Personal Loan: Check Eligibility

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Personal Loan

What it is

Money borrowed as a personal loan can be used for anything from unforeseen adversities like medical emergency or for leisure and travel holidays or even to take care of a wedding expense. A bank offers a personal loan without any security (e.g. house, car, FD, NSC, etc.). But you have to prove that your future income will be sufficient enough to repay the amount borrowed over a period of 1 to 5 years. You may use the amount borrowed for any purpose.

What it is not

What banks in India call personal loans are unsecured loans. If you borrow money by offering either your home or your car or even fixed deposit/ NSC certificates, banks treat it as a secured loan rather than a personal loan. If you have such a security to offer, you could get better rates from the same bank by opting either for a Home Loan, or Loan against property or Car Loan or Loan against security. Only in case you are not willing to pledge any asset, should you consider taking an unsecured personal loan.

Interest rates

Depending on your credit score (published by a credit bureau like CIBIL), your interest rate could vary from 10% to 24% per annum

Range of APR

Annual Percentage Rate (APR) offered to customers in 2023-24 has ranged from 10.35% to 24.59%

Fees and charges

Processing fees could vary from 2% to 3%. Foreclosure charges (also called prepayment fees) are applicable if you back earlier and range from 3% to 4% of the outstanding amount

Minimum repayment period

Loan must be taken for at least 12 months

Maximum repayment period

Loan must be repaid within at most 60 months

Loan amount range

From ₹50,000 to ₹7,00,000


Failure to repay one or more EMIs on time can affect your credit score and hurt your ability to borrow in the future. Failure to repay dues for more than 60 days could result in legal recovery proceedings against you.

Responsible borrowing

While the bank tries to independently establish whether you will be able and willing to repay, the prime responsibility remains that of the borrower - i.e. yourself. Only borrow as much as you will be able to repay taking into account the applicable interest. Do not borrow any more than what you believe your future income can support.

Representative example

Let's say someone borrows an amount of ₹50,000

Loan Processing Fees @4% i.e. ₹2,000 would be deducted from the loan amount disbursed

Thus net amount disbursed: ₹48,000

Repayment period: 5 years

Interest rate: 21% per annum

Equated Monthly Installments (EMI) to be repaid for 60 months = ₹1,353 per month

Total Amount to be Paid Back = ₹2,000 + 60 * ₹1,353 = ₹83,180

Thus Total Cost of borrowing (fees + interest) on a ₹50,000 loan at 21% interest over 5 years would work out to ₹33,180