Personal loan in India – What you should look for?

Personal Loan in India

Personal Loan in India is provided by Banks or NBFCs like SBI, PNB or ABFL to Indians who apply for it to meet any of their unplanned needs/emergencies. This can be availed by

  1. Salaried Professionals (Salary credited to Bank Account)
  2. Self Employed Professionals like Doctors, Architects, CA, etc
  3. Self Employed Non-Professionals who runs a Business (Like Trader, Manufacturer, etc)

Personal Loan is an unsecured loan that you can take to cover any of your immediate needs, be it a wedding, medical, home renovation or any other emergency. You can repay this loan in tranches every month that are popularly known as EMI.

This means there is no collateral being mortgaged by the bank. And it is given on the personal guarantee of the individual. It is available across all urban centers in India like Delhi, Jaipur, etc. Banks like ICICI Bank, HDFC Bank grants a loan on the basis of monthly source of income

  1. Salary (credited into account or by cheque)
  2. Business (based on the past ITRs, Monthly transactions in Bank Account), etc.

Need Personal Loan, what should you do?

I would recommend the following steps –

Step 1. Try checking for your CIBIL score for free. Read this post which may help you. https://indianloan.in/how-to-improve-cibil-score/

Step 2. Check your loan eligibility using this simple calculator. As a thumb rule, I would strongly suggest you should not pay more than 60% of your take-home salary in Loan EMIs.

Step 3. If you think you have a good Cibil score and are good in terms of loan eligibility, look which Bank you already have an existing relationship. Most of the time, if not always, this Bank will give you the best deal in terms of interest rate, processing fees, and other terms.

Step 4. In Banks like ICICI, you can check if you have an existing loan offer online by clicking here. For others like HDFC Bank, you can call up customer care and easily check for the same.

Step 5. If you get an approved offer from your Bank where you already have an existing relationship like Savings account or current account, you can go for it.

Step 6. If you don’t have an approved offer, then you need to decide you should go for an NBFC or Bank. If your CIBIL score is more than 750 and monthly salary after any existing EMI deduction is more than 25 K, you should go for Banks else NBFCs might be the right choice.

Step 7. There are few NBFCs which provides instant loan at very attractive interest rates, you may look at them as it is quick, easy and comfortable. Check out my post on Indiabulls Dhani Instant Loan.

Step 8. You can approach other different Banks, NBFCs and ask for the tentative interest rate and offers but should not submit your application to them unless convinced with the same.

Step 9. Apply with the Bank/NBFC as recommended and as per your choice. I wish your application gets approved and money be disbursed to you.

Note:

I would strongly discourage you to go and apply through a local DSA as typically they submit your loan application with loads of Banks, NBFCs which doesn’t go in your favor.

You can, however, go with a loan aggregator but mention to them you want to apply only in one or two Banks/NBFCs of your choice and they should not submit your loan application to anyone else without your consent.

What you should NOT do while looking for Personal Loan?

  1. Never pay anyone for your Personal loan application. Bank/NBFCs will deduct their charges from your disbursed amount.
  2. Never submit your loan application in multiple Banks/NBFCs. This is seen quite often but is quite bad for the loan applicant. Reasons below:
    • Every loan application puts an inquiry onto your CIBIL which lowers the same.
    • If you applied for the loan more than 3 times in three months, Banks and NBFCs consider this quite negative and suspect that there must be some reason for so many unsuccessful loan applications. Thereby rejecting your loan application which could have been otherwise approved.
  3. Never submit your application without knowing all the details like Processing Fees, Insurance and other charges that this Bank/NBFC generally levy. Always ask for all the information below you apply for a personal loan in any Bank or NBFCs.
  4. Always read the loan agreement papers before the loan disbursal to avoid any unpleasant circumstances.

Popular Banks providing personal loan in India

SBI Personal Loan

Interest Rate10.90% – 16.95%
Loan TenureUp to 6 years
Loan AmountMin. Rs. 25,000, Max. Rs. 15 lakhs
Processing Fee0.5% to 1%
Pre-payment ChargesNone
Toll free number1800-11-2211, 1800-425-3800

State bank of India is the largest bank in India. It is a public sector bank with government as the major share holder. It provides personal loan to residents of India and is one of the most preferred option of Indians. There are three types of personal loan that SBI provides

SBI Xpress Credit Personal Loan

This type of personal loan is available to salaried employees of below type of organizations who maintain salary account with SBI.

