What is a Personal Loan?

Consumers can use personal loans, which are short- to medium-term loans, for purposes other than speculation, such as meeting company or personal needs. Since customers can use them without pledging any collateral or security, they are typically unsecured in nature.

Interest rates for personal loans

A personal loan's interest rate is set by the lender using a credit risk-based pricing model, cost of funds, applicant credit profile, and other factors. One must constantly search for the greatest interest rates accessible on their credit profile, as these will have the biggest impact on the overall cost of borrowing, especially when it comes to personal loans.

Customers should first look at offers from lenders with whom they already have an account, credit card, loan, or deposit before doing this. They should then compare interest rates provided by other banks and NBFCs by visiting online financial marketplaces.

Personal Loan EMI Calculator

Customers can calculate how much they would have to pay each month for the servicing of their personal loans with the aid of the Personal Loan EMI Calculator.

Customers can quickly and easily calculate the interest cost and total amount payable for a variety of loan amounts, interest rates, and loan tenures by using this online calculator.

After taking their ability to repay into account, customers can also choose the optimal term for their personal loans and better organize their loan payments.

Affecting Factors for EMI on Personal Loans

The amount you pay each month is called an Equated Monthly Installment (EMI). The principal and interest on the loan are repaid with this money. Three key elements that affect your personal loan EMIs consist of:

• Principal Amount: An increase in the principal amount will raise your EMI, assuming the loan tenure and interest rate remain constant.
• Interest Rate: Your EMI will rise with any increase in the interest rate.
• Tenure: Opting for a longer loan tenure reduces your EMI, but it results in a higher total interest cost over the life of the loan.

How to calculate EMI for a personal loan?

The following formula can be used to get the EMI on your personal loan: EMI = [P x R x (1+R)^N]/[(1+R)^N-1],wherein

• ‘R’ represents the rate of interest.
• ‘P’ represents the principal amount.
• ‘N’ represents the loan tenure.

Using an online personal loan EMI calculator is preferable to manual calculations, which can be difficult, time-consuming, and prone to errors. To calculate the interest rate, loan amount, and loan tenure for a personal loan, the calculator only needs to know a few simple details.

It takes less than a second to receive your loan EMI amount when all information has been provided. In addition, the calculator shows users the amortization plan and total interest amount in addition to the amount of EMI.

Leading Banks' Personal Loan Programs

A few personal loan programs from some of the top Indian banks and NBFCs are listed below:

HDFC Personal Loan

The interest rate of HDFC Bank personal loan starts from 10.75% p.a. The tenure of the scheme can go up to 6 years whereas the loan amount can go up to Rs 40 lakh. The bank also offers pre-approved loans with ‘10 second disbursal’ to its select existing customers based on their credit profiles.

• Interest Rate: 10.75% p.a. onwards
• Loan Amount: Up to Rs 40 lakh
• Tenure: Up to 6 years
• Minimum Salary: Rs 25,000 per month
• Age: 21-60 years
• Credit Score: At least 650
• Processing Fee: Up to Rs 6,500

Personal Loan from ICICI Bank

To meet its consumers' diverse financial needs, ICICI Bank offers personal loans. The bank also provides younger salaried persons with Fresher Funding, a unique program designed to meet their immediate and other financial needs.

The bank provides pre-approved offers, a top-up loan facility, and an overdraft facility to a limited number of its current clients. Its pre-approved deals have 3-second disbursals and require minimal documentation.

• Interest Rate: 10.85% p.a. onwards
• Loan Amount: Up to Rs 50 lakh
• Tenure: 1 to 6 years
• Minimum Salary: Rs 30,000/month
• Age: 23 to 58 years for salaried and 25 to 65 years for self-employed
• Processing Fee: Up to 2% of loan amount

Personal Loan from Axis Bank

Personal loans from Axis Bank can be used to pay for weddings, home improvements, vacations, emergency medical bills, and a host of other needs. Additionally, the bank offers pre-approved deals to a limited number of its current clients.

These offers are approved instantly and are processed digitally. Additionally, Axis Bank and Paisabazaar have partnered to provide pre-qualified offers to a small group of consumers.

• Interest Rate: 11.25% p.a. onwards
• Loan Amount: Up to Rs 40 lakh
• Tenure: 1 to 7 years
• Age: 21 to 60 years
• Minimum Monthly Salary: Rs 15,000
• Processing Fee: Up to 2%

Personal Lending from Kotak Mahindra Bank

Only salaried people are eligible for loans from Kotak Mahindra Bank. Current customers of other banks or NBFCs can move their outstanding loans to Kotak Bank at a reduced interest rate by utilizing the balance transfer service.

A top-up loan of up to 100% of the original loan amount is also available to those who use the balance transfer service. Additionally, Kotak Mahindra Bank provides its customers with an overdraft facility that allows them to withdraw money from their loan account whenever needed and repay it at their convenience.

