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Personal loan- Everything You Should Know

  • 02-Jun-2022
 Personal loan- Everything You Should Know

If you are planning for your higher studies, want to go for a vacation for a couple of weeks, need to meet any sudden medical emergency or anything else. 

For all your needs a personal loan is a great way to fulfill the requirements. Most of the banks, NBFCs and financial institutions provide loans at attractive interest rates. 

However, to get personal finance, you should know everything about it. Be it a benefit, interest rate, eligibility, document checklist, procedure to apply and so on. 

Let’s have a glimpse of personal loans, everything you should know as detailed below: 


Personal Loan Benefits 



  • Maximum loan amount: - Under personal finance, you can get a maximum loan amount of up to Rs. 25 lakhs that depends on several factors such as age factors, repayment capacity, applicable financial profile, work experience, etc...


  • Quick Approval: - If you want instant approval, you can avail a quick sanction which makes the entire process of loan even more easier.


  • Flexible Repayment: - Basically, lenders provide flexible repayment options which range from 12 to 60 months. Based on your needs you can choose a suitable tenure period.


  • For Multiple Purposes: - Personal loan is one such loan that can be used for multiple purposes whether it is a medical emergency, marriage, travel expenses, higher studies, or endless personal usage.


Personal Loan Bank Details   

Rate of interest   @10.50% per annum   
Loan amount   Up to Rs. 25 lakhs  
Repayment tenure  Up to 7 years  
Processing fee   Up to 2% of the loan amount   


Personal Loan Interest Rates and Processing Fee by Banks 

Bank   Min Interest Rate (p.a)   Processing Fee   
SBI Bank   10.50%   Up to 1%   
Kotak Mahindra Bank   10.75%   Up to 1%   
HDFC Bank   10.50%    Up to 1%   
ICICI Bank   10.75%   Up to 1%   
IDFC First Bank   10.55%   Up to 1.15%   
Axis Bank   10.50%   Up to 1%   
Yes Bank   10.50%   Up to 1%   
IndusInd Bank   10.70%   Up to 1.75%   
Bank of Baroda   10.50%   Up to 1.15%   
Punjab National Bank   11.00%   Up to 1.25%   
Karur Vysya Bank   11.15%   Up to 1.75%   
Standard Chartered   12.00%   Up to 2%   
South Indian Bank   10.50%   Up to 1.50%   
Tata Capital   11.99%   Up to 2%   
Fullerton India   12.50%   Up to 2%   
HDB Financial   12.49%   Up to 2%   
RBL Bank   14.00%   Up to 1%   
Incred Financial   20.00%   Up to 4%   
Hero Fincorp   20.00%   Up to 4% 


Types of Personal Loan Interest Rate 

  • Fixed Interest rates

A fixed interest rate is an unchanging rate which remains same throughout a repayment tenure and the monthly payable EMI remains constant 

  • Floating Interest rates

Floating rates are also known as variable personal loan rates which are affected by fluctuating economic conditions. You can avail low-interest rates initially, but the banks can modify the rates according to the repo rate. Therefore, the interest payable throughout the loan can vary during the tenure.  


Factors Affecting Personal Loan Interest Rates 

  • CIBIL Score 

The CIBIL score reflects the repayment capability which plays a vital role in procuring low interest on loans. If you have a good credit rating, you can avail an attractive rate of interest.  

  • Repayment history 

Besides your credit score, the bank also analyzes your past credit history to determine your current interest rate. A clear credit record with no default on EMIs & disciplined payment are preferred.  

  • Income

Your income substantially determines your interest rates for a loan. If you affiliate to a high income, then the banks spot you as more likely to pay back the loan timely and extend more competitive rates.  


 Processing Fee and Other Charges 

Type of Fees Applicable Charges 
Penal interest  Delay or late payment will be levied 2% to 4% of penal interest charges 
Processing fee  Up to 2% of the loan amount 
Prepayment charges  Up to 5% charges on outstanding loan amount with tax 
Bounce charges  Up to Rs. 1000 per instance 
Part prepayment charges  Up to 2% on the part prepayment amount with tax  
Penal interest 24% per annum – 2% of every month of overdue installments 
Credit report issuance charges  Rs. 50 for every instance along with applicable taxes 


Personal Loan EMI Calculator  

Equated Monthly Installment (EMI) Facilitates the borrowers to calculate their monthly payable EMIs. This amount will be paid regularly to banks or financial institutions for a certain tenure period. It carries the combination of interest & principle that is paid in a single amount.  


The sum of payment & interest together is divided by tenure. Moreover, at an initial stage, applicable rates on the installment would be higher & after each payment, the EMI will be lower. 


If you want to take a loan no matter whether you avail it for a home loan, business loan, car loan, or any other personal finance. Knowing your monthly payable EMI is important element to plan your funds accordingly.  

EMI Calculator is an auto-calculator online tool and a user-friendly device anyone can use it without involving a third party.   


Easy Formula to Calculate EMI:  

P x R x (1+R)^N / [(1+R)^N-1]  

Where -  

P stands for Principal  

N stands for Loan Tenure  

R stands for Monthly Interest Rate 


For example,  

If the borrower avail a loan of Rs. 10,00,000 at an interest rate of 8.10% for a repayment tenure of 4 years, what will be the EMI? 

Principal Amount: - Rs. 10,00,000  

Rate of Interest: - 8.10%  

No. of Monthly Installment: - 48 months or 4 years  

Monthly Payable EMI  Rs. 24460 
Total Interest  Rs. 174075 
Total Payment  Rs. 1174075 


Things to be Kept in Mind While Applying for a Personal Loan 

A few points that should be kept in mind while applying for personal finance are listed below - 

Income - Banks check your income to decide whether you are eligible to avail a loan or not. If your income is higher then you can avail a higher loan amount.  


