

Below-given are the benefits and features of a personal loan:
  1. No Security Required: This loan is collateral-free. You can borrow up to Rs. 1 Crore without securing any asset with the bank/NBFC.
  2. Affordable Interest Rate: The personal loan interest rate starts at 10.50%. The rate of interest is much lower than interest charged (as high as 36%) on a credit card loan.
  3. Flexible Tenure: The tenure is flexible: between 1 year and 5 years. You can choose loan tenure as per your repayment ability.
  4. Quick Disbursal: The loan amount is quickly disbursed within 48 hours of loan approval. Therefore, you can choose a personal loan to fulfil urgent expenses.
  5. Online Application: Most lenders allow you to apply for a personal loan online. Thus, no branch visits are required to request for the funds.
Factors Affecting Personal Loan Interest Rates

Personal loan interest rates take into consideration a lot of factors such as:
  • Your Credit History: Before approving the Personal Loan, a lender usually evaluates your CIBIL score. This is a three-digit numeric rank that the Credit Rating Agency provides to individuals depending on their credit repayment history. . A credit score of 650 or above is typically considered good score. The better your credit score, the higher are your chances of getting a personal loan.
  • Your income: Income is also one of the factors for getting an attractive rate of interest. Banks charge a lower rate if you have a fixed and guaranteed income. Higher-income candidates are considered reliable due to their job security.
  • Your employment type: You need to have a secured job to be eligible for an attractive rate. A Personal Loan is open for self-employed, business owners and salaried individuals. Since Government and Private Sector employees have job security, the interest rates for a loan is offered at a lower rate.
  • Your relationship with the lender: If you have a loyal relationship with a bank, you can negotiate on the Personal Loan interest. When the need for a Personal Loan arises, you can leverage your existing relationship with the bank and avail of an attractive interest rate.
  • Your repayment and loan defaults: Having a bad loan repayment reputation or defaulting on loan debt affects your overall credit score. A low score means paying high interest on a Personal Loan or not getting loan approval. Hence, you need to maintain a good repayment history with no defaults.
CIBIL Ratings Credit Score Chances of being approved by bank
Poor Less than 600 You may not qualify for personal loan
Average Between 600 and 750 Loan may be approved, but at a high interest rate
Good Over 750 Loan is likely to approved with lower interest rate
Excellent Between 800 and 900 Loan with a low interest rate, faster approval, larger loan amount