About Personal Loan
A personal loan is a short-term loan which is availed by the customers to meet the current financial needs. It does not require collateral or security and its offered with minimal documentation. These are mostly used to meet the expenses related to vacations, debt restructuring, unexpected medical expenses and down payments. Basically, it can be used for any types of expenses. The lenders offer flexibility to use funds as per the customers need.
On the basis of some key criteria such as income level, credit and employment history, repayment capacity, etc.A personal loan can be provided by the banks or financial institutions. Usually the interest rates on personal loans are higher than those on home loans and others, this is because of the greater supposed risk while sanctioning the loan. The tenure of personal loan is shorter as compared to other loans, commonly between one to five years
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Benefits of Personal Loan
- No Collateral Required: Personal loan is an unsecured loan, which means the loan is offered without keeping any assets as collateral or security.
- No Limitation on End Use: There are no limitations in utilizing the personal loan. It can be used for any purpose unlike the home loan. This is the easiest way to get cash when there is an urgent requirement of funds.
- Tenure Flexibility: It has a tenure of 1 year to 5 years which means customers can choose a term period which suits them best. Longer the tenure means lower EMI and vice versa.
- Fixed Rate of Interest: These are usually available on fixed rate of interest. So, for entire term period the Equated Monthly Installments (EMI) remains fixed.
- Tax Benefits: Tax deduction of up to Rs.2 lakh can be availed up on the interest part in a financial year under Section 24B. The borrowed money can be used for various activities like construction, renovation of house or down payment for the house, etc.
Different Types of Personal Loan
This type of loan is availed for funding the medical expenses, such as surgery, hospitalization, etc. The loan amount can be up to Rs.25 lac and has higher interest rate.
These loans have a low borrowing limit and are offered to customers to take care of their festive expenses. It is a short-term loan with lower interest rate.
This loan helps customer utilize fund for marriage expenses such as jewelry shopping, hotel booking, catering and decoration among others. During the peak wedding season, interest rates of these loans are usually higher as compared to other seasons.
Home Improvement Loan:
This loan is availed to finance for the repair, renovation and furnishing of house. It has a fixed rate of interest with tax exemption.
Unsecured Business Loan:
The approval for this type of loan depends on credit points, eligibility and not on the value of the customer’s security. This loan helps to set up or expand a business.
Consumer Durable Loans:
Customized personal loans are also offered by banks for purchase of consumer products such as electronic gadgets and home appliances.
At a lower interest rate this loan can be availed by the customers for their travel plans. The loan amount depends both upon the credit card value and travel destination.
Small Business Loans for Women:
This is an exclusive loan for women entrepreneurs which they can avail to set up a small business. Many banks offer different schemes related to small business loans.
This loan can be availed for funding of existing businesses or industrial houses. Both secured and unsecured loans are available.
Top Personal Loan Providers
- HDFC Bank Personal Loan
- ICICI Bank Personal Loan
- Axis Bank Personal Loan
- Bajaj Finserve Personal Loan
- Standard Chartered Bank Personal Loan
- CityBank Personal Loan
- Kotak Mahindra Personal Loan
- TATA Capital Personal Loan
- YES Bank Personal Bank
Personal Loan Frequently Asked Questions (FAQs)
A personal loan is a short-term loan which is availed by the customers to meet the current financial needs. It does not require collateral or security and its offered with minimal documentation.
Personal Loan eligibility depends upon various factors which differ from banks to banks. The main factor is your ability to repay the loan. Also your profile, in terms of residence and working place also matters. These are the factors you need to focus before applying for personal loan.
Generally, the minimum amount for personal loan amount is Rs 50,000 and maximum amount is Rs 30,00,000. Higher loan amounts are depends on an indivisual’s discussion with bank.
Personal loan is a short tenure loan. Most of the banks provide you loan for maximum 3 years (36 months). to max 5 years(60 months).
All personal loans repayment happen in the form of an EMI (Equated Monthly Installment) through the customers bank account. The customer needs to give few PDC’s (Post dated cheques) and sign an ECS mandate in favour of the bank disbursing the loan.
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