A personal loan is an amount of money you can borrow to spend on a range of things. For instance, you might use a personal loan to pay for home improvements, debt consolidation, or a fantasy wedding.
Digitization has made it much easier to apply for a personal loan sitting at home without any time consumption. Online lenders, credit unions, and banks can all provide personal loans. You must pay back the money you borrow over time, usually with interest.
Fees for personal loans may also be assessed by some lenders. You can choose to apply for a personal loan when you require additional funds for family and personal crises, such as a wedding or hospitalization. Due to the fact that they demand fewer papers and are approved more quickly than any other retail loan, personal loans are a practical option to obtain additional financing.
You can take out a personal loan to cover personal expenses and repay the money over time. Personal loans are a kind of installment debt that let you get a one-time payment of money. You could, for instance, take a personal loan to pay for:
- Moving expenses
- Debt consolidation
- Medical bills
- Wedding expenses
- Home renovations or repairs
- Funeral costs
- Vacation costs
- Unexpected expenses
Types of Personal Loans
You can get secured or unsecured personal loans.
Secured Loan:- Any personal loan that includes a requirement for collateral is referred to as a secured loan. For instance, you could use a physical asset like your car or boat to acquire a personal loan instead of cash assets like a savings account or certificate of deposit (CD). The lender could keep the collateral as payment for the debt if you are in default on the loan.
Unsecured Personal Loan:- With an Unsecured Personal Loan, there is no need for collateral. Both secured and unsecured personal loans can be provided to qualified consumers by banks, credit unions, and online lenders. Because there is no collateral to be collected, banks typically view the latter as being riskier than the former. That can result in a personal loan with a higher interest rate.
Types of Personal Loans offered in India
1. Wedding Loan
In India, weddings are significant and expensive events. The majority of people want to make their wedding day unique and memorable by going above and beyond. Banks offer wedding loans to assist you in making your special day special. The prospective bride, groom, or any member of the family may obtain a loan.
- Loan amounts range from $1,000 to $25,000 each.
- A loan repayment period of three to seventy-two months.
- Simple process for documentation.
2. Travel Loan
Travel the world and settle your debts later with holiday loans, which were created just for vacationers. Travel insurance is frequently included as an added advantage with holiday loans, giving you complete protection.
- Documentation procedure that is simple and rapid.
- Loan amount up to Rs. 40 lakh
- Flexible loan payback schedule that can be extended by up to 72 months.
3. Home Renovation Loan
Home loans are used to buy brand-new real estate. Due to the high cost of renovations, many people choose not to do so. The economic value of your home on the real estate market is increased while you are taking care of your repair costs due to home renovation loans.
- A loan of between Rs. 2 lacks and Rs. 40 lakh
- A maximum 30-year loan repayment period
- Interest rates are as low as 6.85% per annum.
4. Pension Loan
Pension loans are only available to retired individuals, so the standard eligibility requirements do not apply to this unique program. Some banks offer 7 to 10 times the pension the retiree received in the month before submitting the loan application as part of this program.
- A loan amount that ranges from Rs.25,000 to Rs.14 lakh
- A maximum 60-month loan repayment period
- Discounted interest rates as low as 11.70% p.a.
5. Education Loan
Many financial institutions provide personal loans that can be utilized for educational purposes. You can utilize the education loan to cover costs ranging from your child’s tuition to any other academic need.
- The duration of loan payback is up to 15 years.
- Interest rates begin at only 6.35% p.a.
- A loan for up to 20 lakh rupees.
6. Festival Loan
Festival celebrations can usually result in costs that you may not have anticipated when budgeting. In order to cover the additional costs associated with festival celebrations, certain banks and NBFCs offer personal loans. Festival loans are often only available from banks in sums up to £50,000.
7. Loan for Consumer Durables
It’s a different kind of personal loan. As the name suggests, consumer durables loans are provided by banks and NBFCs to give borrowers the funds they require to purchase products such as air conditioning units, refrigerators, TVs, other home appliances, etc. For the purchase of such white goods, you can easily obtain a consumer durables loan from banks and NBFCs for up to 5 lakhs.
8. Loan for a Personal Computer or Smartphone
Computers and smartphones have permeated every aspect of our life in this technologically advanced age. As a result, several banks and NBFCs provide small-dollar personal loans specifically to meet the borrowers’ needs in this particular area. In many cases, the loan comes with a free insurance policy for the item you purchased.
9. Emergency Loan for Medical Care
Medical emergencies rarely arrive with caution, and with the increasing cost of hospital stays and medical care, the likelihood that you will not have enough liquid cash on hand during an emergency is very high.
An immediate medical emergency loan could save your life in this circumstance. You can simply obtain an emergency medical loan for an amount up to Rs. 25 lakhs for a term of up to 5 to 6 years, based on your eligibility and credit.
10. Loan for agriculture
A personal loan given to farmers to help them with their farming and agricultural works is known as an agriculture loan. Agricultural loans typically have flexible payback terms and are offered at reduced interest rates.
Best Personal Loan Interest Rates 2023
|HDFC Bank||10.5% p.a. – 21.00% p.a.|
|SBI||9.60% p.a. – 15.65% p.a.|
|Kotak Mahindra||10.25% and above|
|Axis Bank||12% p.a. – 21% p.a.|
|Fullerton India||11.99% p.a. – 36% p.a|
|IndusInd Bank||11.00% p.a. – 31.50% p.a.|
Eligibility Criteria for Personal Loans
For salaried individuals, the following criteria must be met:
- Minimum Age of the Applicant – 21 years
- Maximum Age of Applicant at Loan Maturity – 60 years
- Minimum Employment Period- 2 years in total and 1 year at present company
- Minimum Income – Rs. 7,500 per month to Rs.15,000 per month
For Professionals & Businessmen Who Are Self Employed:
- Minimum Age of the Applicant – 25 years
- Maximum age of Applicant at Loan Maturity – 65 years
- Minimum Business Period- Minimum 2 to 3 years in current profession/business
- Minimum Annual Income – Rs.1 lakh
Take note that each bank has its own set of eligibility requirements.
Documentation Needed to Apply for Personal Loans
- Two passport-size photos
- Proof of income: Last three months’ bank statements (if salaried)
- Income tax returns from the previous two years, if you’re a professional or self-employed.
- Continuity of Employment Verification – Form 16 or Company Appointment Letter (if salaried)
- Identity proof (passport, PAN card, driver’s license, voter ID card, and Aadhar card)
- Proof of Residency (Passport, Ration Card, Aadhar Card, Utilities Bill, Voter ID, LIC Policy Receipt)
- CIBIL) credit score
Lenders charge higher interest rates on personal loans since they are only given in good conscience and do not involve any form of collateral. You can anticipate the interest rate on a personal loan to range from 8% p.a. to 30% p.a. depending on a number of variables like your creditworthiness, the length of the loan, and the loan’s purpose. While banks and lenders charge various rates of interest, you can consider the interest rate to fall somewhere in these ranges.