• Interest Rate: 10.99% p.a. onwards
• Loan Amount: Up to Rs 40 lakh
• Tenure: Up to 6 years
• Credit Score: At least 700
• Age: 21-60 years
• Minimum Monthly Salary:
  • Corporate Borrowers – Rs 25,000
  • Non-corporate Salary Borrowers – Rs 30,000
  • Employees of Kotak Mahindra Bank – Rs 20,000
• Processing Fees: Up to 5% of loan amount

Personal Loan at IndusInd Bank

IndusInd Bank offers a variety of personal loan programmes, including loans for weddings, home improvements, medical expenses, and education.

Additionally, the bank provides balance transfer services to existing borrowers of NBFCs and other banks. It also offers instant online loans with fast processing and quick approvals for those in need of immediate funds.

• Interest Rate: 10.49% p.a. onwards
• Loan Amount: Up to Rs 50 lakh
• Tenure: 1 to 5 years
• Age:
  • For salaried: 21 to 60 years
  • For self-employed: 25 to 65 years
• Processing Fee: 1.5% – 3.5% of the sanctioned loan amount
• Minimum Salary: Rs 25,000/month

Features and Benefits of a Personal Loan

Personal loans are a popular credit option for financing lifestyle goals and addressing cash shortages, thanks to their easy accessibility, minimal documentation, and quick disbursals.

Below are the key features and benefits of personal loans:

1. Collateral-free loan
2. No end-use restriction
3. Loan amount of up to Rs. 40 lakh, which can exceed depending on lenders’ discretion
4. Repayment tenure up to 60 months, which may exceed on a case-by-case basis
5. Top-up loans for additional requirements offered by many lenders
6. Minimal documentation
7. Quick disbursals

Personal Loan Types

To assist their clients in meeting specific financial needs, several banks and NBFCs offer a variety of personal loan options in addition to the standard plans.

The key features available with these loan variations, such as tenure, processing fees, etc., are essentially similar to those found in standard personal loans. Below is a summary of a few personal loan options:

• Instant Personal Loan
• Short Term Personal Loan
• Pre-Approved Personal Loan
• Personal Loan Balance Transfer
• Personal Loan for Education
• Top Up Personal Loan

Quick Personal Loan

Pre-approved loans with immediate disbursements are typically what instant personal loans are. Banks and NBFCs typically give these loans to a limited number of their chosen clients based on the credit profiles of those clients.

Quick Payday Personal Loan

Repayment terms for short-term personal loans are typically brief—a few days to a year. Generally speaking, they are perfect for lesser loan sums.

These loans are typically provided through an end-to-end digital process, which guarantees applicants receive their loan approval and disbursement more quickly.

Pre-approved Individual Loan

Banks and NBFCs typically offer pre-approved personal loans to their current clients based on various factors, including employment profile, income, and credit history.

Transfer of Personal Loan Balance

Borrowers can transfer their outstanding personal loan to a new lender for better loan conditions or lower interest rates through the Personal Loan Balance Transfer (PLBT) program. However, this option should only be used if the savings from the transfer exceed the costs associated with the loan transfer.

Supplementary Individual Loan

Existing borrowers of personal loans who require additional funds to meet their financial obligations are eligible for a top-up loan. This credit option is usually extended to a limited group of borrowers who have fulfilled a predetermined number of EMIs and/or have a satisfactory loan repayment history.

Personal Loan for Advanced Study

The Personal Loan for Education is available for those who are unable to secure a traditional education loan and need funds for vocational training, higher education in India or abroad, etc.

How Might a Personal Loan Be Put to Use?

Personal loans can be utilized for any legal purpose, excluding unlawful or speculative activities. Borrowers may use the loan proceeds for wedding expenses, home improvements, emergency medical care, vacations, business operations, and more. The loan can also help pay off multiple high-interest debts, manage daily expenses, or fund college expenses (even for courses not eligible for education loans).

Fees & Charges for Processing

Personal loan fees and charges can vary significantly based on the lender and the borrower’s credit profile, so it's essential to review these details before applying.

Qualifications for Personal Loans

Qualifications for personal loans can vary among lenders due to differing policies on credit risk. The requirements may also change based on the applicant's occupation profile and the type of loan. However, the majority of lenders commonly use the following criteria to qualify borrowers for personal loans:

• Age range: 18 to 60 years
• Salary: For salaried consumers, at least Rs 15,000 a month
• Income: For self-employed clients, at least Rs 5 lakh per year
• Credit Score: 750 or above is preferred, as it increases the likelihood of loan approval
• Employment Stability: One year is typical, though some lenders may require more work experience
• Business Continuity: Generally, lenders want a three-year duration for business continuity; however, some may require a longer period
• Employment Type: Salaried staff members employed by reputable businesses, multinational corporations, private and public limited companies, government agencies, PSUs, and sizable enterprises

How to Check Personal Loan Eligibility?