Monthly income – Banks also want to know your monthly earnings, if you are a salaried borrower then your monthly income must be Rs. 25,000 and if you are a self-employed borrower then the annual turnover of your business must be more than Rs. 12 lakhs.  


Borrower's age – Banks ask your age to evaluate the tenure schedule. Usually, a longer period will save your amount on the monthly EMI, and this results in non-default on repayment.  


 Also read: - Apply for Instant Personal Loan Online 


Who Can Take a Personal Loan?  

  • Salaried applicant 

Applicants earning an income of at least Rs. 25,000 and fulfill the eligibility requirements can get an instant personal loan. The applicant has to show their KYC documents and relevant income proof for the fast application processing & loan disbursal. It also depends on the income, job stability, work experience, age, and CIBIL Score.  


  • Students

If the borrower is a student and wants to finance their higher education or is looking to finance a big-ticket purchase, they can get a co-signer and apply for personal finance.  


  • Retired individual

Retired individuals who are getting their monthly pension are eligible for a personal loan. Whether the borrower is a defense pensioner or a government pensioner, if you meet the necessary requirement, then you can avail such funds without any hassle.  


Eligibility Criteria of a Personal Loan  

Personal finance is a form of unsecured loan which can be availed for several purposes, the borrower can get the maximum loan amount of Rs. 25 lakhs with a minimum documentation.  

Eligibility criteria depend on several factors such as monthly salary, age of the borrower, total work experience, business income, sales turnover, credit score, and creditworthiness, etc... 

For salaried individuals  

  • The age criteria of salaried individuals range from 20 years to 60 years of age.
  • The work experience of a salaried individual should be a minimum of 3 years.
  • The minimum salary must be Rs. 25,000.
  • CIBIL Score should be 750 or above.
  • The applicant must be a resident of India.


For self-employed individuals 

  • The age criteria of self-employed individuals range from 21 years to 68 years of age.
  • CIBIL Score should be 750 or above.
  • The individual must be the resident of India.
  • A minimum of 2 to 5 years should be required for business continuation.
  • The annual turnover of the business should be Rs. 50 lakhs or above.
  • The borrower can avail loan amounts up to Rs. 40 lakhs.


Documents Required for a Business Loan 

Identity Proof (Any one of the following)   

  • PAN Card
  • Aadhaar Card
  • Valid Indian Passport
  • Valid Voter ID
  • Valid Driving License


Address Proof (Any one of the following)   

  • PAN Card
  • Aadhaar Card
  • Valid Indian Passport
  • Valid Voter ID
  • Valid Driving License
  • Utility Bills (Electricity, Water, Gas)


Income Proof   

  • The bank statement of a salary account should be in form of PDF for the last 3 months.
  • Income Tax Return with computation of income or form – 16.
  • GST return copy for the last year of a self-employed borrower.


How to Apply for a Personal Loan? 

Financeseva allows individuals to compare and choose the best deals offered by the top banks and NBFC for personal finance.  

Step by step online process  

Step 1: - Visit the official website of the preferred bank & check your eligibility.  


Step 2: - With the help of using the EMI calculator, you can calculate your monthly payable EMIs.   


Step 3: - Then, fill in an application form.   


Step 4: - Enter all the required details and choose the loan amount needed & the repayment period.  


Step 5: - After filling in an application form, click on the ‘submit’ button.   


Step 6: - When you submit an application form the bank representative will go through your application and get in touch with you for further formalities. 


Step by step offline process  

 Step 1: - Visit the nearest branch of the preferred bank.   


Step 2: - Ask for an application form to acquire a loan and fill it with all the required information.   


Step 3: - Submit all the required documents such as income proof, address, age proof, identity proof, etc.   


Step 4: - The bank representative will inspect all the documents and justify the eligibility of an individual.  


Step 5: - After that, the loan amount will be credited to the applicant bank account.  


To experience a seamless process approach Financeseva who will help you in getting a personal loan from best lender at best deal. Share your basic details to check your personal loan pre-approved offers. 


FAQs – Personal Loan  


What is a Personal loan? 

Personal finance is a form of unsecured loan in which the individual does not need to mortgage any type of security or collateral in aspects of availing loan.  


What is a Personal Loan EMI? 

When you borrow loans from banks/NBFCs, you have to pay certain EMI (Equated Monthly Installment) on a monthly basis till the end of the loan tenure. EMI amounts include principal loan amount & interest rate, these EMI will remain constraints. 


What are the benefits of getting personal loans? 

The main benefits of getting personal finance are - 

  • Minimal documentation
  • Quick loan payment
  • No security or collateral needed
  • Many repayment options and flexible EMI plans


Who is eligible to get a personal loan? 

Entities such as self-employed and salaried individuals with stable income are eligible to get a loan.  


Which bank is best to avail a personal loan? 

There are many banks and NBFCs that offer personal finance at an affordable rate. Listed below are some banks that are preferred by many borrowers - 

  • Axis Bank
  • ICICI Bank
  • Kotak Mahindra Bank
  • HDFC Bank


What are the mandatory documents required while applying for a personal loan? 

The mandatory documents required while applying for a personal loan are - 

  • Bank Statements for the previous three months.
  • Salary Slips for the last 3 months.
  • Documents showing address proof and identity proof.


How to apply for a personal loan? 

Visit the official website of the preferred lender and fill in an application form, enter all the required information and needed loan amount. Thereafter, within 24 hours the bank representative will get in touch with you for further formalities after analyzing your application. 

Also read: - How can you protect yourself from fraud while taking out a digital personal loan?

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