Personal Loan – Interest Rates, Eligibility, Features, and Factors Affecting Eligibility

A personal loan is one of the most flexible and accessible forms of credit available today. Whether you're planning a wedding, dealing with an emergency, consolidating debt, or funding a big purchase, a personal loan can help bridge the financial gap without needing a collateral. With competitive interest rates and faster approval processes, personal loans are a go-to financial aid for salaried and self-employed individuals alike. 

This article will you through the lastest personal loan interest rates, eligibility criterias, key benefits, and everything else you need to know before applying for a personal loan.

Personal Loan Interest Rates 2025

Key Features and Benefits of Personal Loans

• Personal loans are unsecured loans that do not require the applicant to pledge any asset as collateral. 
• Personal loans are provided based on the borrower’s creditworthiness analysed based on their credit report/history.
• In the case of a home loan or car loan, you can use the funds only to purchase a house or a car. Funds from a personal loan can be used for any purpose.
• Loan tenure can range from 12 months up to 60 months based on your convenience.
• Minimal documentation, such as proof of identity, address, and income, is enough to apply for a personal loan.
• There are many instant loan disbursement schemes where the lender hands the cash to you in a matter of a few hours.
• The loan amount depends on many factors, such as repayment capacity, income source, and more.
• The loan amount can range from Rs.10,000 up to a few lakhs.

Factors Influencing Personal Loan Eligibility

Credit Score

• A credit score is a 3-digit number that shows how well you’ve managed your finances and bills to the lender. A low score can reduce your chances of getting a good loan deal, with the possibility of a lender even rejecting your application.

Monthly Income

• Since collaterals do not back up personal loans, your monthly income and repayment capacity become important. The income requirements vary based on the location you live in, i.e. it may vary across metro cities, tier-1 cities, tier-2 cities, towns, and villages.

Work Experience

• Lenders do not consider applicants who have recently been employed or started their businesses to be financially secure. Applicants with adequate work experience are more likely to get their application approved, as the lenders think that they have relatively secure financial plans and savings. Most lenders prefer applicants with at least 2–3 years of overall work experience, including at least 1 year with their current employer. 

Liabilities

• Your current liabilities can make or break the deal when it comes to approving your loan application. If you are already paying huge credit card bills, loans, and other debts and if you have applied for a personal loan, the lender will weigh your debt-to-income ratio and may decide not to approve the application as most of your monthly income may go towards loan repayments, which may not leave you with enough money for your domestic expenses. 

Age

• The age of the applicant plays an important role in the approval of the loan. Lenders check for their age to ensure that the borrower has enough working time to repay the loan. Salaried applicants must be in the range of 23-58 years, and self-employed non-professionals must be in the range of 28-65 years at the time of applying for the loan for easy acceptance.

When to Take a Personal Loan?

Paying Off a Higher-Rate Debt:

• In the case of failure to repay a credit card bill or a loan having a high interest rate, individuals seek the help of a personal loan so they can repay the high-rate debt instantly and repay the personal loan through monthly instalments.

Medical Emergency:

• When there is a medical emergency and there are not enough funds to take care of the medical expenses, individuals go for a personal loan. Since a few lenders offer personal loans instantly, it comes in handy to handle emergencies.

Education Expenses:

• When you or your loved ones want to pursue great heights through higher education, you may prefer a personal loan to take care of the related expenses. 

Downpayment for car/house:

• A home loan or a car loan will usually include a margin of a minimum of 10%-15%. That means you have to put a minimum of 10%-15% of the property’s cost from your pocket. If you have not saved up enough to handle this, you may go for a personal loan to handle this cost.

Finance your Business:

• Some people utilise personal loans to finance their business. Say there is a sudden requirement of cash to fill in inventory or deliver the bulk order to the client on time. Applying for a business loan in this situation may take a few days to evaluate your documentation. In this case, a personal loan can be useful.

Wedding Expenses:

• Organising a wedding ceremony is a costly affair, especially in India. When the requirements are overshooting your budget, you may go for a personal loan to manage the expenses and repay the loan amount later.

Vacation:

• If you are planning for that international vacation but cannot reach your goal due to the shortage of funds, you could take a personal loan for the funds that are short and pursue your dream vacation. It is always possible to repay the loan once you are back.

Personal Loan Eligibility Criteria

The eligibility criteria for availing of a personal loan varies from bank to bank. However, here are general criteria you should know.

Required Documents for Personal Loan Application

Personal Loan EMI Calculator

A personal loan EMI calculator is a smart tool that calculates your monthly EMI amount payable to the lender. It’s basically a tool where you enter the values, such as Principal loan amount (P), time duration to repay the loan (N), and rate of interest (R) to find out your EMI and figure out your budget in advance.

Things to Keep in Mind Before Applying for a Personal Loan

• Interest Rates: Since personal loans are unsecured, interest rates could be on the higher side. It would help if you chose a fixed or a variable interest rate depending on the bank or NBFC.
• Penalty Charges: Banks and NBFCs charge a high penalty on your loan if you don’t pay your dues/EMIs on time.
• Analyse the Necessity: Personal loans or any loan are meant for genuine and urgent needs. So, if your financial situation can be handled without taking the loan, you should avoid taking it.

How to Apply for a Personal Loan?

Step 1: Check your eligibility to get a personal loan.

Step 2: Do your research on personal loan offers and shortlist a few lenders you think are favourable for you.

Step 3: Visit their nearest branch office or their website.

Step 4: Fill in the application form and attach the necessary documents once you enquire about the offer in detail.

Step 5: The bank will process your application and inform you about their decision within the stipulated period.

Thanks to digitisation, applying for a loan is no longer restricted to visiting the bank several times. Instead, you can do it online. Once you know the whole loan process and agree to the terms and conditions of the personal loan, the bank collects the required documents.

It initiates the loan process, including checking your CIBIL score, the nature of the financial urgency, etc. Based on the evaluation of all the papers, the bank will intimate their decision on your loan application.

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