Close

	Receiver's Name:		*
	Receiver's Email:		*
	Your Name:		*
	Your Email:
	Your Message:

Personal Loan in India: Frequently asked questions (FAQs)

1. What is a personal loan?
2. Where can I get a personal loan from?
3. What determines lending rates ?
4. What is the minimum and maximum amount that can be issued as a personal loan?
5. What is the maximum repayment period possible?
6. Can I get a personal loan?
7. Do I have to pay service charges? If yes, what is the amount?
8. Is collateral or security needed for a personal loan?
9. How can I repay a personal loan?
10. What is the difference between a personal loan and a credit card ?
11. How soon will I get my loan money?
12. How will the personal loan amount be given to me ?
13. Can I apply jointly with my spouse?
14. What are relationship discounts?
15. Can I prepay a personal loan?
16. What documents do I need to get a personal loan?
    

Q1. What is a personal loan?

A personal loan is an all-purpose unsecured loan. As the borrower, you do not need to give any security or collateral to take this loan. There are no restrictions on end use. In theory, you could use this loan to fund your vacation or buy the latest cell phone.

Q2. Where can I get a personal loan from?

Most of the nationalized, foreign and private banks, as well as Non Banking Finance companies offer personal loans in India.

Q3. What determines lending rates ?

The lending rate you will pay depends upon the amount of loan compared to your income, as well as the length of the repayment period you opt for. The main factor is your ability to repay the loan. The lender would like that the EMI for personal loan that you pay should not exceed more than 30% to 40% of your net monthly salary. Additionally your profile in terms of where you live and work also matter. If you are employed with a MNC and reside a location approved by the lender. The lender might offer you a low rate personal loan. However, if you reside in a chawl and work with a proprietorship you might be charged a higher lending rate.

Q4. What is the minimum and maximum amount that can be issued as a personal loan?

Personal loans are available in the range of Rs 10,000 to Rs 10 lakhs.

Q5. What is the maximum repayment period possible?

The period varies widely. However, some lenders permit personal loan repayment tenure up to a maximum of 7 years. Most lenders restrict the repayment period to a maximum period of 3 years.

Q6. Can I get a personal loan?

If you are employed and earn a monthly income, you are eligible for personal loans. You can be a salaried individual, self-employed professional or business man. The amount of loan eligibility will differ based on the person's current earnings.

Q7. Do I have to pay service charges? If yes, what is the amount?

Service charges of up to 2% of the loan amount is levied. This charge might differ across various lenders. It is also known as “processing charges”.

Q8. Is collateral or security needed for a personal loan?

Personal loans are especially designed for people who don’t want to go through the hassles of providing a security or going through extensive legal documentation of the same. This is a totally unsecured loan where no form of collateral or guarantee is taken. Some lenders demand a guarantor in special cases for example, in case of software professionals who often travel overseas.

Q9. How can I repay a personal loan?

You can repay a personal loan by issuing post-dated cheques for the entire duration of the loan. These cheques are made in the name of the lender. The amount of the post-dated cheque would be the personal loan EMI i.e. equated monthly installment. Some lenders also permit you to repay by way of standing instructions to your bank account or deduction at source from your salary every month.

Q10. What is the difference between a personal loan and a credit card ?

Personal loans and credit card differ in quite a few ways:

1. Amount: In personal loan the borrower takes a  fixed amount of loan. However, in a credit card the lender sanctions a limit upto which a borrower can take a loan. The amount is not fixed. He can choose to take a loan lesser then the sanctioned limit as well.
2. Time taken by the lender to sanction loan: About 7 days of sanction time is required for a personal loan, while for a credit card it is immediate if the borrower already has a credit card.
3. Repayment: In personal loan, the repayment needs to be necessarily done through EMIs. In credit card, the borrower has the option of choosing an EMI or paying as per his own convenience without a repayment schedule.
4. Prepayment: You can repay a credit card debt at any given point of time – there is no fixed tenure or EMI schedule attached to it. You need to pay prepayment charges in a personal loan in case you want to make an advance repayment.
5. Interest rate: Usually, credit card debt  comes at a much higher cost than a personal loan.You should use credit card debt as a last resort when you are raising debt.

Q11. How soon will I get my loan money?

Usually lenders promise to give your loan within seven working days. If you want to avoid further delays, you must keep all your necessary documents ready, especially the post dated cheques (PDC). Banks from where you provide your PDCs require at least a day or two’s notice to give you the cheques. The loan is disbursed only after all  the required documents are submitted.

Q12. How will the personal loan amount be given to me ?

After your personal loan amount is approved by the lender – the loan is disbursed either by cheque or draft. Many government owned banks require you to visit the nearest branch to get the loan. Many private and foreign owned lenders can service you at home with their DSA (Direct Sales Associate) network.

Q13. Can I apply jointly with my spouse?

Yes, personal loans can be applied together with a co-applicant who can either be your spouse or your parents. This will help you to increase your income eligibility and you can avail a larger amount of personal loan. Your co-applicants income gets added to your income and the total is taken into consideration for calculating the loan amount you will be eligible for. So if you want a higher personal loan then you should apply jointly with a co-applicant.  

Q14. What are relationship discounts?

Lenders offer relationship discounts if you already have a relationship with them. This means that if you are already banking with the lender from whom you want to avail a loan then they give you certain discounts in the form of reduction in personal loan interest rates or other charges. Some of the other sops available are a free credit card with fees waived for the first year or additional services.

Q15. Can I prepay a personal loan?

Prepayment is the option to repay your loan ahead of the contracted period of the personal loan repayment. Many banks charge a hefty prepayment penalty of about 2%- 5% on the principal outstanding. Despite this heavy prepayment penalty, it is advisable to prepay your loan if you have the money with you.

Q16. What documents do I need to get a personal loan?

You need to provide proofs of your age, identity, residence address and income. The details of documents that can be used as proof can be found in the personal loan buying guide.