What Is a Personal Loan And What Are Its Features You Should Know?
With personal loans becoming more and more popular in the current market because of their flexible nature, it’s important to know what they are and what sets them apart from other forms of financing. Personal loans are usually small, unsecured loans that you can use to finance virtually anything you need or want, as long as the purpose aligns with the terms of the loan agreement.
A typical personal loan ranges from Rs 10,000 to Rs 40 lakh, with an interest rate of 7.90% p.a. and 49% p.a. depending on the institution you’re taking it from.
In this article, we’ll be discussing what a personal loan is and its features to help you educate yourself before taking one out.
What is a personal loan?
A personal loan is a type of unsecured loan where you don’t have to put anything down as collateral. This means that you can borrow money without having to prove that you have enough income or assets to repay the loan.
But lenders do need to check your credit history, and you must have a steady income source.
Your creditworthiness is determined by your CIBIL score. It ranges between 300 and 900. The higher your credit score, the better your chances are for personal loan approval.
A CIBIL report includes a condensed list of your credit cards, current loans, personal information, payment history, and any delinquent balances. The last 36 months of the borrower’s credit history are used in the assessment of this report.
Features of a personal loan
A personal loan can be used for any number of things, such as paying off debt, starting a business, or taking care of an emergency expense. If you would like to know more about the features of personal loans and what you should know before applying for one, keep reading!
- Easy application process: The application process for a personal loan can be easy and simple. All you need to do is fill out a form and send it in, or go online and fill out the information. The form will ask for basic information, like your name, address, date of birth, and employment status.
- There is no need for collateral: You can obtain a personal loan without having to put up any collateral, such as a house or car. Only your creditworthiness, which is determined by factors like your credit score, income, payment history, employer reputation, etc., will determine whether the loan is authorised or not.
- Flexible EMI period: A personal loan typically has an adjustable tenure between 12 and 60 months. The longer the term, the lower your EMI will be.
- Speedy disbursal: When an application is accepted, the amount is often disbursed within a few hours. But if you can accept a loan offer that has already been pre-approved, processing times could even be as fast as a few minutes.
- Less documentation: You’ll find fewer paper trails while applying for a personal loan than in other loan processes. All you’re required to keep at the ready are ID proof, address proof, and income proof.
- Cover versatile expenses: A personal loan can be used for home improvements, debt consolidation, car repairs, vacation expenses, weddings, medical bills, etc. It can cover almost all of your personal needs.
- Loan amounts are flexible: The amount you can opt for in the personal loan is flexible. It ranges between Rs 10,000 and Rs 40 lakh. But again, the approval of the final amount depends on your credit history and income source.
Banks’ current personal loan interest rates
| Banks | Interest Rate Range p.a | Processing Fee | Loan Amount | Repayment Tenure |
| State Bank of India | 10.65% to 13.15% | Nil to 1.5% | 24,000 to 30 lakh | 6 to 72 months |
| HDFC Bank | 11%-21% | Up to INR 5,000 | 50,000-40 lakh | 12 to 60 months |
| ICICI Bank | 10.75%-19% | Up to 2.5% | Up to INR 50 lakh | 12 to 72 months |
| IDBI Bank | 11%-15.5% | 1% | 25,000 to 5 lakh | 12 to 60 months |
| Bank of Baroda | 10.25%-17.6% | 1% to 2% | 50,000 to 20 lakh | 48 to 84 months |
| Bank of India | 9.75%-14.25% | 0.5% to 1% | Up to 20 lakh | 3 to 5 years |
| Central Bank of India | 11.75%-11.95% | 1% | Up to 15 lakh | Up to 84 months |
| Punjab National Bank | 10.8%-15.85% | 1% | Up to 20 lakh | Up to 72 months |
| Axis Bank | 12%-21% | 1.5% to 2% | Up to 40 lakh | 36 months and above |
| Federal Bank | 10.49%-17.99% | Up to 3% | Up to 25 lakh | Up to 48 months |
| Canara Bank | 14.3%-15.8% | 0.50% | NA | Up to 84 months |
| Punjab & Sind Bank | 10.55%-12.15% | 0.5% to 1% | NA | Up to 72 months |
| UCO Bank | 11.95%-12.2% | 1% | Up to 15 lakh | 60 to 84 months |
| Kotak Mahindra Bank | 10.99% onward | Up to 3% | Up to 25 lakh | Up to 60 months |
| Yes Bank | 10%-24% | Up to 6.5% | NA | Up to 60 months |
| South Indian Bank | 12.5%-17.9% | 2% | Up to 20 lakh | Up to 60 months |
| IDFC First Bank | 10.49% onwards | Up to 3.5% | Up to 1 crore | Up to 60 months |
| Bank of Maharashtra | 8.9%-14.7% | 1% | Up to 20 lakh | Up to 84 months |
Final takeaway
If you intend to secure a personal loan for any purpose, be careful to investigate the institution’s reputation for reliability. Be sure you are in a strong position to repay the EMIs in the long term, and always seek a financial expert’s help if you have any questions or confusion.
One such financial expert you can go to is Piramal Finance. They guide you through the whole personal loan or other loan processes. They’ll also suggest which financial institutions you should choose. The company’s financial advisors are always ready to resolve any of your issues until the end of the process.