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  • Loan Info
  • Loan Types
  • Emi Calculator
  • Eligibility
  • Personal Loan FAQ

About Personal Loan

A personal loan is often short-term or a medium term loan that's smaller than a mortgage and is incurred to mitigate the financial needs of the person. A peculiar thing about a personal loan is the absence of collateral, so for the most part, this one is kind of unsecured loan.
Normally the issuance of personal loan is for expenses that range in from financing a car, to structuring a debt, renovating the home, managing unexpected medical and auto repairs or even financing a good ol' vacation. Judging by the period of time, personal loan lasts from 1 year to 5 years, unlike the mortgage ones where they run up to ten, fifteen or twenty years.

Why Choose a Personal Loan?

Personal loan as the name suggests is often partaken in order to meet the financial needs that don't range in for high values. You can avail a personal loan for yourself on for any of the reason as you deem fit. We'll list out the major reasons that mark the issuance of personal loan down below-

  • Financing a Car
  • Renovating your Precious Home
  • Meeting your debts or structuring them
  • Managing unexpected auto repairs or medical expenses
  • Financing yourself or family a good ol' holiday
  • Funding your lavish wedding with your loved ones
  • Act as liaison for meeting business expenses like marketing expenses and more
  • To boost your cash flow for the moment
  • Or to even buy yourself a new off the shelf Flagship Smartphone, aka iPhone.

For many, personal loan has acted as a great means to meet the ever popping personal and business expenses. Personal loan balances out the cash flow for many without causing a great deal of insurgency. There's not much to do to avail a personal loan, as the documentation and filing procedure is pretty easy and quick. No doubt, why the multiple banks and NBFC's are offering different packages of personal loan for all strata of the population, i.e. salaried and self-employed.

Things to Consider while Seeking a Personal Loan

Under all those shiny glitters of personal loan, there's something you need to understand about it before diving deep into it. Personal loan on its part is a great boost of finance in need but ample consideration needs to be laid out so that it never burdens you. The below-mentioned guideline shall help you to manage it better. Read along.

  • Always plan your budget as against the expenditure you're needing it for. Seek only the budgeted amount you need.
  • Have your Credit report or CIBIL score checked. Also keep track of your credit history too.
  • Normally the personal loans come with a repayment period of anywhere from 1 to 5 years, so work out your APR (Annual Percentage Rate) as for the interest calculation. APR calculation would help you in finding the exact amount you'll be paying off. Generally, the interest rate ranges from 11% to 35% as per the varying circumstances.
  • Take this for an example, you take a personal loan of Rs 10 lacs for a period of 4 years with the interest being charged as 11%. Your EMI amount will round off at Rs 25,846 with total interest coming in at Rs 2,40,585. Your total payable amount over the period of 4 years will be Rs 10,40,585. Don't forget the loan processing fee on top of it coming in at around 1% to 5%.
  • Have a round-up on the market and go through the multiple of options before zeroing on the best. Always look for the personal loan with lower processing fees and pre-payment options. Additional costs if not kept tab off, can mark a vivid difference in the loan amount.
  • Keep your options open and seek customized personal quotes on loan so that you have plenty to choose from.
  • Never just fall for the lower rates, as additional charges or flat interest rate might surge your interest and payable amount at the end. Seek answers as to whether the interest is charged on a flat basis or on reducing balance basis.
  • And lastly, always read the documents and their terms carefully before signing the loan papers.

Features, Benefits, and Types of Personal Loans


  • As is the case with a personal loan, it's an unsecured one which results in no collateral for the offered loan. You wouldn't have to collateral your car or even house to avail a personal loan. Personal loan just requires a nice little credit history of the loan seeker.
  • All you need to do is have a fine credit score with no defaults on payment. That way you'd be offered the loan easily as you seem to be a low-risk borrower for the offering company.
  • Personal loan comes with variable interest rates, that differs from one offeror or another. The interest is generally devised upon the basis of the amount of loan taken, the repayment period or the tenure as known by and a little background of your salary.
  • Going by the norms, personal loans have a little to none processing fee (generally its 1% of the loan availed) which is conveyed to the applicant beforehand. It also features a few other charges like pre-payment charges, documentation charges, penalties for late payment, cheque bounce charges. Something that's common with loans.