  • Central and state Government
  • Quasi-Government
  • Central PSUs
  • Profit making State PSUs
  • Educational Institutions of National Repute
  • Selected Corporates who have business relationship with the Bank

SBI Xpress Power

This is available for salaried employees of below type of firms but for this type of SBI personal loan, minimum salary employment is Rs 50,000. It is not required to maintain the salary account with SBI for this loan.

  • Central/ State Governments/ Defense Establishments
  • Quasi Government Bodies
  • PSUs,
  • Educational Institutions of National Repute
  • Select Rated Corporates

SBI Pension Loan

Pensioners from Central or state government or defense can apply for SBI pension loan if they are less than 76 years of age and draw their pension from the SBI branch. They can apply for the loan at the same branch.

HDFC Bank Personal Loan

Interest Rate10.99% – 21.52%
Loan TenureUp to 5 years
Loan AmountMin. Rs. 50,000, Max. Rs. 40 lakhs
Processing Feeup to 2.5%
Pre-payment ChargesNo pre-payment in part or full permitted until repayment of 12 EMIs.
13-24 Months – 4% of Principal Outstanding,
25-36 Months – 3% of Principal Outstanding
>36 Months – 2% of Principal Outstanding
Customer care number080 61606161

HDFC Bank is the largest private sector bank in India. It is the largest ban kin terms of Market capitalization in India and offers a wide range of services for retail and commercial customers.

HDFC Bank usually processes the loan with in a day after submission of documents. It is a bank of choice for customers who are salaried and work in firms approved with the Bank. It is easier to avail the personal loan from HDFC Bank if your net monthly salary is more than Rs 25,000.

ICICI Bank personal loan

Interest Rate11.25% – 19.25%
Loan TenureUp to 5 years
Loan Amountup to 20 Lacs and more on the bank credit approval
Processing Feeup to 2.25% + GST
Pre-payment Charges5% per annum of principal outstanding plus GST
Toll free number1860 120 7777

ICICI Bank is a very popular private Indian Bank having large number of branches in India. It provides personal loan to both Salaried and Self employed professionals.

For the customers who have an existing relationship my have a pre-approved personal loan from ICICI Bank. You may check for the same from here by entering your registered mobile number at this LINK.

Axis Bank Personal Loan

Interest Rate15.75% to 24%
Loan TenureUp to 5 years
Loan AmountRs 50,000 to Rs 15 Lacs
Processing FeeUpto 2%
Pre-payment ChargesNone
Toll free number1 – 860 – 419 – 5555

Axis Bank is the third largest private sector bank in India with its head quarters in Mumbai. It has a wide network of Bank branches and ATMs. It provides personal loan to resident Indians.

Popular NBFCs providing personal loan in India

  1. Bajaj Finserv
  2. Capital First (IDFC Bank)
  3. Tata Capital
  4. Fullerton India
  5. Indiabulls Dhani Loan

Popular Instant / Quick Loan apps that you can look for

  1. Dhani Loan
  2. Money view
  3. Qbera

Check out more details on them from below.

Short Video on Personal Loan in Hindi

Personal Loan for Salaried in Hindi

For what purpose you can take Personal Loan?

The proceeds from the Personal Loan in India can be used for any unplanned / emergency purposes. Like it can be availed for Wedding, Vacation, Medical Emergency, education of the child, etc.

Personal Loan eligibility

Banks/NBFCs grant the loan to the individuals taking into consideration multiple factors. Below are the major factors for personal loan eligibility.

Credit Score from agencies like CIBIL, Experian etc

Banks/NBFCs check for the CIBIL score to know how your past repayment history is. If you have repaid your loans on time meaning your CIBIL score would be more than 750, they would be taking this as a positive factor for your Personal loan application.

Type of company individual works for

If you work for a Private Limited company or Govt organization which is within the approved list of your organization, it would be a positive factor for your loan application. Whereas, if you work for say proprietorship firm, most of the Banks may not be willing to lend you the money.

Occupation

If you work at the Executive level or above, there is a high chance for your loan approval. While, if you work at Grade 4 or in some risky professions, banks may not be willing to lend.

Age

Generally, Banks/NBFCs lend those who are in the age of 23 to 58 years. Though in some cases, where you have a salaried account with a Bank, they may lend above 21 years as well.

Salary

If your Salary is more than Rs 25000, most of the Banks would be willing to lend you. In some cases, NBFCs may lend if your Net Monthly Take home Salary is Rs 12000 and above, you may become eligible for Personal Loan. Though the interest rate charged could be quite high.

