Personal Loan – Interest Rates and How to Apply for Instant Loan Online
Personal loans are a popular means to meet your urgent funding needs. You can borrow the required amount with minimal documentation and zero collateral. In addition, you can repay the personal loan at suitable EMIs over a fixed tenure. However, personal loans do come with their set of limitations. Read on to understand what is a personal loan and if you should apply for it to fulfil your financial needs.
What is a Personal Loan?
The simplest personal loan definition is a borrowed lump sum amount from a financial institution without restrictions. You often get a personal loan without collateral and repay through convenient EMIs over a fixed tenure. Moreover, personal loans need minimal documentation.
This loan funds day-to-day expenses, and stabilises your cash flow, or any cost from wedding, travel, to buying a costly gadget. So, let us dig deeper to understand the significance of personal loan meaning and how it works.
How do Personal Loans Work?
Unlike other loans, personal loans are uncomplicated. Therefore, it is wise to borrow according to your needs to improve your finances that significantly impact your life. Moreover, you get the amount in a lump sum after the bank evaluates your creditworthiness and documentation. However, there are minor differences between lenders, and you must factor in the following before applying for the loan.
- Interest Rate: Your credit rating is the primary criterion for fixing the payable interest rate on your loan. In addition, you pay fixed loan interest and a uniform instalment throughout the loan’s tenure.
- Repayment Tenure: You repay the personal loan in fixed EMIs over the tenure according to the lender’s terms.
- Processing Charges: One factor that tells upon the cost of funds is the processing charges applied by the lender while disbursing the personal loan. Accordingly, depending on your credit score, you must be ready to shell out anything between 1 and 8% of the loan amount.
Uses of Personal Loans
Of the several advantages of a personal loan, the most beneficial is using the loan proceeds however you wish. Consequently, no bank loan is as diverse and flexible as a personal loan. Thus, let us study some typical personal loan uses for you to explore.
- Debt consolidation: Personal loans are a source of quick and instant funds helping you to consolidate your other high-interest loans. For example, you can liquidate multiple credit cards and other debts for lower interest and softer repayment terms matching your financial capacity.
- Wedding loan: A wedding remains one of the most expensive events in your life. Accordingly, you can fill the budgetary gaps in the pricey event and repay the personal loan over time in fixed instalments.
- Travel loan: Do not restrain your wanderlust for want of funds. Instead, explore the benefits of a personal loan to meet your travel-related expenses to fulfil your holiday dreams. Thus, the fund can help you plan a vacation without worrying about fund shortages.
- Medical emergencies: No loan works better during medical emergencies than personal loans, which disburse funds instantly with minor hassles. In addition, many lenders grant personal loans online in a few days to provide financial support when an emergency strikes.
- Home improvement: You can always use the home renovation loan if you are willing to invest substantial effort and time besides collateral. On the other hand, an unsecured personal loan can see you through while you renovate and refurbish your house with instant funds.
- Expensive purchases: You often want to buy a costly gadget or a piece of jewellery but refrain from buying due to lack of funds. However, a personal loan can help you purchase the coveted item, even if expensive and repay in convenient instalments.
- Second Hand Car and Bike: In case you are falling short of funds to make a down payment while purchasing a new car or vehicle, you can opt for a personal loan for a second hand car or bike.
Benefits of a Personal Loan
Personal loans are convenient when you require instant funds to meet your needs. Thus, you will be looking for a hassle-free process with minimal documentation. So, here are a few salient features and benefits of personal loans to help make an informed choice.
- You can apply for a personal loan with any financial institution, offline and online. Accordingly, they are collateral-free, not needing you to pledge any asset against the loan. In addition, even a third-party guarantee is not essential.
- The process is seamless, whether online or offline, and many lenders offer the loan through their apps in a paperless environment. In addition, several lenders offer pre-approved personal loans depending on your profile.
- You can use the personal loan proceeds as you please, and the lender does not impose any conditions. Thus, you can avail of a personal loan for various reasons without worrying about any requirements, including funding your business ventures.
- The interest rate depends on your financial profile and credit score. Thus, you can enjoy lower fund costs if you maintain a healthy credit score.
- The most advantageous feature of a personal loan is its highly flexible repayment tenure. Thus, you can choose the loan tenure depending on your paying capacity and convenience. However, shorter loan tenures help you reduce the interest burden.
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Documents Required to Apply for a Personal Loan
Personal loans require the following documents:
- PAN card
- Aadhaar card
- A selfie to complete the process
However, the document list varies from lender to lender, and it is prudent to check with them individually. However, the following are the indicative documents most lenders seek.
1. Documents Required for Salaried Applicants:
Personal Loan Interest Rates and Charges
Personal loan interest rates are relatively higher than other loans, mainly because they are unsecured and do not have the backing of matching collateral. In addition, every lender offers interest rates deriving them from their MCLR (marginal cost funds-based lending rate), which depends on the RBI’s Repo Rate notified from time to time.
