Personal Loan
Get a personal loan of up to Rs 40 lakh with interest rates starting at 10.5% p.a. Explore pre-approved offers from our partner lenders, featuring end-to-end digital processing and instant disbursals.
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Last updated: 29 November, 2024
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What is a Personal Loan?
Personal loan is a short to medium term loan, which consumers can avail to meet both personal and business needs other than speculative purposes. They are usually unsecured in nature as consumers do not need to pledge any collateral or security to avail them.
Gaurav Aggarwal is the Chief Business Officer (Unsecured Lending) at Paisabazaar. A seasoned fintech professional, Gaurav has played a pivotal role in transforming Paisabazaar from a challenger brand to being India's largest online marketplace for consumer credit and free credit score platform. Over the last decade while building Paisabazaar, Gaurav has worn multiple hats across a wide spectrum, from product development to analytics. Gaurav brings close to 2 decades of experience in the financial services sector.
Personal Loan Interest Rate
Eligibility for Personal Loan
Personal loan eligibility criteria can vary from one lender to another due to their varying credit risk policies. It can also vary as per the loan variant and the occupation profile of the applicant. Here are some of the personal loan eligibility criteria used by most lenders:
Documents Required for Personal Loan
Personal loan lenders require documents from their applicants to establish their identity, income, loan repayment capacity and place of residence. These documents are more or less the same across lenders. Here are the few common set of documents that you will need to submit when applying for a personal loan:
Requirements | Salaried Individuals | Self Employed Professionals/Non Professionals |
Proof of Identity | Passport, Voter ID, Driving License, Aadhaar Card or PAN Card | Passport, Voter ID, Driving License, Aadhaar Card or PAN Card |
Proof of Residence | Aadhaar Card, Voter ID, Passport or Utility Bills | Aadhaar Card, Voter ID, Passport or Utility Bills |
Proof of Income | Salary Slips, Bank Statements, Form 16 | Previous Years’ ITR, P&L Statement and Balance Sheet, Bank Statements |
Processing Fees and Charges
While the fees and charges of personal loans can vary widely depending on lender and the credit profile of the loan applicants, the following table will give you a fair idea of the personal loan fees and charges levied by the lenders:
Particulars | Charges |
---|---|
Loan Processing Fees | 0.5% to 4% of loan amount |
Prepayment/Part-prepayment/Foreclosure Charges | For Floating Rate: NilFor Fixed Rate: Usually around 2% - 5% on the principal outstanding |
Loan Cancellation | Usually around Rs 3,000 |
Stamp Duty Charges | As per actuals |
Legal Fees | As per actuals |
Penal Charges | Usually @ 2% per month; 24% p.a. |
EMI/Cheque Bounce | Around Rs 400 per bounce |
Other fees and charges levied by the lenders include documentation charges, verification charges, duplicate statement charges and NOC certificate charges.
How Can I Apply for a Personal Loan Online?
Get up to ₹40 Lakh in 5 Simple Steps
Step 1: Enter your mobile number in the application form
Step 2: Provide your personal details
Step 3: Enter OTP to verify your mobile number
Step 4: Select the loan purpose and loan amount
Step 5: Compare offers and apply for the best-suited loan
Types of Personal Loan
Several banks and NBFCs offer various loan variants to help their customers meet their unique financial requirements. The broader features such as tenure, processing fees, etc. offered on these loan variants are more or less the same as those offered on regular personal loans. Here is a brief description of some of the personal loan variants.
Features and Benefits Personal Loan
Personal loan is a preferred credit option for financing lifestyle goals and fund shortages due to their easy accessibility, minimal documentation and quicker disbursals. Here are the key features and benefits of personal loans:
- Collateral-free loan
- No end-use restriction
- Loan amount of up to Rs. 40 lakh, which can exceed depending on lenders' discretion
- Repayment tenure up to 60 months, which may exceed on case-by-case basis
- Top up loans for additional requirements are offered by many lenders
- Minimal documentation
- Quick disbursals
Explore Our Personal Loan Lenders
We have been recognised at several prestigious forums for our consumer-focused innovations over the last decade.
How to Calculate EMI for a Personal Loan?
You can calculate EMI on your personal loan using the formula: EMI = [P x R x (1+R)^N]/[(1+R)^N-1],
where,
- ‘R’ denotes the rate of interest
- ‘P’ denotes the principal amount
- ‘N’ denotes the loan tenure
As manual calculations can be time-consuming and prone to errors, using an online personal loan EMI calculator would be preferable. The calculator requires just a few basic details for EMI calculation, including interest rate, loan amount, and tenure. Once the details are entered, the calculator will display the EMI, total interest amount and amortization schedule basis which you can compare various personal loan offers based on your loan repayment capacity.
