What is a Personal Loan?

A personal loan is an unsecured loan offered by banks and financial institutions based on your income, credit history, and repayment ability. It’s commonly used for personal expenses like weddings, medical emergencies, or travel.

Unlike secured loans, there’s no need for collateral. However, interest rates tend to be higher due to the increased risk for lenders. Understanding the loan’s terms and your repayment ability is essential before applying.

Secured vs Unsecured Loans

Secured loans require an asset (like property or gold) as collateral, which the lender can claim in case of default. These loans generally have lower interest rates.

Unsecured personal loans don’t need collateral but are offered only to applicants with a good credit score and stable income. Choose the type based on your financial profile and risk comfort..

Interest Rate Types

Personal loan interest rates can be fixed or floating. A fixed rate stays the same throughout the tenure, making EMIs predictable, while floating rates may change with market conditions.

Compare offers from multiple banks and calculate the total cost over the loan’s duration. Even a small percentage difference in interest rate can significantly affect your overall repayment amount.

Loan Eligibility and Application Process

Lenders assess your eligibility based on income, employment type, credit score, and existing EMIs. A higher credit score and lower existing debt usually lead to faster approvals and better rates.

To apply, you’ll typically need proof of identity, income documents, and bank statements. Many banks also offer instant digital applications, with disbursal happening within hours if approved.