  • Personal loan has a short or medium time frame and generally runs around for 1 year to 5 years and is fixed upon the loan availing time.
  • Personal loans are often hassle-free and don't require much paperwork or running around. A loan application is often approved within 24 to 48 hrs.

Types of Personal Loans

Different Types of Personal Loan Features Loan Offering Institutions
Loan for Low CIBIL Score Holders
  • Generally, sought by people with low credit score or CIBIL score
  • Loan comes with High-Interest rate
The loan seeker should negotiate with the bank for the loan to be availed or seek secured personal loan for time being.
Loans for Unemployed
  • Only for unemployed applicants and doesn't require any collateral
  • The interest rate if quite high for the loan
Multiple options like Government plans, TATA Capital, Max Finance, India Lends and more.
Business based Startup Loan
  • Usually for Startups and SME's
  • The loan comes to little interest for the first few months and with an average rate of interest for the rest of the period.
Almost all finance services and banks of India
Same Day Loans
  • Sought by people with emergency need of cash
  • The loan gets approved in minutes but is charged at a higher rate of interest.
HDFC Bank and Citi Bank
Corporate Loans
  • Available for both existing business and industrial sectors either as secured or unsecured
HDFC Bank, HSBC Bank, Kotak Mahindra, TATA Capital, IndusInd, Bank of Baroda, Citi Bank, Standard Chartered and more.
Govt. Based Loan for Small Business
  • Exclusively to be availed only by Women under different schemes
HDFC Bank, TATA Capital, IndusInd, ICICI, Bank of Baroda, Punjab and Sind Bank, Dena Bank and more.
Home Renovation and Improvement Loan
  • Generally availed by those seeking the renovation and repair of their house.
  • The loan comes with 90%-100% coverage and had an interest rate ranging from 9-12.5 % per annum.
Offered by ICICI Bank, HDFC Bank, Bank of Baroda, DHFL Bank, PNB and more.
Medical Expense Related Loan
  • To meet up any unexpected or expected medical expenses.
  • No requirement of any collateral item.
  • The loan is generally up to 25 lacs.
SBI Bank, Arogya Finance, TATA Capital
Marriage Expense Related Loan
  • For financing marriage expenses.
  • The loan amount can be anywhere between 5 lacs to 20 lacs.
  • Has a medium to high-interest charge
SBI Bank, ICICI Bank, Axis Bank, TATA Capital, Bank of Baroda, PNB and more.
Free CIBIL Score Calculator - CreditSmart.inLooking for an easy to use EMI calculator? Try this one here at CreditSmart. This free online resource will quickly calculate any kind of EMI, whether it be a personal loan, an auto loan, or a home loan. Simply input your data and it will break down exactly what you need to pay each month. It's important to not miss a single payment of any loan, because as we know even one missed payment can translate into many points falling off your CIBIL score. It's just good CIBIL maintenance and smart life practice to never miss a payment, so we hope this tool will assist you in your monthly budget.

While you're here, please try our free CIBIL Score Estimator Calculator. This invaluable tool will guide you through a few questions to understand your financial picture, and then show you an accurate estimate of what your CIBIL score actually is. It's a complex algorithm that factors your existing loans, debt, and behavior and calculates this into your score. And we provide this all for free.

Once you have tried our CIBIL Score Calculator and EMI Calculator, you've gotten a little bit of knowledge about where you are financially. We want you to grow this knowledge and take an interest in learning how the rewards of maintaining good financial habits can last a lifetime. For this, we hope you'll stay close to our site. We update CreditSmart 5 days a week with the latest information on credit cards, loans, improving CIBIL score, and all kinds of topics geared toward making you more financially aware. You can bookmark us or subscribe to get our latest posts. If you have a question or valuable information for the community, please ask or share in our forum! Wishing you the best of luck. We hope to see you again here at  

Personal Loan Eligibility Criteria

We talked about the personal loan being easy to process and requires little to none documentation up above. Well largely that's the case with personal loans, they don't require a bunch of documents like other housing or mortgage loans. But as things stand, you'd still need to furnish a few documents and be able to pass their eligibility criteria. Personal loan can be sought by any Indian national or citizen working either in salaried, self-employed or professional capacity. The loan comes with no collateral and hence requires the borrower to be of little risk. Here's what you should possess-

