Personal Loans in India
A personal loan is one of the most common ways people in India meet short-term and mid-term money needs. This guide explains the basics in simple language, so you can understand how personal loans work before you speak to any lender.
What Is a Personal Loan?
A personal loan is an unsecured loan. This means you do not have to pledge property, gold or any other asset as security. A bank or NBFC lends you a fixed amount, and you repay it in equal monthly instalments (EMIs) over an agreed tenure. People use personal loans for medical needs, weddings, travel, education costs, home repairs or to bring other debts under one repayment. Because the loan is unsecured, the lender relies mainly on your income, credit history and repayment record when it reviews your application.
Who Can Apply?
Salaried employees, self-employed professionals and business owners can apply for personal loans, subject to each lender’s policy. Most lenders expect the applicant to be an Indian resident, to be at least 21 years old, and to be within a set age limit when the loan ends. Lenders also look at job or business stability, monthly income and place of residence. Rules differ between banks and NBFCs, so meeting one lender’s criteria does not mean you will meet another’s.
Benefits of Personal Loans
- No collateral: you do not need to pledge an asset.
- Flexible use: the money can usually be used for many personal needs, as long as the lender’s terms allow it.
- Fixed EMIs: most personal loans have a fixed monthly instalment, which makes budgeting easier.
- Choice of tenure: you can often pick a repayment period that fits your monthly budget.
- Simpler paperwork: many lenders ask for fewer documents than they do for secured loans, though this depends on the lender.
Interest Rates and Charges
Interest rates on personal loans are set by each lender. They depend on your credit profile, income, employer type, loan amount and tenure. Personal loan rates are usually higher than rates on secured loans such as home loans, because the lender takes more risk. A lower rate is not the only thing to check. Also ask about:
- the processing fee, which is often a percentage of the loan amount plus GST;
- prepayment or foreclosure charges;
- late payment charges and penal interest;
- any documentation or other administrative charges.
Regulated lenders are generally required to share a Key Fact Statement that sums up the main terms of the loan, including the annual percentage rate (APR). Read it carefully before you accept any offer.
Eligibility Criteria
Every lender sets its own criteria, but these are the points most of them check:
- Monthly income: lenders usually set a minimum income, which can be higher in some cities.
- Credit score: a good credit score, often 700 or above, helps. A short or weak credit history may limit your options.
- Existing EMIs: lenders compare your current loan and card payments with your income.
- Work experience: a steady job or a running business with a stable record is preferred.
- Employer or business type: some lenders have different rules for different categories.
You can get a rough idea with our eligibility calculator. The result is only an estimate, and the lender takes the final decision.
Documents Required
Requirements differ by lender, but commonly asked documents include:
- PAN card and Aadhaar or another valid address proof;
- recent salary slips or income tax returns as income proof;
- 3 to 6 months of bank statements;
- a recent photograph;
- proof of employment or business, where the lender asks for it.
Keeping these ready can make the process smoother. Only share documents with lenders you have chosen to proceed with.
How To Compare Loan Options
Do not choose a loan based on the interest rate alone. Compare the total cost: the rate, the processing fee, other charges and the total amount you will pay back. Check the tenure and the EMI, and make sure the EMI fits comfortably within your monthly budget. Find out whether you can prepay the loan and what it costs. Confirm that the lender is a bank or NBFC regulated by the Reserve Bank of India. You can use the EMI calculator on this page to see how the loan amount, rate and tenure change your monthly instalment and total interest.
Why Use Credway?
Credway is an online loan enquiry platform. We are not a lender, and we do not approve or disburse loans. You share one enquiry, and a loan expert contacts you to explain the options available from participating banks, NBFCs and DSAs. Credway does not charge borrowers any fee, and you are never required to proceed with any lender. Eligibility, loan amount, interest rate, fees and approval are decided only by the lender. Never pay anyone to guarantee a loan. When you are ready, check your loan options.