Personal loan is a short to medium term unsecured loan granted to an individual. It is commonly used to meet such financial needs as debt consolidation, wedding expenses, unexpected medical costs, home renovation and others. Flexibility of usage, minimal documentation and quick processing make personal loan a preferred financing option. Unlike other loans, it usually has a shorter repayment tenure ranging from 1-5 years. Depending upon the individual applicant's profile and lender, the APR (Annual Percentage Rate) of a personal loan may vary from 10.99% to 26%.
personal loan interest rates start from 10.99% onwards and there is no negative which also depends on the eligibility of the applicant.
|Bank/NDFC/Fintech||Interest Rate (p.a.)|
|ICIC Bank||11.25% onward|
|HDFC Bank||10.75% onward|
|Yes Bank||12% onward|
|Axis bank||15.75%-24% per annum|
|Aditya Birla Bank||14%|
|IDFC Bank||11.25%-18.50%||kotak Bank||17.99%|
|TATA CAPITAL Finance||10.99% to 18.00%|
|RBL Bank||13.99% onward|
|Panjab National Bank||12%-15%|
|AU Small Finance Bank||10.75%|
|Ujjivan Small Finance Bank||23.25%|
|Capri Global Finance Ltd.||10.5%-15%|
Most banks and NBFCs have similar guidelines in respect to the documents required for personal loans. A generic list of such documents has been provided below*:
|Identity Proof||PAN Card/ Voter’s ID/ Aadhaar Card/ Passport/ Driving License|
|Address Proof||Bank Account Statement/ Aadhaar Card/ Lease/ Property purchase Agreement/ Utility Bill (not more than 3 months old)/ Passport/ Driving License|
|Income Proof||For Salaried Individuals:Salary Slip/ Bank Account Statement/ Form 16.
For Self Employed: Previous Year ITR/ P&L Statement and Balance Sheet/ Bank Account Statement
|Business Proof||Certificate of Practice/ Partnership Deed/ GST Registration and Filing Documents/ MOA & AOA/ Shop Act License|
It is always a good practice to plan your monthly expenditures in advance to avoid any financial hassle later. It has designed a personal loan EMI calculator, where you just need to enter the loan amount, interest rate and tenure to calculate your EMI instantly. This can help you make an informed decision regarding the loan option that best suits your unique requirements.
To get an idea about how personal loan EMIs are computed, take a look at the table given below:
Credit Clean-up: One of the main factors taken into consideration by lenders is your credit score. Getting a personal loan is easier with a high credit score. If your score is low, you must check your reports to see if there are any errors. Sometimes, simple errors could have an adverse effect on your scores, and if you find any of these, you must report them to CIBIL.
Rebalancing your income and debts: Lenders ask for proof of income when you apply for personal loans in order to ascertain your debt-to-income ratio. Consider the sale of liquid assets like stocks or earning more through a part-time job to increase your annual income. Doing so will increase your debt-to-income ratio and increase your chances of getting a loan.
Consider Co-signers/Guarantors: If you are finding it hard to get a personal loan on your own accord, you can apply for one by adding a co-signer or guarantor. The person you choose as a guarantor must have a good credit score. Their main aim is to guarantee that you will repay the loan. However, they will also be liable to repay the loan themselves if you are unable to do so. Picking an individual with a credit score over 750 will considerably increase your chances of getting a personal loan.
Limit Your Borrowing: It can be risky to ask for more money than you require to meet your financial targets. Make sure that you calculate how much you need and apply only for that specific amount.
Choose the Right Lender: Every lender has their own requirements when it comes to credit scores and income. When looking for personal loans, pick a lender whose eligibility criteria you meet and apply accordingly.
Salaried Individuals include Salaried Doctors, CAs, employees of select Public and Private limited companies, Government Sector employees including public sector undertakings:
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:
How to Reduce Your Monthly EMI?
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 alternative is to opt for a personal loan balance transfer. In this case, the principal outstanding of your current loan is transferred to a new lender at a lower rate of interest. As a result of the lower interest rate, your individual EMI payments will decrease.
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 installments (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 payout, 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.