Factors Affecting Personal Loan EMI
Three major factors that influence your personal loan EMIs are:
- Principal Amount: An increase in the principal amount leads to an increase in your EMI, provided the values for loan tenure and interest rate remain unchanged.
- Interest Rate: Personal loan EMIs increase with every increment in the interest rates.
- Tenure: Choosing longer tenure on your loans results in lower EMIs. However, it also leads to higher overall interest cost on the loan.
EMI Calculators | |
---|---|
SBI Personal Loan EMI Calculator | ICICI Personal Loan EMI Calculator |
HDFC Personal Loan EMI Calculator | Axis Bank Personal Loan EMI Calculator |
5 Tips to Increase your Chances of Getting a Personal Loan
The unsecured nature of personal loan increases credit risk for lenders as it leaves them with no collateral or security to compensate their losses in case of a loan default. To mitigate this risk, banks and NBFCs factor in various aspects of their applicants’ credit profiles and follow strict eligibility policies when evaluating their loan applications. Those planning to avail personal loan can improve their chances of approval through these tips:
- Maintain your CIBIL score above 700
- Check for inaccuracies in your credit report, as they might adversely impact your credit score and thereby, reduce the chances of loan approval
- Compare the personal loan offers available from banks and NBFCs before finalizing any loan deal
- Apply for the loan from a bank/NBFC where you have the highest chances of approval
- Avoid making multiple loan applications within a short period
Things to Know Before Getting a Personal Loan
Before applying for a personal loan, here are a few things you should know:
- Many banks and NBFCs offer pre-approved instant personal loan offers to their existing customers: Many lenders provide pre-approved offers to their select existing customers based on their credit profiles. Such pre-approved offers feature quick disbursals and require minimal to no documentation. Many lenders also offer lower interest rates to their existing customers.
- Having a higher credit score increases your chances of loan approval at lower interest rates: Banks and NBFCs prefer sanctioning personal loans to those having higher credit scores of 700 and above. Many lenders also set lower interest rates for such applicants. Having higher credit scores also increases an individual’s eligibility for pre-approved loan offers.
- Increase your EMI affordability by choosing longer tenure: Longer tenure leads to lower EMIs. Hence, consumers wanting to increase their EMI affordability can select longer tenures and/or lower loan amounts when making the loan application.
- No charges are levied on prepaying or foreclosing floating rate personal loans: RBI has barred banks and NBFCs from levying prepayment/foreclosure charges on floating rate personal loans. In the case of fixed rate, lenders can choose to levy these charges.
- Making multiple loan applications within a short span might reduce your chances of loan approval: Lenders fetch credit reports of every loan applicant as part of their loan evaluation process. Such lender-initiated credit report requests are known as hard enquiries. Having multiple hard enquiries within a short period can lead to a sudden decline in your credit score, thus, reducing your chances of availing personal loans.
Instant Loan vs Regular Personal Loan
The differences between an instant personal loan and a regular personal loan are as below:>
Instant Personal Loan | Regular Personal Loan |
---|---|
Disbursed in a few minutes or seconds | Usually takes 2-4 days’ time for loan disbursal |
Usually pre-approved and offered to select existing customers having good credit profiles | Offered to new individuals as well as existing customers |
Can avail only till the sanctioned loan amount | Can avail higher loan amounts based on their repayment capacity |
What is the Maximum Loan Amount I Can Get on My Personal Loan?
Personal loans offered by lenders can range anywhere between Rs 10,000 and Rs 40 lakh. Some lenders may offer higher loan amounts, depending on their discretion and the applicant’s loan repayment capacity. Some banks and NBFCs use the Multiplier Method, wherein the eligible loan amount is calculated on the basis of a predetermined multiple (ranging between 10 and 24 times) of an applicant’s net monthly income.
Other lenders use the EMI/NMI Ratio, wherein the EMI of the proposed loan cannot exceed a predetermined proportion of the applicant. Some lenders also use a combination of both of these methods to find the loan amount eligible of the applicant.
What Can a Personal Loan Be Used For?
Personal loans can be availed for any purpose, except for speculation or illegal activities. Borrowers can use the loan proceeds for covering medical emergencies, home renovation, wedding, vacation, business operations, etc. The loan can also be used for managing everyday expenses or for covering higher education costs (including courses not eligible for education loan) and for consolidating multiple high-interest debts.
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