Banks and NBFCs evaluate an applicant’s personal loan eligibility based on various factors, including age, credit score, income, loan repayment capacity, occupation profile, and employer’s profile. Due to differing credit risk policies, the eligibility criteria for personal loans may vary among lenders. Applicants can check their eligibility by visiting the branch or website of various banks and NBFCs individually, or they can use online financial marketplaces like Charvi Finservices to compare personal loan offers from multiple banks and NBFCs based on their credit profiles.

Documentation Needed for Personal Loans

Lenders of personal loans require applicants to provide documentation related to their identification, income, ability to repay the loan, and address. These document requirements are generally similar across all lenders. When applying for a personal loan, you will typically need to provide the following sets of documents:

Five Strategies to Raise Your Personal Loan Prospects

Due to the lack of collateral or security to cover losses in the event of a loan default, the unsecured nature of personal loans raises the credit risk for lenders. In order to reduce this risk, banks and NBFCs evaluate loan applicants' applications based on stringent eligibility criteria and take into account a variety of factors related to their credit profiles. By using these suggestions, those wishing to apply for a personal loan can increase their chances of being approved:

1. Keep your CIBIL rating higher than 750.
2. Before completing any loan transaction, compare the personal loan offers that are offered by banks and NBFCs.
3. Apply for the loan at the bank or NBFC where your chances of being approved are the best.
4. Do not apply for more than one loan in a short period of time.

Things to Consider Prior to Taking Out a Personal Loan

Here are some things to consider before you apply for a personal loan:

1. Many banks and non-bank financial institutions provide their current clients with immediate pre-approved personal loan offers: Numerous lenders make pre-approved offers to a limited number of their current clients based on the credit histories of those clients. These pre-approved deals have prompt payout times and little to no documentation requirements. Additionally, a lot of lenders provide their current clients with cheaper interest rates.
2. Your chances of getting a loan approved and at a cheaper interest rate are increased by having a higher credit score: When it comes to personal loans, banks and NBFCs favor those with credit ratings of 750 and above. For these applicants, several lenders also offer lower rates on personal loans. Higher credit scores also make a person more qualified for offers of pre-approved loans.
3. Selecting a longer tenure will help you make your EMI more affordable: Lower EMIs result from longer tenures. Therefore, it is advisable to consider extending the loan term to reduce your monthly financial burden.
4. There are no fees associated with foreclosing or paying off variable rate personal loans: The RBI has prohibited NBFCs and banks from charging prepayment or foreclosure fees on personal loans with floating rates. Lenders have the option to impose these fees in the case of fixed-rate personal loans.
5. Applying for more than one loan in a short period of time may lower your chances of being approved: Every loan applicant's credit report is obtained by lenders as part of the loan evaluation procedure. Hard inquiries are those that are started by lenders and involve credit report demands. Several hard inquiries made in a short amount of time may cause your credit score to drop suddenly, which may lower your chances of being approved for a personal loan.

How can I use Charvi Finservices to apply online for a personal loan?

Salaried people can easily evaluate personal loan offers from over thirty banks and non-bank financial institutions (NBFCs) on Charvi Finservices and apply online for the best deal. The following are the steps to do the same:

1. Enter your mobile number.
2. Select your personal details like annual income, employer name, etc.
3. Enter OTP to verify your mobile number and login.
4. Select your reason to apply for a personal loan.
5. Select your residence type.
6. Select the desired loan amount.
7. Compare offers and apply for the loan.

What's the most money I can borrow on a personal loan?

Personal loans typically range from Rs 10,000 to Rs 40 lakhs from lenders. However, your income and any current loan repayment obligations—if any—will largely determine how much they approve. The following methods are commonly used to calculate the eligible loan amount:

Multiplier Method: Some banks and non-bank financial institutions employ this method, which computes the qualifying loan amount by multiplying the applicant's net monthly income by a predefined number, typically between 10 and 24.

EMI/NMI Ratio: Other lenders use this ratio, which limits the requested loan's EMI to a pre-established percentage of the applicant's income.

Combination of Methods: Certain lenders may also use a blend of the Multiplier Method and the EMI/NMI Ratio to determine the applicant's eligibility for a specific loan amount.

• 50 Thousand Personal Loan
• 1 Lakh Personal Loan
• 3 Lakh Personal Loan
• 5 Lakh Personal Loan
• 10 Lakh Personal Loan

Why should I use Charvi Finservices for personal loans?

Prospective borrowers should evaluate offers from as many lenders as they can when searching for a personal loan. While examining personal loan offers on the websites of individual banks and non-bank financial institutions is still an option, using an online financial marketplace such as Charvi Finservices will expedite, simplify, and enhance the process. Here are some further justifications for using Charvi Finservices to apply for personal loans:

• Without negatively impacting your credit score, check and contrast personal loan offers from more than 30 partner banks and NBFCs.
• Receive pre-approved deals with prompt payouts.
• Find out how likely it is that your loan will be approved based on your credit score and other credit profile factors.
• Apply online for a personal loan using a digital end-to-end approach.