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Personal Loan FAQs

Common Questions Related to Personal Loan

Last Updated 26th Sep 2021

  • A personal loan is an unsecured loan that is availed without pledging any collateral to fulfil instant fund requirements.
  • The loan comes with no end usage restriction, meaning it can be used for any purpose.
  • To know about required credit score, tenure and others check personal loan FAQS based on eligibility.
  • Also, check the answers to all questions related to personal loan balance transfer.
  • Check what all documents are required to avail of a personal loan.
  • Check Best Offers
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Personal Loan FAQs based on Eligibility

When can I opt for a personal loan?

A personal loan is an unsecured loan that comes with no end usage restriction meaning the loan amount can be used to meet the financial emergency, medical emergency or plan a holiday, pay the bills or even upgrade your lifestyle, for example, home renovation.

Am I eligible for a personal loan?

You are eligible for a personal loan if you are a salaried or a self-employed professional with a regular source of income. However, your eligibility is affected by the income you are getting after all the deductions, credit score, residential location and company you are working with.

Is there a minimum personal loan amount that I need to borrow?

Yes, the minimum personal loan amount limit for every bank is different but most of the banks have set their personal loan amount limit to ₹ 50,000. However, there are instant loan apps like MoneyTap, EarlySalary and Paysense that provide personal loan above an amount of ₹ 5,000.

Can my spouse’s income be included in calculating the loan amount?

No, you can not include your spouse’s income while calculating the personal loan amount. Lenders will approve the loan amount only considering your monthly income. However, you can add your spouse as a co-applicant that way your and your spouse’s salary will be considered while deciding the loan amount.

How is the maximum loan amount decided?

The maximum loan amount is decided considering various factors like the age of a borrower, monthly income and credit score. Generally, lenders don’t sanction a loan amount that exceeds 50% of the borrower salary as EMI. For example, If you have a monthly salary of ₹ 80,000 then your EMI should not exceed ₹ 40,000.

What is the tenure of a personal loan?

Personal loans are categorised under a short term loan, meaning such loans are available for a shorter tenure like 6 months to 5 years.

Can I apply for a personal loan jointly with my spouse?

Yes, a personal loan can be applied jointly. A co-applicant can be a family member like spouse, parents or children (if earning). Adding a co-applicant will make you eligible for a higher loan amount and both of you can avail of tax benefits.

Do I need to provide any security or collateral for a personal loan?

No, you are not required to provide security or collateral to avail of a personal loan. These loans are unsecured in nature.

What is the criteria followed by banks to decide the maximum personal loan amount that I can get?

The key factors which are considered to evaluate the eligibility of a borrower while sanctioning a personal loan are credit score, monthly income, current EMIs and the company you are currently working with. A credit score and monthly income show creditworthiness. This way a borrower evaluates if a borrower will be able to repay the loan on time or not.

Is eligibility for a digital personal loan different from a traditional personal loan?

The eligibility criteria remain the same as for a personal loan applied in a bank branch. Any salaried or self-employed professional who is between 21 years and 65 years of age sitting in the corner of the country can apply for the same.

Is it important to have a good credit score while taking a personal loan?

Yes, it is important to have a good credit score if you wish to avail a personal loan. Credit score plays an important role while checking your eligibility and creditworthiness. Most of the lenders approve the loan only if your credit score is above 750. If you have a credit score higher than 800 then there are chances that you can get a personal loan at a lower interest rate.

I want to avail a personal loan but my credit score is 650. How can I improve?

If your credit score is 650 or less and wants to avail yourself of a personal loan then you must repay all your debts and credit bills, restrict your credit usage as per the allotted limit, and avoid taking too many debts at one time. If you follow these tips for 6 months then definitely your credit score will improve.

How is a personal loan different from a loan against a credit card?

A personal loan can be availed from any financial institution whereas a loan against a credit card can only be availed by a lender whose credit card you are using and moreover loan against a credit card facility is not offered on the credit cards. Also, you are required to submit documents while availing of a personal loan whereas no documents are required if you take a loan against a credit card.

Personal Loan FAQs based on EMI

Which type of interest rate results in lower EMI?

