PERSONAL LOAN
- ARE
- Feb 1, 2020
- 10 min read
Personal loan is a short to medium term unsecured loan that helps an individual to meet his urgent financial needs. In order to avail a personal loan, you don’t have to pledge any collateral or security unlike a home loan or a car loan. This loan offers a flexible end use to an individual as it can be used to serve various purposes like a long- due vacation, medical emergency, home renovation, purchasing a gadget, etc. A personal loan is easy to avail online with simple and quick approval process and minimum documentation and is sanctioned only after considering an individual’s credit score, income, repayment history, employer, etc.
Features and Benefits
No Collateral Required: Personal loan is an unsecured loan which means you don’t need to provide any asset (e.g., a house or a car) as collateral to the bank to avail this loan. Since no collateral needed, a personal loan is sanctioned on the basic of an individual’s credibility that is decided after considering his age, credit score, salary, employer, repayment history, etc.
Flexible end use: Unlike a home loan or a car loan, a personal loan can be used to eal with multiple purposes without any restriction. It can be used to overcome many financial constraints, which may arise due to a medical emergency, debt accumulation, sudden travel plans, house renovation, etc.
Flexible Tenure: In a personal loan, an individual gets flexible tenure of up to 5 years to repay the loan amount, thus, making it more preferable than other credit options such as loan against credit cards or gold loans. An individual can choose the tenure as per his repayment ability.
Simple Documentation Process: To apply for a personal loan, you need to submit minimum documents. Almost all the banks and NBFCs allow their customers to avail a personal loan online, through their app or on the official website and thus, you can easily upload the documents from the comfort of your home.
Quick disbursal: As the whole process of availing a personal loan takes place online, the documents are uploaded instantly and once approved, the loan amount is disbursed to your account within.
Flexible Quantum of Loan: Based on an individual’s repayment history, monthly income, age, profession, employer and other such factors, lenders offer personal loan of amount as low as Rs. 10,000 to as high as Rs. 40 lakhs. The amount may vary from lender to lender.
Interest Rates
The interest rates of personal loans offered by various banks and NBFCs are as follows:
Allahabad Bank
Interest Rates
MCLR + 4.50%
Processing Fees
1.60% of the Loan Amount, minimum amount Rs 1068
Andhra Bank
Interest Rates
(For state and govt employees:) - Up to 36 months - MCLR 1 year + 3.00%; More than 36 months- MCLR 1 Year + 3.25%
(For Private employees, non-salaried:) - Up to 36 months - MCLR 1 year + 3.50%; More than 36 months - MCLR 1 year + 4.50%
Processing Fees
Nominal
Axis Bank
Interest Rates
16% - 24%
Processing Fees
1.50% to 2.00 % + GST as applicable
Bajaj Finserv
Interest Rates
Starting from 12.99%
Processing Fees
Up to 3.99% of the loan amount
Bank of Baroda
Interest Rates
For existing customers having account relationship of minimum 6 months- One year MCLR +SP+3.00% to One year MCLR +SP+ 6.00% (As per Risk Rating of the applicant/s)
For applicants having account relationship with other Bank at least for 6 months- One year MCLR +SP+5.00% to One year MCLR +SP+ 8.00% (As per Risk Rating of the applicant/s)
Processing Fees
2% of the loan amount
Bank of India
Interest Rates
Fully Secured: 1 year MCLR + 4.50%
Clean/Unsecured: 1 year MCLR + 5.50
For citizens aged 60 & above for loans up to Rs 50,000 : 1 year MCLR + 3.50
Financing secured under tie ups arrangements: 1 year MCLR + 4.50%
Processing Fees
One time @ 2.00% of loan amount Minimum of Rs 1000 and Maximum of Rs 10,000
Bank of Maharashtra
Interest Rates
Starting from 15%
Processing Fees
1.00% of the Loan Amount (Min.:Rs.1000/)
Canara Bank
Interest Rates
With Salary tie-up: 13.00%
Without salary tie-up: 14.00%
For BSNL Employees: 11.00%
Processing Fees
0.5% of the Loan Amount subject to a minimum of Rs 1000/- and maximum of Rs 5000/-
Central Bank
Interest Rates
MCLR (12M) + 3.00%
Processing Fees
Rs 500 + S.T
Citibank
Interest Rates
Starting from 10.99%
Processing Fees
Upto 2.75% of loan amount
Corporation Bank
Interest Rates
12.95%
Processing Fees
1.50% of the loan amount subject to a minimum of Rs.500/-
Federal Bank
Interest Rates
10% to 27%
Processing Fees
Decided by the bank on the basis of loan amount and eligibility criteria
Fullerton India
Interest Rates
20% to 49%
Processing Fees
Upto 6.5% of the loan amount
HDFC Bank
Interest Rates
15.50% to 21.50%
Processing Fees
Up to 2.50% of the loan amount subject to a minimum of Rs. 1,999/- & Maximum of Rs. 25000/- for Salaried Customers.
