Overview

A personal loan is a type of loan that can be used for any kind of personal spending. These are unsecured loans provided by banks and other non-banking financial companies (NBFCs). An individual’s credit rating, income, employment history, and repayment capability are some of the eligibility criteria considered by lenders when approving a personal loan.

Unlike a car or home loan, personal loans are not secured against an asset and therefore do not require collateral. So availing a personal loan is easier if you meet the eligibility requirements. Besides, a personal loan helps you overcome any financial shortfall you may experience in your day-to-day life, including emergency medical expenses, wedding expenditure, and expenses related to education.

More importantly, personal loans are a better alternative to spending on credit cards. While credit cards put you in an on-going cycle of debts, personal loans are characterized by a predetermined repayment schedule, which gives you better control over your finances.


Personal Loans for Your Financial Needs

Personal loans are a popular choice for consumers who need to access funds for a variety of different purposes. From covering a major purchase to starting a business, a personal loan through FinMarket can help you quickly access the funds you need.

FinMarket includes top lenders offering personal loans and offers one easy platform to receive customized offers.


Personal Loans Explained

Whichever lender you choose to borrow from, a personal loan comes with some common features and benefits:

No Collateral Required

In contrast to home and auto loans, personal loans are normally unsecured loans which means that they do not require collateral such as a house or car. This allows you to maintain the flexibility to take a home loan or car loan later on if you need to.

Quick Approval and Disbursal

Our lenders have the ability to provide quick approvals and can disburse funds to your account upon approval. No asset verification is required so you can count on the funds being available quickly for your intended purpose.

Multi-purpose Loan

A personal loan offers great flexibility. It is a multi-purpose loan that can be utilized for any type of spending ranging from travel and medical emergencies, to home improvement, wedding expenses, and debt consolidation. FinMarket works with the top lenders that provide loans with rates starting as low as 10.99%.

No Prepayment Penalty

Pay off your loan anytime without penalty with some of our lenders. If you decide to repay your loan before it matures, you may do so without incurring any fees or charges. This is another feature that makes a personal loan attractive and one of the most flexible types of loans.

Flexible EMI payments

The repayment term on personal loans can go up to 7 years. However, you have the flexibility to choose a suitable repayment period for your loan. The tenure you choose determines your EMI (Equated Monthly Instalment). If you choose a longer term period the EMI is lower and vice versa.

Tax Benefits

When personal loans are used for purposes such as renovations or down payments on property, tax deduction can be availed up to 2 lakh rupees, under section 24B, for the interest part paid during a given tax year.

Minimal Paperwork

Personal loans require very minimal paperwork in comparison to other loans.


How to choose the right Personal Loan?

While you may be opting for a personal loan to meet your unforeseen financial needs, it is important not to make a hasty choice. The interest rates, fees and other charges for taking a personal loan vary from one lender to another. So, always compare loans from different lenders and pick one that best suits your needs without having to pay many hidden costs or high charges. Here are the aspects that you need to compare:

Interest Rate

Compare the annual rates of interest charged by different lenders. This way you will know which bank offers the lowest rate for the same loan amount and repayment term.

Fees & Other Charges

The interest is not the only extra cost you pay for a loan. There may be many other charges such as processing fees, service charges and late payment charges. Take these charges into account while comparing personal loans from different lenders.

Prepayment Penalty

You need to check whether the personal loan you choose has repayment flexibility. Some lenders may charge a full or partial repayment penalty. But some banks have no prepayment charges. Choosing one such bank/lender for your personal loan may prove beneficial, especially if you think there is a chance you will repay the loan early.

Affordable EMI

Estimate and compare the EMI for the loan amount from different lenders. This will help you understand the financial commitment that will bind you, and give you an idea of how much you will be paying each month.


Top 10 Personal Loans from Microfinance Institutions in India

Here’s a list of the top 10 Microfinance Institutions in India providing financial assistance to the underprivileged sections of society:

  1. Spandana Spoorthy Financial Limited
  2. Bharat Financial Inclusion Limited
  3. Shri Kshetra Dharmasthala Rural Development Project
  4. Share Microfin Limited
  5. Bharatiya Samruddhi Finance Pvt. Ltd.
  6. Asmitha Microfin Ltd.
  7. Grama Vidya Micro Finance Pvt. Ltd.
  8. Grameen Koota Financial Services Pvt. Ltd.
  9. Cashpor Micro Credit
  10. Bandhan Financial Services Pvt. Ltd.

Types of Loans

Personal Loan for Home Improvement/Renovation

Your house may need a repair/renovation at some point. Or, you may just want to give your home fresh look. But the costs involved in home improvement/renovation can be very high. A personal loan for home improvement is meant for this purpose. These loans fund your home renovation project, allowing you to repay the amount over a comfortable loan period that you choose.

