What is a personal loan?
Personal Loan is a type of loan which you can avail to meet your immediate financial requirements. You wish to go on a trip, or need funds for marriage, or simply need cash to purchase any electronic appliance, or for any other reason, then you can simply compare the various personal loan schemes offered by various banks and apply for the one most suitable for you.
Types of Personal Loan
There are two main types of personal loan schemes.
- Unsecured Personal Loan: Under these types of personal loan schemes, you don’t need to provide any security or collateral to the bank. If you meet all the eligibility criteria and have a decent credit score, then you can avail yourself of an unsecured personal loan.
- Secured Personal Loan: Under these types of personal loan schemes, you will need to provide some form of security or collateral to the bank. Loan against property or a business loan or a gold loan is an example of a secured loan as you may have to provide some form of property to apply for a business loan and gold if you wish to avail a gold loan.
Rate of Interest
Personal loan rate of interest varies from 10% to 36% per year as per nature of loan availed. Normal personal loans are in the range of 10% to 18% but instrument like Credit Card and other high risk loan comes with interest rates up to 36% per year.
The factors like Loan Amount, Type of loan- Secured or unsecured, Your credit score, Time of EMI Repayment also affect the rate of interest. With the help of EMI Calculator you may easily find the difference at the time of loan application. Sometime you need to negotiate as well with bankers to lower the rate of interest.
Where and How Could You Use Your Personal Loan?
ome of the common reasons that people take out personal loans for includes meeting sudden business or educational expenses, paying for a vacation, buying high-end electronic gadgets or household appliances, wedding expenses, emergency medical expenses, home renovations, etc. It can also be used for buying a vehicle if the rate of interest on the personal loan is lower than that of a vehicle loan. Thus, a personal loan has a wide variety of uses and can come in handy for meeting either planned or emergency expenditure.
It cannot be used for speculative purposes or for making investments in the stock market.
Eligibility Criteria for Salaried and Self Employed
Applying a personal loan is different for a salaried and self employed person.
| Criteria | Salaried | Self Employed |
| Applicant’s Age | 20 to 60 Years | 20 to 60 Years |
| Monthly Income | 20000 | 25000 |
| Cibil Score | 700 | 700 |
| Loan Limit | up to 20 Lakh | up to 40 Lakh |
Documents Required
When you apply a personal loan, you require to submit a set of documents to bankers or lenders. Some of common documents are as below:
- ID Proof- Adhar/PAN/Voter ID, Driving License
- Address Proof- Voter ID, Driving License, Passport, Bills of Utility
- Income Proof- Salary Slip or Salary Certificate for Employed, Bank Statement of Business for self emloyed
- Passport Size Photographs
- Cancel Cheque
- Reference of two person- from family and friends, co-workers
- Filled Application Forms