Personal Loan

Personal loan eligibility criteria can vary from one lender to another due to their varying credit risk policies. It can also vary as per the loan variant and the occupation profile of the applicant. Here are some of the personal loan eligibility criteria used by most lenders:

• Age: 18 - 60 years
• Salary: At least Rs 15,000 per month for salaried customers
• Income: At least Rs 5 lakh p.a. for self-employed customers
• Credit Score: Preferably 700 and above as having higher credit scores improve the chances of loan approval
• Employment Stability: Usually 1 year with some lenders requiring longer work experience
• Business Continuity: Usually 3 years of business continuity with some lenders requiring longer period of business continuity
• Employment Type: Salaried employees working with government, public sector undertakings, MNCs and other reputed corporates

Personal loan lenders require documents from their applicants to establish their identity, income, loan repayment capacity and place of residence. These documents are more or less the same across lenders. Here are a few common set of documents that you will need to submit when applying for a Instant personal loan:

Requirements	Salaried Individuals	Self-employed Professionals/Non Professionals
Proof of Identity	Passport, Voter ID, Driving License, Aadhaar Card or PAN Card	Passport, Voter ID, Driving License, Aadhaar Card or PAN Card
Proof of Residence	Aadhaar Card, Voter ID, Passport or Utility Bills	Aadhaar Card, Voter ID, Passport or Utility Bills
Proof of Income	Salary Slips, Bank Statements, Form 16	Previous Years’ ITR, P&L Statement and Balance Sheet, Bank Statements

While the fees and charges of personal loans can vary widely depending on lender and the credit profile of the loan applicants, the following table will give you a fair idea of the personal loan fees and charges levied by the lenders:

Particulars	Charges
Loan Processing Fees	0.5% to 4% of loan amount
Prepayment/Part-prepayment/Foreclosure Charges	For Floating Rate: NilFor Fixed Rate: Usually around 2% - 5% on the principal outstanding
Loan Cancellation	Usually around Rs 3,000
Stamp Duty Charges	As per actuals
Legal Fees	As per actuals
Penal Charges	Usually @ 2% per month; 24% p.a.
EMI/Cheque Bounce	Around Rs 400 per bounce

Other fees and charges levied by the lenders include documentation charges, verification charges, duplicate statement charges and NOC certificate charges.

You can calculate EMI on your personal loan using the formula: EMI = [P x R x (1+R)^N]/[(1+R)^N-1],

where,

• ‘R’ denotes the rate of interest
• ‘P’ denotes the principal amount
• ‘N’ denotes the loan tenure

As manual calculations can be time-consuming and prone to errors, using an online personal loan EMI calculator would be preferable. The calculator requires just a few basic details for EMI calculation, including interest rate, loan amount and tenure. Once the details are entered, the calculator will display the EMI, total interest amount and amortization schedule basis which you can compare various personal loan offers based on your loan repayment capacity.

Factors Affecting Personal Loan EMI

Three major factors that influence your personal loan EMIs are:

• Principal Amount: An increase in the principal amount leads to an increase in your EMI, provided the values for loan tenure and interest rate remain unchanged.
• Interest Rate: Personal loan EMIs increase with every increment in the interest rates.
• Tenure: Choosing longer tenure on your loans results in lower EMIs. However, it also leads to higher overall interest cost on the loan.