Personal Loan for Wedding

From choosing the venue and caterer to purchasing the outfits and jewelry, a wedding brings with it, not just great excitement, but also a whole lot of expenses. Despite years of planning and saving for a wedding, families most often experience a shortfall of funds while planning a wedding. A personal loan for a wedding is meant to ease this burden. It provides the funds required for successfully carrying out this once-in-a-lifetime event.

Personal Loan for Travel

Who doesn’t like the idea of a vacation? If there’s anything to dislike about it, it’s the cost we pay. Travelling is an expensive affair and you don’t want your travel bills to drain your savings. A personal loan for travel helps you overcome this setback, and provides the funds you need to enjoy your vacation without having to use your credit card for making payments.

Personal Loan for Education

If there’s one thing that’s completely worth spending for, it’s education. It’s the best gift you can give yourself or your children. But, often, the only thing that stands in the way of getting educated is money. A personal loan for education is meant to overcome this financial barrier and provide everyone with equal opportunity for education.

Personal Loan for Medical Expenses

Medical emergencies often strike without warning. And when they do, they not only bring physical trauma but also a whole lot of financial stress. To help you deal with such circumstances, FinMarket offers access to personal loans for medical expenses. With lenders that provide quick loan processing and disbursal, these loans are ideal for medical contingencies.

Personal Loan for Debt Consolidation

Credit cards are the most common mode of payment. While they offer unmatched convenience, they can also put you in a vicious cycle of debts and dues in the absence of controlled spending. To help you overcome and pay off multiple debts and credit card balances, lenders offer personal loans for debt consolidation. These loans can be used to clear your credit card dues or consolidate all debts into one single loan.

Personal Loan Balance Transfer

When the paying high interest on your personal loan becomes too much to handle, or when the EMI becomes a burden, you have the option to transfer your balance to another lender. This typically involves moving the unpaid principal amount of your loan to another bank where you can pay a lower interest rate. Lower interest rate or longer loan term, or both, are the main reasons for balance transfer. Most lenders allow you to transfer your balance with little or no charges, especially if you haven’t defaulted on previous payments.

Personal Loan against Mutual Funds

The process of taking personal loan against mutual funds is very similar to that of the overdraft facility in bank accounts. Several banks and NBFCs provide this option. The advantage of taking a personal loan against mutual funds is that you can avoid redeeming your units prematurely. This way your Systematic Investment Plan (SIP) also remains unaffected. Since you will be pledging your mutual fund units, the loan is given based on the value of your units. Besides this, the interest rates on this type of loan will be much lower than rates for unsecured personal loans.

Personal Loan against Fixed Deposit

Most lenders provide personal loans against fixed deposits. This enables borrowers to obtain funds without breaking their fixed deposits. The primary advantage of such a loan is that the interest rates are much lower than those charged on regular unsecured personal loans. While most personal loans come with a minimum interest rate of 10.99%, in this case you are charged only 1% more than the interest rate payable on your fixed deposit.

Documentation

Loan approval relies, to a large extent, on the documentation you provide. If you can support your loan application with the required documents, getting an approval becomes much easier. Here is a list of documents needed to apply for a personal loan:

General Documents

  • Online application
  • Proof of Identity ( Copy of PAN Card / Passport / Driving license / Aadhaar Card)
  • Proof of residence (Copy of Voter ID / Electricity bill / Telephone bill / Property tax receipt)
  • Bank statements for the last six months
  • Cheque for processing fee
  • Identification of signature from present banker

Income Documents

  • Latest salary slips
  • Certificate and proof of business
  • Income tax returns for the last 3 years (self and business)
  • Profit and loss and balance sheet for the last 3 years (for self-employed borrowers)

Personal Loan Eligibility

All residents of India with a minimum age of 21 and maximum of 60 years are eligible for a personal loan. This includes salaried employees of Public and Private Limited companies, Multi-National Corporations, and Government Sector employees, Self-Employed Professionals such as doctors, lawyers etc., and other self-employed individuals. The other criteria for personal loan eligibility include:

  • Net monthly income of ₹ 20,000
  • Minimum work experience of 2 years
  • Income tax returns for the last 3 years (self and business)
  • Minimum period of employment with the current employer/in the current business for 1 year

The eligibility amount for personal loans varies according to the individual’s income and repayment capacity. For example:

  • Salaried individuals with a minimum income of ₹20,000 per month are eligible for a maximum loan of ₹ 15,00,000.
  • Self-employed professionals with a minimum annual income of ₹ 2,00,000 are eligible for a maximum loan of ₹ 20,00,000.
  • Self-employed individuals with a minimum annual income of ₹2,00,000 are eligible for a maximum loan of ₹ 15,00,000.

