Personal loan

personalloanPersonal Loan is an unsecured loan for personal use which doesn't require any security or collateral and can be availed for any purpose, be it a wedding expenditure, a holiday or purchasing consumer durables, the loans is very handy & caters to all your needs. The amount of loans can be ranged from Rs. 50,000 – Rs. 20 lakh & the tenure for repaying the loan varies from 1 to 5 years.

Tips for Best Personal loan deal

  • Compare exact Emi | Processing fee | Tenure | Documents before choosing bank
  • Never pay any fee to any person to get loan sanctioned. Processing fee are deducted from Loan amount.
  • Only give documents to one bank and check whether he is authorized Bank employee or vendor.

Basis to Compare Personal Loans

Compre Interest Rates:

personalloanUnsecured Loan can be compared primarily on the basis of interest rates which vary across banks depending on your profile which is further linked to your occupation, salary/income, credit history etc and the company that you work with. The personal loan interest rates ranges from 13% to 40%, you must go for that loan which is offering you at the minimum rate. These rates are lowest if you are working in top 5000 companies in India and you have income above 75000 and you have a good cibil track.

Other Charges

You should also check on the other charges like processing fee, pre-payment penalties and documentation fee because they increase the overall loan cost and vary widely across banks. Processing fee range is between 0.5% to 2.5% and prepayment charges are in range of 0-5%.

Evaluation of various Loan offers

You should first calculate the entire loan cost across banks which constitute the rate of interest & other charges. Evaluate offers keeping the tenure of the loan constant & compare the rate of interest, EMIs & other charges. This process will help you get the Best Loan deal.


EMI is the monthly equated installment which constitutes the principal amount and the interest on the principal equally divided across each month in the loan tenure. Use our EMI Calculator to compare EMIs across banks


Tenure is the time frame for the loan payments to be paid back to the bank; it ranges from 1 year to 5 years. If you have a longer tenure you will end up paying more interest & will have lower EMI, on the other hand shorter loan tenure will carry higher EMIs & the interest amount is less. You must compare the loan offers by keeping the tenure constant.

Eligibility Check

Before taking a loan you must know the eligibility criteria's offered by various banks on the basis of which they offer loans and also compare personal loan banks. Checking the eligibility parameters will help you find the best loan deal. Check out your eligibility.

Turnaround time

It becomes one of the most important factors in evaluation of your loan application when you are in a dire need of money. Turnaround time is the time which banks take in processing your loan application; you must check this parameter which varies from bank to bank.

How does 0 % Prepayment help

If you have taken a personal loan and you expect some money to come in between the tenure of personal loan which you can return. By returning the loan amount before the tenure will save you a lot. Eg. If you take up a Personal Loan of 1 Lac for a tenure of 4 years @ 15% ROI with 0% prepayment. You will be able to save approx Rs. 3,925 per Lac if you foreclose you loan after one year; Rs. 2766 per Lac if you foreclose your loan after two years; Rs. 1421 per Lac if you foreclose your loan after three years of repayment.

Benefits of Personal loan

Loan without security

A Personal Loan is not a secured loan (bank doesn't ask for any security or collateral) as against a Secured Loan where one is required to pledge a house or other security to acquire a loan.

Simple Documentation

A Personal Loan can be accessed with minimal paperwork or documentation & doesn't take much time to procure as against a Secured Loan.

No specification about the end use of the loan amount

You are not required to disclose the end use of the money borrowed, Banks are concerned about the fact that whether the borrower is able to pay back the loan with interest before the due date or not and they confirm this by checking the income, employment or business & other factors of the borrower.

Big Loan Amount

Personal Loan is a means to fulfill bigger loan requirement, you can take a loan ranging from Rs. 50,000 to Rs. 30 lakhs.

Documents required in Personal Loan

The documentation process is very fast. Following documents are required by financial institutions to process the loan application:

In case of Salaried
  • Identity proof
  • 3 to 6 months Bank statements
  • Residence proof
  • Salary slip
  • Guarantors & their same set of documents In case of Self Employed
  • Balance Sheets.
  • Profit & Loss Account.
  • Partnership Deed / ROC mandatory documents etc.
  • ITR for 3 Years.

Personal Loan Criteria by various banks

Banks offer Loan to borrowers depending on various factors such as income, employment, continuity of business so as to make sure that they repay the loan with interest before the due date. The eligibility criterion of a personal loans is primarily based on the work profile of a loan seeker which is broadly divided into the following two classes:

Self-employed /  Salaried

In addition to the above factors banks also consider other aspects such as age, work experience, existing relationship with the bank, repayment capacity etc.

To find your eligibility Criteria across various banks in accordance with the above parameters; Erum Eligibility Criteria Check for Loan seekers.

How does the Cibil Score affect your loan application?

This a norm wherein the banks before giving Personal Loan checks the database of all loan borrowers in the country by the Credit Information Bureau of India (CIBIL) which is called the Cibil Score. If there has been a default in your loan payment; your loan application would certainly be rejected. Your Cibil score ranges from 100 to 999, for instance if your credit score is 100 then your loan application might be out rightly rejected. On other hand if it is higher say 800, then your loan application would be processed faster & will be rewarded with lower interest rates & discounts in processing fee & other charges. You can improve your credit score by repaying your loan EMIs on time and always pay the minimum payment on your credit card to avert from the bad credit score.

Reducing Interest Rate or Flat Interest Rate, which is better?

The Interest Rates vary between 14% and 25% depending on your profile & payment ability. There are basically two types of interest Rates offered by banks which are 1. Reducing Balance Interest Rate 2. Flat Interest Rate In the Reducing Interest Rate calculation method, the interest on your loan keeps on reducing as it is calculated on the reduced principle amount which gets reduced daily, monthly, quarterly or annually. Flat Interest Rate calculation method on other hand implies that your rate of interest remains the same & is calculated over the entire loan period. The outstanding loan amount is never reduced over the loan tenure.

It is always advised to take a loan at reducing balance interest rates as the Flat rate calculation comes out to be really expensive.

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