Location of the individual like Metro/Non Metro

If you are located within the city boundaries, most likely you should be eligible. Though some areas are designated as negative areas by Banks and if you live in there, you may not be eligible for a loan from that Bank/NBFC.

Any defaults or Credit Settlements

If you have defaulted on Loans in the past, this could become a major negative factor for your Personal Loan to get approved.

Documents required for personal loan in India

Generally acceptable docs required are

  1. Identity proof
    • Aadhaar Card
    • Valid Passport
    • Valid Voter id Card
    • Driving License
    • Any other as acceptable
  2. Address proof
    • Valid Passport
    • Valid Voter id
    • Rental Agreement
    • Electricity Bill
    • Any other as acceptable
  3. Last 3 to 6 month’s Bank statement
  4. Recent 3 salary slips or salary certificate
  5. Latest 2 years of Form 16

Why Interest rates for Personal Loans are high?

There is no collateral of any asset like Home, Car for the personal loan. They carry higher interest rates than say secured loans like Home Loan, Loan against property or Car Loan. This is due to the higher risk carried by the Bank/NBFC in granting them. Personal loan interest rates generally vary from around 11% up to 33% depending factors as mentioned above.

Lenders on their discretion may offer lower interest rates for

  1. Govt Employees
  2. Few Pvt Ltd companies’ employees as per their benchmarking
  3. Own Bank Account Holders

EMI Calculator for Personal Loan

Here is how you can calculate your EMI, Total payment amount and Total interest that you will pay on Loan.

Process for Personal Loan in India

If one applies for a loan, the process for taking this loan is quicker. Submit the documents and application. It then goes through the verification and underwriting process to check the creditworthiness of the borrower. This could mean whether a loan can be sanctioned or not.

If it is sanctioned, underwriting decides the loan amount and the interest rate at which loan would be granted. Post this disbursal of the loan amount happens. This process can be instant or take up to a week depending upon the Bank/NBFC and creditworthiness of the borrower. Steps for taking this loan are

  1. Application submission
  2. Credit Underwriting and credit score check
  3. Verification by the Bank like Address, Employment, Business profile
  4. Loan Sanction based on above factors if approved
  5. Signing of Agreement
  6. Loan disbursal

Charges for Personal Loan in India

Processing Fees 
The lender charges processing fees for the granting of the personal loan. This generally varies from 0% to 4%.

Insurance 
Insurance for Personal loan protects one from risk arising out due to Job loss, Inability to work due to sickness, injury or death, etc depending on the insurance taken.

Prepayment charges 
It may also carry Prepayment charges which vary based on the Bank/NBFCs one is taking this loan. This can vary from 0% to 4% of the outstanding loan amount.

Duration

The duration for the personal loans generally varies from 1 year (12 months) to 5 years (60 months). Customers can choose the Loan duration according to their needs.

Advantages of Personal Loan in India

  • Quick. It is one of the quickest Loan than one can get as the processing time for Personal loan is generally less compared to other types of loans.
  • Minimum Documents. It requires minimum documents for availing it.
  • No Collateral. As it is an unsecured loan, there is no collateral (like Home, Car, etc) required.
  • Build a Credit History. Consistent timely repayment of Personal Loan can build a good Credit Score.
  • Any Purpose. You can avail this loan for any purpose like Wedding, Travel, Medical Emergency, education of the child, etc. This is not like Car Loan or Home Loan which can be used for buying Car or Home only respectively.

Disadvantages of Personal Loan

  • High-Interest Rates. Interest rates on personal loans are higher due to no collateral.
  • Part Payments/ foreclosure. Some Banks/NBFCs don’t allow Part payment/ Foreclosure till a certain duration like one year.
  • Pre-payment Fees. Some Banks/NBFCs charge Pre-payment fees on part payment/foreclosure of the Loan.
  • Credit History. It is important to have a good credit history maintained for availing Personal Loans. Hence they are more difficult to avail then let’s say secured loans like Home Loans or Car Loans etc.

What is Secured and Unsecured Loans

Secured Loans like Home loans

Secured Loans are the loans where you give something tangible like Home, Car or Gold, etc to Bank as a guarantee. So if you don’t pay, Bank will take that with them, eventually, sell and get its money back. Since they become secure to the Bank, they are often provided at a lower interest rate.

Unsecured Loans like Personal loans

Unsecured Loans as the name suggest are loans no collateral or guarantee is required and are provided on your own personal monetary status. So if you don’t pay, Bank can’t take their money back.

But obviously, nonpayment will impact your Cibil score and make any future loans very difficult for you. As they are risky to the Bank, they are often provided at a higher interest rate.

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