The unsecured nature of personal loan increases credit risk for lenders as it leaves them with no collateral or security to compensate their losses in case of loan default. To mitigate this risk, banks and NBFCs factor in various aspects of their applicants’ credit profiles and follow strict eligibility policies when evaluating their loan applications. Those planning to avail personal loan can improve their chances of approval through these tips:

1. Maintain your credit/CIBIL score above 700
2. Check for inaccuracies in your credit report, as they might adversely impact your credit score and thereby, reduce the chances of loan approval
3. Compare the personal loan offers available from banks and NBFCs before finalising any loan deal
4. Apply for the loan from a bank/NBFC where you have the highest chances of approval
5. Avoid making multiple loan applications within a short period

Before applying for a personal loan, here are a few things you should know:

1. Many banks and NBFCs offer pre-approved instant personal loan offers to their existing customers: Many lenders provide pre-approved offers to their select existing customers based on their credit profiles. Such pre-approved offers feature quick disbursals and require minimal to no documentation. Many lenders also offer lower interest rates to their existing customers.
2. Having a higher credit score increases your chances of loan approval at lower interest rates: Banks and NBFCs prefer sanctioning personal loans to those having higher credit scores of 700 and above. Many lenders also set lower interest rates for such applicants. Having higher credit scores also increases an individual’s eligibility for pre-approved loan offers.
3. Increase your EMI affordability by choosing longer tenure: Longer tenure leads to lower EMIs. Hence, consumers wanting to increase their EMI affordability can select longer tenures and/or lower loan amounts when making the loan application.
4. No charges are levied on prepaying or foreclosing floating rate personal loans: RBI has barred banks and NBFCs from levying prepayment/foreclosure charges on floating rate personal loan. In the case of fixed rate, lenders can choose to levy these charges.
5. Making multiple loan applications within a short span might reduce your chances of loan approval: Lenders fetch credit reports of every loan applicant as part of their loan evaluation process. Such lender-initiated credit report requests are known as hard enquiries. Having multiple hard enquiries within a short period can lead to a sudden decline in your credit score, thus, reducing your chances of availing personal loan.

The differences between an instant personal loan and a regular personal loan are as below

Instant Personal Loan	Regular Personal Loan
Disbursed in a few minutes or seconds	Usually takes 2-4 days’ time for loan disbursal
Usually pre-approved and offered to select existing customers having good credit profiles	Offered to new individuals as well as existing customers
Can avail only till the sanctioned loan amount	Can avail higher loan amounts based on their repayment capacity

Given below are a few personal loan schemes offered by some of the leading banks and NBFCs in India:

HDFC Bank Personal Loan

The interest rate of HDFC Bank personal loan starts from 10.85% p.a. The tenure of the scheme can go up to 6 years whereas the loan amount can go up to Rs 40 lakh. The bank also offers pre-approved loans with ‘10 second disbursal’ to its select existing customers based on their credit profiles.

• Interest Rate: 10.85% p.a. onwards
• Loan Amount: Up to Rs 40 lakh
• Tenure: Up to 6 years
• Minimum Salary: Rs 25,000 per month
• Age: 21-60 years
• Credit Score: At least 650
• Processing Fee: Up to Rs 6,500

ICICI Bank Personal Loan

ICICI Bank extends personal loan to cater to the varied financial requirements of its borrowers. The bank also offers Fresher Funding, a special scheme for funding immediate and other financial requirements of younger salaried individuals. For its select existing customers, the bank offers overdraft facility, pre-approved offers and top up loan facility. Its pre-approved offers feature minimal documentation and 3-second disbursals.

• Interest Rate: 10.85% p.a. onwards
• Loan Amount: Up to Rs 50 lakh
• Tenure: 1 to 6 years
• Minimum Salary: Rs 30,000 per month
• Age: 23 to 58 years for salaried and 25 to 65 years for self-employed
• Processing Fee: Up to 2% of loan amount

Axis Bank Personal Loan

Axis Bank’s Personal Loan covers expenses related to wedding, home renovation, travel, medical emergency and much more. The bank also extends pre-approved offers to its select existing customers. Such offers have digital processing and instant approvals. Axis Bank has also collaborated with Paisabazaar to extend its select customers pre-qualified offers.