HSBC Bank
Interest Rates
10.75% to 17.84%
Processing Fees
Up to 1% of the disbursed loan amount
ICICI Bank
Interest Rates
Starting from 11.25%
Processing Fees
Up to 2.25% per annum of loan amount plus GST
IDBI Bank
Interest Rates
Starting from 14.15%
Processing Fees
1% of the Loan Amount
IDFC First
Interest Rates
11.49% to 14.49%
Processing Fees
Decided by the bank on the basis of loan amount and eligibility criteria
Indian Bank
Interest Rates
Where Check off facility and undertaking by the employer is available - 10.65%
Where Check off facility and undertaking by the employer is not available but salary is Credited with the bank - 11.25%
Processing Fees
0.51% on the Loan Amount with a maximum of Rs. 510
IndusInd Bank
Interest Rates
11.29%-17.99%
Processing Fees
Upto 2.5% of the loan amount plus tax
Kotak Mahindra Bank
Interest Rates
10.99% to 24%
Processing Fees
Up to 2.5% of the loan amount + GST and other applicable statutory levies
Punjab National Bank
Interest Rates
For existing customers- MCLR + 3.55%
For non- existing customers- MCLR + 4.55%
For individuals who are availing the loan under check off facility- MCLR + 5.55%
For others upto Rs.5 lakh- MCLR + 6.55%
Processing Fees
1.80% of the loan amount
RBL Bank
Interest Rates
14.5% p.a. up to 23%
Processing Fees
3% of the loan amount (plus Tax at the prevailing rate)
Standard Chartered Bank
Interest Rates
Unsecured: 1 year MCLR + 4.85% p.a.
Secured: 1 year MCLR + 3.85% p.a.
Processing Fees
0.50% of the loan amount with minimum of Rs 500/-
State Bank of India
Interest Rates
12%-15.50%
Processing Fees
1% of the loan amount
Syndicate Bank
Interest Rates
Unsecured: 1 year MCLR + 4.85% p.a.
Secured: 1 year MCLR + 3.85% p.a.
Processing Fees
0.50% of the loan amount with minimum of Rs 500/-
TATA Capital
Interest Rates
Starting from 11.25%
Processing Fees
Up to 2.5% of the loan amount + GST
UCO Bank
Interest Rates
For Men- MCLR of 1 Year + 3%, 11.70% at present
For Women- MCLR of 1 Year + 2.75%, 11.45 at present
Processing Fees
1% of the loan amount (min. of Rs. 750)
Union Bank of India
Interest Rates
Under Tie ups: 1 year MCLR + 4.00% (Floating)
Non tie up: 1 year MCLR + 5.00% (Floating)
Processing Fees
0.50% of the total Loan, subject to minimum of Rs. 500, plus applicable GST
Yes Bank
Interest Rates
Starting from 10.75%
Processing Fees
Up to 2.50% of the loan amount subject to a minimum of Rs 999/- plus taxes
Interest rates by various banks and NBFCs are offered depending on the applicant’s profile and are influenced by many factors including an individual’s age, credit score, repayment history, employer, etc.
Fixed Rate of Interest
Fixed Interest Rate is an interest rate that remains fixed throughout the personal loan tenure. Let’s say, if an individual has taken a personal loan for 4 years, the interest rate offered by the bank will remain same throughout the tenure.
Floating Rate of Interest
Floating interest rate is an interest rate that changes during the loan tenure. For this type of loan, there is a base rate that is informed to the borrower while availing the loan and the interest rate keeps on fluctuating above and below this base rate as per floating components.
Factors that Influence Your Personal Loan Interest Rates
A personal loan interest rate usually starts from 10.99% but is not same for everyone and if you are planning to avail a personal loan, it is important for you to understand the factors that may influence your interest rate. Depending upon the following factors two individuals can get different interest rates on a personal loan from the same lender:
Credit score: A credit score not only helps you to avail a personal loan but also contributes in narrowing down your interest rate. How? A credit score is a 3-digit number that acts as a validation of how you have handled the past repayments of your credit cards and personal loans. Every time you repay your EMI on time, points are added to your credit score and defaults or late payments take your credit score down by a few points. It is necessary to maintain a good credit score of 750 or above as it proves your creditworthiness and such individuals are considered reliable by the lenders while offering a personal loan and hence a lower interest rate may be offered.
Income: As personal loans are unsecured loans and do not involve any collateral against them and a higher monthly income of an individual works as an assurance to the lenders. The lenders tend to believe that high income borrowers will be able to repay the loan without any delay and hence offer a lower interest rate to them. For example, a borrower with a monthly income of Rs. 90,000 might get a personal loan with an interest rate of as low as 11% but on the other hand, a borrower with a monthly income of Rs. 25,000 might get an interest rate of 14% from the same bank.
Reputed employer: If you are working with a reputed organization, you are most likely to crack a great deal on your personal loan interest rate. This happens because lenders believe that such borrowers have a stable job and receive timely salaries and hence would be able to repay the EMIs on time. Apart from this, the nature of your job also influences your credit score as a salaried professional might get a different interest rate as compared to a self- employed individual.
