Guide Book For Personal Loan

Personal Loan


A personal loan is a very popular credit tool that has taken care of millions of people over the years. These loans are availed by banks or Non-Banking Financial Companies (NBFCs) and can be a saviour in cases of sudden expenses such as wedding expenses, travelling, etc or any other case of emergency. Various private companies have been the leading players in this segment. Let’s know more about personal loans.Checkout the personal loan guide book and apply online today.

What is a personal loan?

Banks have introduced various schemes of loans to meet the requirements of various segments of the population. These loans are given for certain purposes, and against securities, and include home loans, vehicle loans, education loans, etc. A personal loan is one of such kind extended to the borrower by banks or NBFCs without any particular purpose and backed without any securities which means that it isn’t availed against any assets such as property, fixed deposits, etc. These loans might be available for the payment of other loans, outstanding credit card bills, wedding expenses of self or any other family member, vacation, or even for starting up a small business.

Features of a personal loan

Before you apply for a personal loan, there are a few things that one needs to consider and they are as follows:


The purpose of the personal loan can be anything and the banks or the NBFCs aren’t going to monitor your activities.

Interest Rate

The interest rate on personal loans is higher as compared to that of a home loan or a car loan as it is unsecured by nature and because of the magnitude of risk associated with it.


This is the most crucial part before you apply for a personal loan. So the question arises: who is eligible for a personal loan? The criteria of different lenders are different but it roughly comes down to your income level, age, and your repayment capacity.

Loan Duration

The tenure of a loan is normally for a period of 1 to 3 years but can be extended to up to 5 years which is recovered through EMIs.

Disbursal of Loan

Usually, it takes around 7 working days from the day of application for the loan to be disbursed. You’ll receive the loan amount in the form of a cheque, draft, or even electronically credited straight to your account.

Documents Required

A personal loan is provided based on KYC (Know Your Customer) compliance supported by:

  • Identity proof (Aadhar Card, PAN Card, Passport, etc.)
  • Address Proof ( electricity bill, telephone bill, etc.)
  • Proof of income based on your Income Tax Return (ITR) of the last 3 years
  • 3-6 months of bank statement and salary slips
  • Credit history based on CIBIL Score & repayment capacity

How much can one borrow?

The amount of loan one is availed is highly dependent on his income, whether he is salaried or self-employed and other similar factors. Banks usually restrict the loan amount to such an extent that when the borrower makes his monthly payments, the EMI is less than 40-50% of their income. If you have a high credit score which is closer to 900, the lender will be under the impression that you’ll repay the loan on time and thus might avail you a bigger loan and vice versa. Your income and liabilities determine your repaying capacity. If your income falls in a lower bracket and you have outstanding liabilities such as credit card dues, another loan repayment then you might not avail a bigger loan.

Any default can affect the credit history of the borrower. The successful payment of the loan as per the schedule will improve the credit score, failing which, it might cause difficulties to the borrower in availing other loans in the future. The default on a personal loan can cost high. Due to the pandemic, the risk of default is likely to go up since there is retrenchment across the industry. Despite that, the government had allowed an extension of the repayment period of the various loans including personal loans.

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