• Interest Rate: 11.25% p.a. onwards
• Loan Amount: Up to Rs 40 lakh
• Tenure: 1 to 7 years
• Age: 21 to 60 years
• Minimum Monthly Salary: Rs 15,000
• Processing Fee: Up to 2%

Kotak Mahindra Bank Personal Loan

Kotak Mahindra Bank offers loans only to salaried individuals. Existing borrowers of other banks/NBFCs can avail balance transfer facility to transfer their outstanding loan to Kotak Bank at lower interest rates. Those exercising balance transfer facility can also avail top up loans of up to 100% of their loan amount. Kotak Mahindra Bank also offers an overdraft facility, giving borrowers the flexibility of withdrawing their funds from their loan account anytime and repaying it as per their convenience.

• Interest Rate: 10.99% p.a. onwards
• Loan Amount: Up to Rs 40 lakh
• Tenure: Up to 6 years
• Credit Score: At least 700
• Age: 21-60 years
• Minimum Monthly Salary: Corporate Borrowers - Rs 25,000, Non-corporate Salary Borrowers - Rs 30,000
• Processing Fees: Up to 5% of loan amount

IndusInd Bank Personal Loan

IndusInd Bank offers multiple personal loan schemes including wedding loan, home renovation loan, loan for medical expenses and loan for education. The bank also offers balance transfer facility to existing borrowers of other banks and NBFCs. For those requiring quick financing, the bank extends instant personal loan online with quick processing and loan approvals.

• Interest Rate: 10.49% p.a. onwards
• Loan Amount: Up to Rs 50 lakh
• Tenure: 1 to 5 years
• Age: for salaried - 21 to 60 years and for self-employed - 25 to 65 years
• Processing Fee: Up to 3.5% of the sanctioned loan amount
• Minimum Salary: Rs 25,000 per month

Bajaj Finserv Personal Loan

Bajaj Finserv offers personal loans to both salaried and self-employed individuals. The NBFC also extends special personal loan schemes for doctors as well as Chartered Accountants. Customers requiring personal loan overdraft can also avail Bajaj Finance’s Flexi Personal Loan. For its select existing customers, the NBFC offers pre-approved offers. The loan features instant approval, minimal documentation and same-day loan disbursals.

• Interest Rate: 10% p.a. onwards
• Loan Amount: Up to Rs 50 lakh
• Tenure: 1 to 8 years
• Age: for salaried - 21 to 80 years
• Processing Fee: Up to 3.93% of the sanctioned loan amount

What Can a Personal Loan Be Used For?

Personal loans can be availed for any purpose, except for speculation or illegal activities. Borrowers can use the loan proceeds for covering medical emergencies, home renovation, wedding, vacation, business operations, etc. The loan can also be used for managing everyday expenses or for covering higher education costs (including courses not eligible for education loan) and for consolidating multiple high-interest debts.

What is a Personal Loan Top-Up and How Does It Work?

A personal loan top-up is an additional loan amount offered to existing personal loan borrowers over and above their outstanding personal loan amount. Like personal loans, top up loans are unsecured and can be used to pay for various financial requirements. They are also faster and easier to avail than a new personal loan, as top-up loans are offered to borrowers who have already undergone the lender's checks for their existing personal loan, allowing them to get approved much quicker. Top up personal loans are usually offered to existing personal loan borrowers having satisfactory loan repayment history and having completed a specified number of EMIs.

Can you avail personal loan with zero processing fee?

The personal loan processing fee charged by lenders can go up to 4% of the loan amount. However, some lenders waive off processing fees during special festive offers or promotional periods. Additionally, some lenders also waive off waivers or discounts in processing fees to their existing customers and/or applicants meeting predetermined cut-offs in terms of their credit score, income, occupation, etc. Thus, it is always a good idea to first approach the banks and/or NBFCs with whom you have your deposits, loans and/or credit card accounts. This should be followed by visiting online financial marketplaces like Paisabazaar to compare various personal loan processing fees offered by multiple lenders and then make the loan application.

Apart from processing fees, loan applicants should also factor in the interest rates while comparing loan options. They should use online APR calculators to compare various personal loan options on the basis of their overall borrowing cost.