Relationship with your bank: If you have a salary or a savings account with any bank and share a good history of repaying the past EMIs with the bank on time, the bank is most likely to offer you a personal loan with lower interest rate or processing fee. The bank might also offer you a few additional benefits.
Best Deal on Your Personal Loan Interest Rate
Availing a personal loan is quick and easy but availing a personal loan at the lowest interest rate might be challenging if you don’t consider the following points before applying for a personal loan.
Improve your credit score: As mentioned above, it is necessary to maintain a credit score of 750 or above as it defines your creditworthiness and convinces the lenders to offer you a lower interest rate. If your credit score is below 750, you will have to make efforts to improve it. The easiest ways to do so are to keep paying the EMIs of your existing loans and credit cards on time and keep checking your credit report for any defaults.
Pay existing debts, if any: Your Debt to Income Ratio (DTI) that is calculated by dividing your monthly debts (both loans and credit cards) by your monthly income is also taken into consideration by lenders as this ration helps the lenders to determine your ability to manage monthly EMIs along with the other expenses. If your DTI is more than 50%, you will either not be considered for a loan or the lender will charge you a high interest rate. Before applying for a personal loan, it is advisable to pay your existing debts to bring the DTI ration down, which will ultimately help you to get a lower interest rate.
Compare lenders: Don’t go for the very first personal loan offer you get or see. It is a good practice to compare interest rates offered by various banks and NBFCs on a personal loan and then go for the lender offering the lowest interest rate. At Paisabazaar.com, you can compare the interest rates offered by various banks under one roof and can choose the desired one. Also, do not forget to compare other hidden charges and terms and conditions as well.
Apply with a co- applicant: If your credit score is below 750, lenders might sanction your personal loan but with a higher interest rate. Under such circumstances, you can apply for a personal loan with a co-application (maybe spouse or a parent) having a credit score of 750 or above. This way, the financial information of both your co- application and you will be considered and you might get a lower interest rate.
Consider pre- approved offers: Lenders after considering your repayment history may offer you a pre- approved loan. When such an offer comes from the bank side, a lower interest rate might be offered because the bank has already analyzed each and every aspect. So, keep looking for personal loan pre- approved offers.
Eligibility Criteria
Any Indian citizen be it a salaried professional or self-employed individual is eligible for a personal loan. The eligibility criteria might differ from one lender to another; however, there are a few basic eligibility criteria that are common amongst most lenders. Some of the factors that influence the eligibility criteria of an individual are as follows:
Credit Score: A good credit score of 750 or above increases the chances of getting your personal loan application approved along with favorable loan amount, interest rate and tenure. It is very important to maintain a good credit score before applying for a personal loan.
Credit Score Range - (Category)
900 to 750 - (Excellent)
749 to 700 - (Good)
699 to 650 - (Fair)
649 to 550 - (Poor)
549 to 350 - (Bad)
Must Read: How to Get your Personal Loan Approved in No Time
Employment stability: Both salaried professionals and self- employed individuals need to have a stable job or business respectively. As per most banks, a salaried professional having minimum 2 years of working experience with 1 year in current job and a self- employed individual with minimum 2 years in current profession is preferred by the banks.
Income: An individual should meet the stipulated minimum monthly income (for salaried professionals) or gross annual income (for self- employed individuals) defined by the lender. Most of the lenders prefer a salaried professional with a minimum income of Rs. 15,000 and gross annual income of Rs. 5 lakh.
Age: An individual also needs to qualify for the age bracket defined by the lender. The age bracket for a salaried professional is usually 21 to 60 years and for a self- employed individual is 21 to 68 years.
The table given below summarizes the basic eligibility criteria required by most banks and NBFCs for individuals requesting a personal loan:
Salaried
Age (21 - 60 years)
Minimum Income (Rs. 15,000/ month)
Credit Score (Above 750)
Employment stability
Total experience- Minimum 2 years
Minimum experience in current organisation- 1 year
Self-Employed
Age (21 - 68 years)
Minimum Income (Rs. 5 lakh - gross annual)
Credit Score (Above 750)
Employment stability (Total experience- Minimum 2 years in current business)
Documents Required
Most banks have similar guidelines for personal loan documentation. A generic list of documents required to apply for personal loan is as follows:
Documents for Salaried Individuals
Proof of identity (a copy of Passport/Voter ID Card/Driving License/Aadhaar)
Proof of residence (a copy of Passport/ Voter ID Card/ Driving License/ Aadhaar/Leave and License Agreement/ Utility Bill of not more than 3 months)
A copy of latest salary slip/current dated salary certificate with the latest Form 16
Bank statement of previous 3 months
2 passport size photographs
Documents for Self-Employed Individuals
Proof of identity (a copy of Passport/Voter ID Card/Driving License/Aadhaar
Proof of residence (a copy of Passport/Voter ID Card/Driving License/Aadhaar/Leave and License Agreement/Utility Bill of not more than 3 months)
Proof of income (audited financials for the last 2 years)
Proof of office address
Proof of office ownership
Proof of continuity of business
Latest 6 months’ bank statement
Two passport size photographs
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