Personal Loan

The interest rate offered on a personal loan is determined on the basis of the eligible applicant’s credit profile and also the lenders’ policy (based on credit risk-based pricing model, cost of funds, etc.) As the interest rate on a personal loan primarily influences the total borrowing cost, applicants must always look for the best interest rates available on their credit profile.

For this, individuals should first check offers from lenders with whom they already have deposit(s), credit card(s) and/or loan account(s). They should also visit online financial marketplaces like Paisabazaar to compare interest rates offered by other banks and NBFCs. Consumers are advised to always compare offers before applying for any kind of credit to make an informed choice.

Personal loan eligibility criteria may vary across lenders. To give you a fair idea, here are some of the general requirements:

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 a few common set of documents that you will need to submit when applying for a personal loan:

Three major factors that influence your personal loan EMIs are:

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 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:

Also Read: CIBIL Score and Personal Loans: What’s the Connection?

Before applying for a personal loan, here are a few things you should know:

The following are the key steps to take before applying for a 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.

Given below are a few personal loan schemes offered by some of the leading banks and NBFCs in India:

HDFC Bank

The interest rate of HDFC Bank personal loan starts from 10.90% p.a. The tenure of the scheme can go up to 6 years whereas the loan amount can go up to Rs 40 lakh. The bank also offers pre-approved loans with ‘10 second disbursal’ to its select existing customers based on their credit profiles.

• Interest Rate: 10.90% p.a. onwards
• Loan Amount: Up to Rs 40 lakh
• Tenure: Up to 6 years
• Minimum Salary: Rs 25,000 per month
• Age: 21-60 years
• Credit Score: At least 650
• Processing Fee: Up to Rs 6,500

ICICI Bank

ICICI Bank extends personal loan to cater to the varied financial requirements of its borrowers. The bank also offers Fresher Funding, a special scheme for funding immediate and other financial requirements of younger salaried individuals. For its select existing customers, the bank offers overdraft facility, pre-approved offers and top up loan facility. Its pre-approved offers feature minimal documentation and 3-second disbursals.

• Interest Rate: 10.80% p.a. onwards
• Loan Amount: Up to Rs 50 lakh
• Tenure: 1 to 6 years
• Minimum Salary: Rs 30,000 per month
• Age: 20-58 years (for salaried); 23-65 years (for self-employed)
• Processing Fee: Up to 2% of loan amount

Axis Bank

Axis Bank Personal Loan covers expenses related to wedding, home renovation, travel, medical emergency and much more. The bank also extends pre-approved offers to its select existing customers. Such offers have digital processing and instant approvals. Axis Bank has also collaborated with Paisabazaar to extend its select customers pre-qualified offers.

• Interest Rate: 9.99% p.a. onwards
• Loan Amount: Up to Rs 10 lakh
• Tenure: 6 months to 5 years
• Age: 21 to 60 years
• Minimum Monthly Salary: Rs 15,000
• Processing Fee: Up to 2% of loan amount

Kotak Mahindra Bank

Kotak Mahindra Bank offers loans only to salaried individuals. Existing borrowers of other banks/NBFCs can avail balance transfer facility to transfer their outstanding loan to Kotak Mahindra Bank at lower interest rates. Those exercising balance transfer facility can also avail top up loans of up to 100% of their loan amount. Kotak Mahindra Bank also offers an overdraft facility, giving borrowers the flexibility of withdrawing their funds from their loan account anytime and repaying it as per their convenience.

• Interest Rate: 10.99% p.a. onwards
• Loan Amount: Up to Rs 35 lakh
• Tenure: Up to 6 years
• Credit Score: At least 730
• Age: 21-60 years
• Minimum Monthly Salary: Rs 25,000 (for corporate borrowers); Rs 30,000 (for non-corporate salary borrowers)
• Processing Fees: Up to 5% of loan amount

IndusInd Bank

IndusInd Bank offers multiple personal loan schemes including wedding loan, home renovation loan, loan for medical expenses and loan for education. The bank also offers balance transfer facility to existing borrowers of other banks and NBFCs. For those requiring quick financing, the bank extends instant personal loan online with quick processing and loan approvals.

• Interest Rate: 10.49% p.a. onwards
• Loan Amount: Up to Rs 50 lakh
• Tenure: 1 to 7 years
• Age: 21 to 60 years (for salaried); 25 to 65 years (for self-employed)
• Processing Fee: Up to 3.5% of the sanctioned loan amount
• Minimum Salary: Rs 25,000 per month

Personal loan overdraft is a credit facility offered by bank and financial institutions that allows you to withdraw funds up to a pre-approved limit. You pay interest only on the utilized loan amount from the assigned limit and can be withdrawn multiple times.

Closing Your Personal Loan Early

Borrowers having surplus might want to close their personal loans early. Below are a few points that can help you in prepaying your personal loans early and smartly:

Also Read: Dos and Don’ts of Personal Loan Prepayment

Having a CIBIL score of 750 and above can help you in the following ways: