What is a Personal Loan?
A **Personal Loan** is an **unsecured loan** provided by banks, NBFCs, or online lenders, allowing you to borrow money without pledging any asset as collateral. It can be used for a wide range of personal expenses, such as medical bills, weddings, travel, education, or home renovation. The loan is repaid in fixed monthly installments (EMIs) over a predetermined tenure. Approval is based on your financial history, credit score, and repayment capacity.
Key Features of Personal Loans
Unsecured
No collateral is required, making it easy to access funds quickly.
Quick Disbursal
Many lenders offer quick approval and disbursal, sometimes within 24 hours.
Flexible Usage
You can use the loan amount for any purpose, with no restrictions.
Fixed EMIs
The fixed monthly payments help you manage your budget and finances effectively.
Calculate Your Personal Loan EMI
Loan Details
Loan Summary
Monthly EMI
₹0
Total Interest
₹0
Total Payment
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Loan Repayment Breakdown
See the split between your principal and interest payments.
Principal Amount
Total Interest
View Full Amortization Schedule (Monthly)
| Month | Beginning Balance | EMI | Principal Paid | Interest Paid | Ending Balance |
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Documents Required for a Personal Loan
While the exact documents may vary by lender, here is a general list of what you'll need to submit with your application:
- Identity Proof: Passport, Aadhaar Card, PAN Card, or Driver's License.
- Address Proof: Utility bill, Passport, Aadhaar Card, or Voter ID.
- Income Proof (Salaried): Last 3 months' salary slips, and bank statements for the last 6 months showing salary credits.
- Income Proof (Self-Employed): Latest ITR, business financial statements, and bank statements for the last 6 months.
- Photograph: A recent passport-sized photograph.
Key Benefits of a Personal Loan
No Collateral
Since it's an unsecured loan, you don't need to put up any assets like your home or car as security.
Rapid Approval
The application and approval process is often fast, with some lenders offering instant digital approval.
Fixed Interest Rates
Most personal loans come with a fixed interest rate, so your EMI remains the same throughout the tenure.
Minimal Paperwork
The documentation process is streamlined, especially for existing bank customers.
How Personal Loans Work
1
Check Eligibility & Compare Offers
Review lender requirements for credit score, income, and employment history. Compare interest rates, fees, and terms from multiple lenders.
2
Submit Application & Documents
Complete the application with required documents like ID proof, income statements, and address proof.
3
Receive Funds & Repay
Once approved, the loan amount is disbursed to your bank account. Repay the loan through fixed monthly EMIs as per the schedule.
Factors Affecting Personal Loan Eligibility
Credit Score
- A higher credit score (usually 750+) increases approval chances.
- It also helps you secure a lower interest rate.
Income Level
- Lenders evaluate your income to ensure you can comfortably repay the loan.
- A stable, higher income improves your chances.
Employment Stability
- A consistent employment history with your current employer is a key factor.
- Lenders prefer salaried individuals with a long tenure.
Existing Debt
- Your existing debt-to-income ratio is considered.
- High existing debt can limit your new loan amount.
Frequently Asked Questions
What is a Personal Loan and how is it different from other loans?
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A personal loan is an unsecured loan, meaning it does not require any collateral. Unlike a home or car loan, which are secured by the asset you are purchasing, a personal loan is based on your creditworthiness. This makes it a more flexible option for various personal expenses.
What is the minimum credit score required for a personal loan?
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While the minimum score varies by lender, most banks and NBFCs prefer a credit score of 750 or higher. A good credit score significantly improves your chances of approval and helps you get a better interest rate.
Can I get a personal loan if I am self-employed?
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Yes, many lenders offer personal loans to self-employed individuals. The eligibility criteria usually involve submitting proof of a stable income, such as income tax returns (ITR), business financial statements, and a consistent banking history.
What is the typical interest rate for a personal loan?
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Personal loan interest rates in India typically range from 10.5% to 30%, depending on the borrower's credit score, income, and the lender's policies. A higher credit score and stable income can help you qualify for a lower rate.
How is EMI calculated for a personal loan?
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EMI stands for Equated Monthly Installment. It is calculated using a formula that takes into account the principal loan amount, the interest rate, and the loan tenure. The EMI remains the same throughout the loan period, making it easier for you to plan your finances.
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