Personal loan interest rates depend on different types of lenders. The following table denotes the major banks and NBFSc you can avail a personal loan from:
1. NBFC Personal Loan Interest Rates
| NBFCs | Interest Rates (p.a.) | Processing Fee |
| Navi | 9.9% onwards | Up to 7,500 |
| Bajaj Finserv | 13% onwards | Up to 4% of the loan amount |
| StashFin | 11.99% onwards | Up to 10% of the loan amount |
| Faircent | 12% onwards | Up to 8% of the loan amount |
| Dhani Loans | 13.99% onwards | Up to 3% of the loan amount |
| Muthoot Finance Limited | 14% onwards | Up to 3.50% of the loan amount |
| HDB Finance Services | 36% onwards | Up to 3% of the loan amount |
| Tata Capital Financial Services LTD | 10.99% onwards | Up to 2.75% of the loan amount |
| Pay Sense | 16.80% onwards | Up to 2.5% of the loan amount |
| Money View | 15.96% onwards | Up to 2% of the loan amount |
2. Bank Personal Loan Interest Rates
| Banks | Interest Rates (p.a.) | Processing Fee |
| HDFC Bank | 10.75% onwards | Up to 2.50% of the loan amount |
| State Bank of India | 9.60% onwards | Up to 1.50% of the loan amount |
| ICICI Bank | 10.50% onwards | Up to 2.50% of the loan amount |
| Axis Bank | 10.25% onwards | Up to 2% of the loan amount |
| Kotak Mahindra Bank | 10.50% onwards | Up to 2.50% of the loan amount |
| IndusInd Bank | 10.49% onwards | Up to 3% of the loan amount |
| Yes Bank | 20% onwards | Up to 2.50% of the loan amount |
| Punjab National Bank | 8.90% onwards | Up to 1% of the loan amount |
| Bank Of Baroda | 9.20% onwards | Up to 2% of the loan amount |
| Bank Of India | 10.35% onwards | Up to 2% of the loan amount |
Disclaimer: All the data has been taken from respective banks’ and NBFCs’ websites as on 5 August 2022. The data is for illustrative purposes only, the actual applicable interest rate would be ascertained based on the borrower’s eligibility as per the terms and conditions of the lender
- Address Proof: Any officially valid document, including Aadhaar, Driving License, Passport, etc.
- ID Proof: Any officially valid document, including PAN card Aadhaar, Driving License, Passport, EPIC, etc
- Salary slips for the previous three months
- Form 16
2. Documents Required for Self-Employed Applicants:
- Address Proof: Any officially valid document, including Aadhaar, Driving License, Passport, etc.
- ID Proof: Any officially valid document, including PAN card Aadhaar, Driving License, Passport, EPIC, etc
- Bank statements for the previous six months
- IT returns for the last two years
- Proof of business
- IT challans or TDS certificate
Eligibility Criteria to Avail of a Personal Loan
Every lender’s eligibility criteria vary, and you are responsible for checking and ensuring you are eligible for a personal loan.
- Age: You must be between 18 and 65 years to avail of the personal loan
- Credit score: The minimum credit score to apply for a personal loan is 650, and a lower score is a reason for rejection.
- Income source: You must either be a salaried or a self-employed individual with a steady income
- Income amount: The income must qualify to service the loan without default. However, it varies across lenders.
Follow these steps to get a personal loan from Navi:
- Step 1: Install the Navi app on your smartphone.
- Step 2: Enter your mobile number.
- Step 3: Fill out your basic information. This will help determine your eligibility.
- Step 4: Choose the loan amount and EMI.
- Step 5: Complete the KYC process.
- Step 6: Enter your bank account details so that the loan amount can be transferred to your account.
After KYC document verification, the loan will be disbursed directly to your account.
Things to Consider when Applying for a Personal Loan
Different lenders offer personal loans with varying features to attract customers. However, Navi instantly provides a personal loan through a seamless digital lending app. But, you must still factor in the following before applying for a personal loan.
- Credit Score: An above-average credit score is ideal for reducing the fund cost. So, a good score above 750 fetches you a better deal on your loan.
- Repayment Capacity: Though the personal loan helps you tide over your urgent fund requirement, do not lose focus on its repayment. So, ensure that you have the repayment capacity to avoid default.
- Compare Various Lenders: The best way to strike a good deal is to compare personal loan offers from different lenders. The critical parameters to check are the interest rates, processing charges, and tenure.
- Need-Based Borrowing: Getting overburdened with debt is never a sound financial decision. Accordingly, choose the amount required regardless of your eligibility.
- Use the EMI Calculator: You can make an informed decision using the EMI calculator before applying for a personal loan by designing the parameters in advance.
Final Word
Personal loans are the answer when you are short of cash and need money immediately. Knowing what a personal loan is can come in handy in many circumstances. However, choose from the lender that offers the best deal in terms of interest rates, tenure, and levy of charges. Accordingly, consider Navi personal loan through their digital lending app for a simple, paperless, instant personal loan with many redeeming features
FAQs
Ans: The personal loan amount limit varies from lender to lender. However, Navi offers a maximum of Rs.20 Lakh as a personal loan.
Ans: Yes, you can choose your spouse, parents, or siblings as co-borrowers for a joint personal loan. In addition, you get the advantage of a higher amount as the dual incomes determine the loan quantum.
Ans: Foreclosure charges depend on the lender and range from 1 to 2% of the outstanding loan amount. Thus, you must check with the lender before applying for a personal loan.
Ans: If your loan application faces rejection, you can explore alternative means to generate instant funds. The two ready avenues are credit cards and loans against mutual funds.
Ans: Your repayment burden goes up for default in repayment. For example, your interest burden increases with a penal interest levy and tenure extension.
Ans: The primary criteria for a personal loan are your income, repayment capacity, and credit score, which should be more than 650 to apply.
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
