Introduction
Personal Loan is an unsecured loan that covers sudden expenses and emergencies without collateral. Sanction is primarily based on credit history, income stability and employer profile, so documentation is lean (KYC + income + bureau report). Use-cases include vacation, medical, wedding, education, home repair/renovation, small business needs, or balance transfer.
Product Variants
- Regular Term Loan: Fixed EMI over 1–5 years; ideal for predictable needs.
- Flexi / Line of Credit: A pre-sanctioned limit. Withdraw anytime, repay anytime. Interest is charged only on the amount utilized (often on a daily count), keeping outflow low during short usage.
- Balance Transfer: Move to another lender to reduce rate/EMI or change product/tenure.
Eligibility Criteria
- Age: Typically 21–55 years.
- Income: Net monthly income ≥ ₹20,000 (varies by city/lender).
- Location: Residence or workplace within the lender’s service city.
- Employer Type: Preference for Pvt Ltd/MNC/selected categories; proprietorships often restricted.
- Ownership: Owning a home/office can improve approval odds (policy-based).
- Citizenship: Resident Indian as per policy.
- Credit: Clean repayment history; 700+ score generally preferred.
- Stability: Confirmed employment, recent salary credit with current employer, consistent ITRs for self-employed where applicable.
- Capacity: Total EMIs usually capped around 60–70% of net monthly income.
Do’s & Don’ts
Do
- Check income/credit eligibility before paying fees or triggering multiple enquiries.
- Choose tenure carefully: balance EMI affordability vs total interest.
- Enable auto-debit (ECS/NACH/SI) to avoid late fees and credit hits.
- Compare rate, processing fee, prepayment terms and product flexibility.
- If you miss an EMI, pay within the same month to avoid bureau impact.
- Prioritise higher-cost debt first (credit card dues, then PL, etc.).
Don’t
- Apply to many lenders simultaneously—multiple enquiries can lower score.
- Ignore documentation checklists—missing docs cause delays or declines.
- Bank with unknown institutions for a tiny discount—service matters.
- Let any fee cheque bounce; it may get you blacklisted.
Common reasons for rejection
- Weak credit score, late payments, or frequent cheque bounces.
- High EMI burden vs income; many existing loans.
- Acting as guarantor on another stressed loan affecting capacity.
- Unstable job history, gaps in service, cash income, or irregular ITRs.
- Residence in blacklisted areas (policy-based).
- Profile with high dependants/low savings; weak risk assessment in PD.
Selecting the best lender
- Policies: Ensure your profile fits the lender’s matrix (employer, city, income).
- Rate model: Compare reducing balance rates; avoid “flat/simple interest”.
- Processing fee & charges: Compare overall cost, not rate alone.
- Products: Flexi/LOC is great for variable needs—interest only on usage.
- Tenure: 1–5 years; pick a tenure that keeps EMI comfortable.
- Prepayment: Check part-prepayment/foreclosure rules and fees.
Benefits
- Quick approval & disbursal (often within 24–48 business hours, subject to profile).
- Minimal paperwork—no collateral required.
- Flexi/LOC lets you draw and repay anytime, interest only on usage.
- Regular repayment can improve your credit health.
- Generally cheaper than revolving credit card interest.
Limitations
- Higher interest than secured loans.
- Prepayment penalties common—plan tenure wisely.
- Shorter tenure (max ~5 years) means higher EMIs.
- No tax benefits specific to PL.
To do after disbursement
- Preserve your original sanction letter; note fees/charges and repayment schedule.
- Activate online loan access/net-banking to download statements and track terms.
- Obtain amortization schedule to see principal vs interest month by month.
- Record any security cheques (PDC/UDC) given to the lender.
To do after paying it off
- Collect original No Dues/NOC from lender and keep a scanned copy.
- Retrieve any unused security cheques.
- Check your credit report ~45 days after closure to confirm “Closed” status.