Personal loans are unsecured credit with flexible end-use that typically have a tenure of 12 months to 60 months. If a shorter tenure is chosen, individual EMI amounts are higher, while a longer tenure results in lower individual EMIs.

~ No Collateral/Security Required: You don’t need to provide any collateral such as house or car to avail a personal loan. The loan is approved only on the basis of your creditworthiness, which depends on your credit score, income, repayment history, employer reputation, etc.

~ Flexible End Use: Unlike a car loan or home loan, personal loans can be used for multiple purposes, such as to meet expenses of a medical emergency, travel, house renovation, debt consolidation, etc.

~ Flexible Tenure: Personal Loans come with flexible tenure usually ranging from 12 months to 60 months.

~ Minimal Documentation: You can apply for a personal loan online and even offline with minimal documentation. Key documents that lenders generally need the applicant to provide include a proof of identity, a proof of address and a proof of income.

~ Quick Disbursal: Personal loan disbursal can happen within a period as short as a few hours, once the application is approved. Turnaround times can also be as short as a few minutes, if you are able to avail a pre-approved loan offer.

~ Flexible Loan Amount: The eligible personal loan amount is based on an individual’s repayment history, monthly income, age, profession, employer reputation and other such factors. Lenders offer personal loans of amount as low as Rs. 10,000 to as high as Rs. 40 lakh.

~ Credit Score:
It is a 3-digit number between 300 and 900 based on an individual’s financial health and repayment ability. The higher your credit score, the better your chances of getting a personal loan at a lower interest rate.

~ Loan Amount:
Some lenders charge a higher interest rate if the applicant is borrowing a larger loan amount. This is due to the perceived higher risk of default, as a larger loan typically leads to a higher EMI payout.

~ Loan Tenure:
Interest rates may vary based on the tenure of the loan. Some lenders charge different rates for long-term loans versus short-term loans, depending on their internal criteria.

~ Repayment Capacity:
Borrowers with high existing debt may be charged higher interest rates, as higher fixed obligations increase the lender’s risk of default.

~ Maintain a high credit score and clean credit history
~ Ensure you have minimal outstanding debt (i.e., maintain a credit utilisation ratio of 30% or less)
~ Apply for a personal loan with a lender with whom you have a prior relationship
~ Opt for a secured personal loan (e.g., loan against shares, NSC, KVP, LIC, etc.)
~ While the above tips are helpful, a low interest rate is not fully guaranteed, as multiple factors impact the loan interest rate.
~ Ways to Decrease Total Interest Pay-out:
> Opt for a shorter tenure – Higher EMI, but lower total interest
> Part pre-payment or foreclosure – Reduces principal, hence lowers interest
> Opt for a lower loan amount – Smaller principal means lesser total interest

~ Reducing Balance Method
Method of Calculation : EMIs are calculated only on the principal amount outstanding after each prior payment.
EMI Payout : Individual EMI payouts decrease with each successive EMI payment.

~ Flat Interest Rate Method
Method of Calculation : EMIs are calculated on the original amount borrowed, i.e. the entire loan principal.
EMI Payout : Individual EMI payouts remain unchanged over time.

The verification process for a personal loan involves the following key steps:

Step 1: Once you have submitted your online application we receive your online loan application.
Step 2: Subsequently, OUR representative will call you to verify application details and arrange for pickup of documents required for your loan application.
Step 3: Once the documents have been collected and successfully verified, the personal loan application is approved.
Step 4: Loan is disbursed once the applicant signs the loan agreement.

Once your personal loan application is approved and the loan has been sanctioned, disbursal occurs in one of 2 ways:
~ Option1. Direct transfer of funds to a savings/current bank account specified by the applicant
~ Option2. An account payee cheque/ draft sent to the applicant’s mailing address by post
Currently the 1st option is more commonly used as disbursal is quicker and there is no risk of a cheque/draft getting lost in transit by post.

The main factors affecting the disbursal limits of personal loans include the following:
~ Income of the applicant – higher income level tends to increase the disbursal amount
~ Current EMI payable – higher EMI pay-outs typically decrease the disbursal amount
~ Number of dependents – higher number of dependents usually decrease the disbursal amount

The list of factors impacting disbursal limits of personal loans mentioned above is not exhaustive and there may be others that impact the disbursal decision made by lenders.

Timely EMI payments of your personal loan are essential to ensure that you maintain a clean credit history and good credit score. There are multiple ways you can pay your loan EMI:
~ Standing Instructions – You can use NACH mandate to set up standing instructions
~ Autopay – You can use internet banking to set-up autopay for EMI payment
~ Online Transfer – EMI payments can be made online using NEFT, RTGS, IMPS payments
~ Cheque/Draft – Post-dated cheques (PDC) or drafts can also be used to pay your PL EMI

Do keep in mind that the different EMI payment options mentioned above may or may not be available in case of your lender.

If you are finding it difficult to keep up with your monthly loan repayments, you might be able to negotiate a lower EMI by extending your repayment tenure. You should however bear in mind that in this situation, due to the longer tenure, you will end up paying more interest over the loan tenure.

The following are a few specific terms related to personal loans that you must know:

~ Personal Loan for Women: It is a special category of personal loan offered to women by several banks and NBFCs. A preferential rate of interest is applicable in such cases to promote and support female entrepreneurs and working women.
~ Personal Loan for Pensioners: It is offered to senior citizens so that they can meet their retirement needs, medical expenses, or plan a trip without any financial constraint.
~ Pre-approved Personal Loan: This is a special category of personal loans, also known as instant personal loans. These are usually offered to existing customers (account holders/credit card holders) of the bank or NBFC. Instant personal loans are characterized by minimal to no documentation and quick disbursal of the loan amount (generally within a few hours). However, the loan amount sanctioned in such quick personal loan offers depend on the applicant’s profile and cannot be changed.
~ Top-up Loan: This is a personal loan issued to a borrower who already has an unpaid personal loan from the current lender. Top-up personal loans are usually available to select PL customers of the NBFC and they often feature an interest rate similar to that of a standard personal loan.
~ Balance Transfer: Balance transfer is the process by which the principal outstanding of an existing loan is transferred to a new lender offering a lower interest rate. This decreases the overall interest payout over the loan tenure.
~ EMI: Equated monthly instalments (EMI) are the scheduled monthly payments that a borrower needs to pay over the loan tenure to pay off the amount borrowed along with interest accrued.
~ Partial-Prepayment: In case the borrower decided to repay a loan amount that is greater than the monthly EMI pay-out, the extra amount is considered to be a partial-prepayment. Such partial prepayment decreases the outstanding loan principal and in effect reduces the total interest outgo for the loan. In such cases, prepayment penalties and related taxes may be applicable.