Frequently Asked Questions

A personal loan is a loan that is unsecured (no collateral required) and can be used for virtually any purpose. Funds can be used to consolidate or repay credit card debt, make a major purchase, take a vacation or for any other lawful purpose.

Our lenders offer personal loans that range in term between 1 and 5 years.

Most banks and lenders charge a processing or origination fee between 2% and 3 %. However, some banks are flexible on this fee and may reduce or waive this amount.

The typical range that banks allow is between 30% and 40% of your annual income which can include the income of a spouse if they choose to co sign.

Our lenders offer both fixed and floating interest rate loans.

The banks can disburse funds in as little as 72 hours post approval after all of the documents have been signed.

Banks will check your CIBIL score when you apply and normally approve borrowers with a minimum score of 750.

  • Receive various offers for a wide variety personal loan types.
  • E-application saves time and allows you to compare and find the best deal for you.
  • Fill your information just once and receive multiple offers from lenders without visiting multiple banks.
  • Receive offers for products and deals from top lenders that are targeted to your unique needs.

The interest rate on a personal loan varies from one lender to another, and is also influenced by your credit rating. It can range anywhere from 10.65% to 22% per annum.

Calculating the monthly payment or EMI (Equated Monthly Instalment) is a complex job. In order to calculate the EMI, you need to be aware of the personal loan amount, the tenure of the loan in months, and the interest rate that is to be charged on the loan. These details have to be applied in the following formula to arrive at the EMI:

EMI= [P x R x (1+R) ^ N]/ (1+R) ^ N - 1]

Here, P stands for the Principal amount borrowed as loan, R for the rate of interest levied (monthly rate), N for the repayment term of the loan, otherwise called the tenure (in months).

Debt consolidation is the process by which you take a fresh loan to pay off all your existing loans so that you make a single monthly payment rather than many. Typically the new loan comes with a lower interest rate. These loans are ideal for those with several debts such as an education loan, a home loan, car loan, and/or multiple credit card balances. By taking a personal loan for debt consolidation you have the opportunity to lower your monthly financial burden while also paying off all your other debts quickly.

Your personal loan application may be rejected for one or more of the following reasons:

  • You have a poor credit history: Lenders are wary about granting loans to applicants with a poor credit. Defaulted payments, debt settlements, too many loans, and unpaid credit card balances are some of the things that lead to poor credit.
  • Insufficient income/Absence of a steady source of income: Lenders pay special attention to your income to check your repayment capacity. If you do not have a steady income, or your income is not adequate to sustain monthly payments, your application may be rejected.
  • Incomplete Documents: Lenders typically request a few documents supporting your eligibility for the loan, and your capability to repay it. Personal loans often get rejected when all the required documents are not furnished.

You can find out your credit score and get a copy of your credit report through TransUnion CIBIL, a leading credit information company. To obtain your credit score and report from CIBIL, you need to register and apply through their website. However, you need to pay a subscription fee to get access to this information.

Personal loans can be closed by paying the EMI throughout the tenure, or by pre-closure. Based on the type, personal loan closure can be categorized as:

  • Pre Closure:  Where you pay the balance loan amount before the completion of the tenure and obtain a closure statement from the bank.
  • Regular Closure:  This involves closing the loan by paying the predetermined EMI for the actual tenure of the loan. Once the tenure is successfully completed, the bank issues a loan closure statement.
  • Settlement Closure:  If you are unable to pay the monthly instalments and have defaulted payments, the bank may have to write-off your loan balance or settle it for an amount lower than what is owed. This is also referred to as bad closure. When borrowers are bankrupt or do not have the means to repay the loan, this option may be used. However, this has a drastic effect on your credit rating and affects your borrowing capability in the future.

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Track your Personal Loan application status

With most lenders providing online services, you can now track your loan application status by visiting the bank/lender’s official website. You don’t have to worry about physically visiting the bank or waiting to know the status. You merely need to register on the lender’s website, and create a login ID and password. Once you have done this, all you need is your loan application/reference number, your PAN number, and your mobile number to track your loan status online, all from the comfort of your home.

How to apply for a personal loan through FinMarket

Applying for a loan through FinMarket is a simple process. All you need to do is fill in the requested information on our online application form and click ‘Submit’. Based on your requirements we bring you customized offers and products to choose from. Once you select the product and provide the necessary documents, our lenders approve your loan and the funds are disbursed directly to your bank account.

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