  • The ability to repay the personal loan within the specified period with distinctive employment service or sufficient business to back off with.
  • The applicant should either be earning the stipulated amount of repayment amount or the minimum salary as per the case.
  • The loan seeking applicant must be part of the age group as mentioned in the lender's guidelines and loan terms.
  • The applicant should have a well-to-do credit history with good credit score, something that matches with the lending company's guidelines.
  • As is the case, the applicant should have cleared any existing loans on his behalf or have a strong financial endurance to ward off additional loans or debts.

Documents Required for Personal Loan

With that eligibility criterion passed onto, it was time we provided the know-how on the documents required to avail personal loan. Let's head down for it-

  1. The loan application form filled out and duly signed.
  2. Recent Passport sized photo of the applicant attached with the form.
  3. Identity Proof (Any one of below)
    • Aadhaar Card.
    • Voter's ID Card.
    • Driver's License.
    • Passport.
    • Ration Card.
    • Employer Issued ID Card.
    • PAN Card.
  4. Address Proof (Any one of below)
    • Passport.
    • Recent Utility Bills.
    • Bank Passbook.
    • Ration Card.
    • Voter's ID.
  5. Residence Proof (Any one of below)
    • Documents relating to property ownership.
    • Maintenance Bill.
    • Recent Utility Bill.
  6. Office Ownership Proof (Only for Self-Employed or Businessman)
    • Sales Deed or Executed Agreement.
    • Company Registration License.
    • Tax Registration.
  7. Income Proof
    • For Salaried Employee.
    • Latest copy of salary slip or salary certificate something ranging between 3-6 months' time or as required by the lender company.
    • A copy of appointment letter or an employment certificate along with this proof.
    • Statement depicting last three months' statement for salary account.
    • For Self-Employed Personals.
    • Bank Statement for the past 1 year.
    • A certified computation of income, P/L Statement and Balance Sheet by a C.A.
    • A statement showcasing last six months of all bank accounts held by you.
  8. Tax Payment Proof
    • Form 16 and Income Tax Return (ITR) copy for the last two years.
    • An acknowledged copy of ITR as proof for a turnover.
  9. Added Documents
    • For Salaried Employees.
    • Certificate of Job Continuation or current employment certificate.
    • For Self-Employed or Businessman.
    • Professional Degree Certificate in case of professional.