Frequently Asked Questions

Can I avail an instant personal loan online?

Yes, you can get an instant personal loan online. However, it is subject to pre-approved offers based on your credit profile and other eligibility requirements. To check offers, you can either contact the banks/NBFS directly or you may check instant loan offers at Paisabazaar. Here, you can compare rates and charges across multiple lenders without a any impact on your credit score.

Can I avail a personal loan if I have a home loan?

Yes, you can apply for a personal loan even if you already have a home loan. However, the chances of your loan approval will depend on whether you have adequate repayment capacity to repay the proposed home loan.

What is a Personal Loan EMI Calculator?

Personal Loan EMI Calculator is an online tool, which individuals can use to determine the amount they will have to pay each month towards servicing their personal loans. Using this calculator, consumers can also quickly calculate the interest cost and total amount payable against various combinations of loan amounts, interest rates and loan tenures in no time. The consumers can also determine the best possible tenure for their personal loans after considering their repayment capacity and plan their loan repayment better.

What is the process of obtaining no dues certificate from my personal loan lender?

Your existing lender will provide you with a no-dues certificate after the complete repayment of your personal loan.

Can a pensioner avail a personal loan?

Lenders offer personal loans to pensioners in the form of pension loans. However, these loans are offered only to those pensioners who maintain their pension account with the respective bank.

Can I avail a personal loan for business purposes?

Personal loans usually have no end use restrictions, except for any speculative or illegal activities. However, some lenders restrict its usage to personal requirements only.

Can I avail personal loans from multiple banks at the same time?

Yes, you may avail personal loans from multiple lenders at the same time, provided the lender of your second personal loan is satisfied with your repayment capacity. However, it is better to take a single loan of a larger amount from the lender providing lower interest rates and/or better terms and conditions.

What are the pros and cons of availing a personal loan?

Pros: Personal loan comes with several benefits like no restrictions on end usage (other than speculation), no collateral/security requirements, minimal to no documentation and quick processing.

Cons: The interest rates are usually higher than its secured alternatives like gold loan, loan against property, etc. Also, its short repayment period/tenure (usually till 5 years) leads to higher EMIs, which in turn reduces the EMI affordability and overall loan amount eligibility of the borrower.

Do I need to provide any security or collateral to apply for a personal loan?

Traditionally, personal loan are unsecured loans, which implies that the borrower does not need to pledge collateral or security to avail the loan. However, some lenders also offer secured personal loans wherein the borrower needs to provide security or collateral to avail the loan. An applicant should opt for the secured loan facility only when he is ineligible for availing unsecured loan or is charged very high interest rates for it.

What is the difference between an instant personal loan and a regular personal loan?

Instant personal loan is a personal loan variant, which is usually disbursed within a few minutes of making the loan application. This loan facility is usually pre-approved in nature and lenders usually offer this facility to their select existing customers having a good credit profile.

Regular personal loan schemes, on the other hand, have the same features as instant personal loan except that regular personal loan schemes have turnaround time of 2-7 days for loan disbursal and the eligible loan amount is usually higher than what is offered through instant personal loan by the same lender.

Are there any charges for prepaying a personal loan?

Lenders are free to levy prepayment/foreclosure charges on personal loans availed at fixed interest rates. However, the RBI has barred the lenders from levying these charges on loans availed at floating interest rates.

Can I avail a personal loan without providing my salary slip?

Yes, you can avail a personal loan without providing salary slips. You can submit your bank account statement/ a copy of Form 16/ employee certificate from the employer, etc. as proof of income to fulfill the eligibility criteria. However, it is always recommended to confirm the list of required documents with the lender as it may vary from one bank to another.

How to check personal loan eligibility?

Banks and NBFCs check an applicant’s personal loan eligibility based on his age, credit score, income, loan repayment capacity, occupation profile, employer’s profile, etc. Due to varying credit risk policies, the eligibility criteria may vary across lenders. Therefore, applicants would have to check their eligibility by individually visiting the branch or website of various banks and NBFCs.

Can a student apply for a personal loan?

Students can apply for personal loans only if they satisfy the various eligibility requirements related to age, income, credit score, etc. set by the lenders.

Is it a good idea to transfer a personal loan to another bank?

Those who had availed their personal loans at higher interest rates and are now eligible for lower interest rates due to their improved credit profile should avail balance transfer facility. However, before making the transfer, they should calculate the net savings from the transfer after factoring in various costs associated with the transfer. If the savings are not significant, then they should continue with their existing loan.

What is the maximum personal loan amount that I can avail of with a Rs. 60,000 salary?

Lenders use different methods, like the EMI/NMI ratio and/or multiplier method, to determine their applicant’s eligible loan amount. As these ratios may vary across lenders, the maximum loan amount that you can avail on Rs 60,000 salary would also vary. However, broadly speaking, your maximum personal loan amount eligibility on a salary of Rs 60,000 can range anywhere from Rs 9 lakh to Rs 20 lakh, depending on the EMI/NMI ratio or NMI multiples used by the respective lender, and the loan tenure and interest rate.

How much personal loan can I avail if my salary is Rs 15,000?

Very few lenders offer personal loan on a salary of Rs 15,000. The ones they do, may offer maximum personal loan amount of up to Rs 4.5-5 lakh (assuming NMI multiple of 30 times.

Can I cancel a personal loan after the loan amount is disbursed?

In some cases, you may cancel a personal loan after disbursal subject to the terms and conditions of the lender. Loan cancellation will lead to cancellation charges and processing fees. Please note that all banks do not allow loan cancellation once the amount is disbursed. However, you can always prepay the loan amount as per the terms and conditions of the bank and save on the interest component.

How do I make overdue payments of my personal loan?

You can make personal loan EMI overdue payments online through the bank’s internet banking platform, mobile application, UPI app or other digital payment systems such as NEFT/RTGS, digital wallets (e-Wallets) and payments apps. You can also visit the lender’s branch to make overdue payments through offline modes like cash, cheque and demand draft (DD).

Why should I avail personal loans from Paisabazaar?

Checking personal loan offers on Paisabazaar will make the process faster, easier and more convenient. Here are a few more reasons to apply for personal loans through Paisabazaar:

• Check and compare personal loan offers from 30+ partner banks and NBFCs without adversely affecting your credit score
• Get pre-approved offers with instant disbursals
• Know your chances of Instant loan approval based on your credit score and other aspects of your credit profile
• Personal loan apply online through end-to-end digital process

Can retired individuals apply for a personal loan in India?

Lenders offer personal loans to retired individuals in the form of pension loans. Just like personal loans, pension loan proceeds can be used for various personal financial needs like children's marriage, home renovation, medical bills, etc. However, unlike personal loans, retirees can avail pension loans only from banks with which they maintain their pension accounts.

What to do if your personal loan application is rejected?

Your chances of loan approval may vary from one lender to another based on the varying credit risk assessment of the applicants and the internal credit risk policies of the lenders. On rejection of your personal loan application, first approach banks/NBFCs with whom you maintain your deposits, loans and/or credit card accounts as many lenders prefer to lend personal loans to their existing customers. Then, visit online financial marketplaces to compare the personal loan offers from other lenders and then, apply for the loan accordingly.

How to choose the right tenure for your personal loan?

Choosing the right tenure for your personal loan is crucial as it directly impacts your EMIs as well as the total interest cost of the loan. Note that your EMI decreases with the increase in the loan tenure and vice-versa whereas longer loan tenure results in higher total interest cost and vice-versa. Thus, opt for longer tenure only when you lack adequate repayment capacity after considering your monthly contributions for your unavoidable financial goals. Else opt for shorter tenure.