Personal Loan FAQ

  • How would personal loan serve me?
  • Personal loan will help you manage your expenses on many things like renovating homes, financing cars, debt management or even on financing a new car. And don’t forget the unexpected medical expenses that might pile up in the nearest future.
  • Can I avail a personal loan?
  • Well if you satisfy the eligibility criterion of the personal loan, then you can definitely avail it. All you need is to have a regular stream of income and a good credit history and you’re set for good. Personal loan doesn’t have a long list of eligibility criteria and can be met easily upon.
  • What are the eligibility documents to be submitted at the time of application?
  • The documentation process requires furnishing off these following documents
    • Income Proof
    • Identity Proof
    • Address Proof
    • Certified copy of Professional Degree in case of self-employed
  • What are the major pros of personal loan?
  • Personal loan is often the major source of cash influx for many in need and is pretty much straightforward. Here are the pros associated with personal loan-
    • Quick processing-The whole documentation procedure requires little time and can be processed really quick in 1-2 days’ time. And whoosh, you’ll have the money in your hand or account.
    • Minimal requirements-Personal loan doesn’t require a host of requirements as seen in other loans like business loans, commercial vehicle loans and more. It has pretty minimum requirements.
    • No need of collateral or security-Personal loan is unsecured and doesn’t require any collateral for submission. Just a fine credit score and history will work for you.
    • Flexible-Personal loan offers a flexibility in usage of funds and doesn’t reserve any cap limit on it.
  • Are there any cons of personal loan?
  • Well, there are a few of the cons, though. Here’s what they are-
    • Pretty high-interest rates-Adhering to the quick processing and no collateral agreement, personal loans have high-interest rates than the secured ones.
    • Varying Qualification criterion-The eligibility criteria is mandated on the basis of good credit history and can only be availed on the basis of the same.
  • What is the process behind the application of loan?
  • The application of loan is followed by the discretion of loan sanctioning officer who decides whether the applicant has furnished the rightful documents that match the bank's criteria. The loan then gets processed towards verification stage whereby the loan gets sanctioned thereupon. The entire process takes anywhere from 48 hrs. to 2 weeks.
  • How long would personal loan last?
  • Personal loan comes in with plans from 1 year to 5 years and can be decided upon by the applicant along with the lending company. However, there are exceptions and rarities where a person can seek shorter or longer tenure of personal loan depending upon the case.
  • What are the extra charges associated with the application for personal loan?
  • Personal loan comes with an additional non-refundable charge that is to be paid at the time of the application of loan. Furthermore, the processing fees also come in at around 1%-2% of the loan amount. The processing charge might as well be waived off as seen in certain cases. However, as things stand, both of these charges are associated with the application of personal loan.
  • Is the interest rate for the personal loan on fixed or floating basis?
  • The personal loan differs as per the scheme and can be based either upon the fixed rate or the floating rate. Nevertheless, these are pre-mentioned during the application procedure to the loan seeker. The fixed rate shall mean that your EMI is same at every month while floating basis shall mean that the EMI amount is on a decreasing order adherent to the reducing balance method.
  • Is there anything to differentiate in between flat interest and reducing interest?
  • Flat interest rate shall mean that the borrower is charged interest on the entire loan balance with the same EMI to carry for the remaining period of the loan tenure. However, in reducing interest method, the interest to be charged shall be calculated only on the outstanding amount of loan and will be lesser as the period goes by.
  • What is the mode of disbursement for personal loan?
  • Personal loan is either disbursed via an account payee cheque or a draft. You can also seek the loan amount directly into your account via the electronic transfer method.
  • What are the means for the payment of personal loan and its EMI?
  • The loan amount can be paid via EMI amounts in through cheque. The cheque should be post-dated and should be drawn in the favor of the lending bank.
  • What will be the pre-payment penalty for the personal loan?
  • Personal loan comes with a tenure during which the loan needs to be paid. In cases where the person availing the loan wants to pay it off before the expiry of the tenure, then an additional pre-payment penalty shall be charged on. The penalty generally ranged around 1% to 2% of the remaining principal amount.
  • What will happen if I ever default on my EMI payment schedule?
  • If there arises a situation where you default on your EMI payment and become unable to make future payments, then the lender shall seek the attempted recovery via settlements and more. Your credit history will be severely affected with the loan reported as default on payment. That in itself is a grave mistake to make as your future applications shall be affected due to it.
  • Will my CIBIL Score and Credit history affect my prospect of a successful application?
  • Credit history and CIBIL Score has a great role in landing you a preferred personal loan. The criterion for personal loan is based on your previous credit history and your current monthly income. As such, CIBIL Score and Credit history will prove to be the differential in ensuring the lesser interest rates.
  • How does a Bank or Finance Company calculate the maximum EMI Amount?
  • As of the norm, the maximum EMI amount is calculated on the basis of the affordability tag of the applicant. Generally, the banks or finance company charges the EMI at around 30% to 40% of the take home salary. However, in cases of existing loan, the personal loan based EMI will be capsized accordingly.
  • Should I opt for personal loan or car loan to buy a car for commercial use?
  • You can choose between any of personal loan or commercial vehicle loan. However, judging by the offerings from the banks and more, commercial vehicle loan is comparatively lesser and cheaper option than the personal loan. But, commercial vehicle loan often requires specific eligibility criterion which needs to be fulfilled. If you can’t fulfill that criterion, then the personal loan should be your option.
  • Is there any personal loan for pensioner if I happen to have a pension account in a leading financial institution?
  • Multiple of banks, both private and public offer personal loan to pensioners on the behalf of pension account. You can avail personal loan of amount up to 10 to 20 times from your monthly pension or as accordingly under the bank’s rules.
  • What is the minimum personal loan that I can avail?
  • The minimum stipulated amount that can be availed as a personal loan varies from one lending bank to another. However, as of the norm, many lenders have set the mark at Rs 30,000 at present.