Your EMI can be lower if you choose a floating interest rate. There are chances that the interest rate may go down after some time which means that you can save on interest amount at that time. However, go for floating interest rate only if you see that the personal loan interest rate may fall in the coming times.

Should I only consider the lowest EMI when selecting a lender?

No, you should not only consider the lowest EMI while selecting a lender. It is true that the lowest interest rate means low EMI and you will have to pay less loan amount at the end of the tenure. However, in some cases, you might end up paying extra because there are other charges like processing fees also which are to be paid. So, before making a decision, check the interest rate as well as other charges carefully.

Why do my initial EMIs have little impact on the principal amount due?

The initial EMIs of a personal loan is used to pay off the interest dues and a small amount is used to pay off the principal amount, this process is termed as ‘front loading’. In later years, the EMI amount is used to pay off the principal amount.

What if I default on my scheduled Personal Loan EMIs?

If you default on your scheduled personal EMIs, initially the lender will send you a notice. Even after notice if you do not repay the loan then they will attempt to recover the amount through settlement or recovery agents. If the amount is not paid after all these attempts then the lender will mark it default and it has a negative impact on your credit report so much so that it might get difficult for you to avail loan or credit card in future.

Personal Loan FAQs before you apply for Personal Loan

How to decide which bank/financial institution to take the loan from?

As a rule of thumb, always compare banks or financial institutions to get the lower interest rate, tenure and loan amount as per your need. Comparison of banks can be done easily at an online marketplace like MyLoanCare. By comparing you can save on interest rate, processing fees and various other charges.

How can I compare personal loan interest rates?

You can compare personal loan interest rate at an online marketplace like MyLoanCare. With interest rate, you can also compare processing fees, prepayment charges and benefits offered by the lenders. Also, you can check the eligibility and calculate EMI within no time.

Personal Loan FAQs based on Documents

What are the key documents required when applying for a personal loan?

Document requirement for the personal loan vary from lender to lender, however, the general documents which are required by most of the lenders are:-

  • Identity proof: Aadhar card, PAN card, Driving License
  • Address proof: Aadhar card, PAN card, Utility bills (electricity or telephone)
  • Income proof: Last 3 months salary slip, bank statement

Can I get an instant personal loan without documents?

There is a possibility that the lender will approve a personal loan without documents if you have a high credit score, all outstanding dues and debts are cleared, the debt-income ratio is low and you have a good relationship with the lender.

Personal Loan FAQs based on Charges

What are the extra charges which I need to pay while applying for a personal loan?

There are extra charges apart from interest on the principal amount which is to be paid by a borrower on a personal loan. Lenders charge a processing fee which is usually 1%-2% of the loan amount and it is incurred for the application procedure of a loan. However, at times like during festival season banks or NBFCs waive off the processing and if you have a long term association with the bank then also the fees can be waived off.

Are personal loan interest rates fixed or floating?

Most of the lenders offer personal loans at fixed interest rates which means your EMI on a personal loan will remain the same throughout the tenure and there is no impact of change in MCLR or external benchmark rates on a personal loan.

What is a relationship discount?

It is a discount that is given to the borrowers who already have a savings/salary account with a lender. One must have a pre-existing relationship with a bank or financial institution to avail of this added benefit. This discount can definitely bring down the interest amount significantly.

What are foreclosure charges and how much are they?

Foreclosure charges are an additional fee that you have to pay if you decide to repay the personal loan amount before the tenure. Banks charge such fees to cover the loss of interest amount and these charges range between 1%-2% of the outstanding principal amount. However, RBI has barred banks from charging foreclosure charges if a borrower has opted for a floating interest rate.

What is the part payment of the loan?

Part-payment of loan is a system when a borrower decides to pay off some part of the outstanding loan amount before the tenure gets over. This results in a reduction of EMI or a reduction in tenure. Part-payment is allowed after you have paid a certain number of EMIs.

How can I get the best personal loan rate?

To get the best personal loan rate you must have a credit score above 750 with a good credit history. Also, you can get the best offers during the festive season because at that time, banks offer lower interest rates and waive off a few charges and fees.

Personal Loan FAQs based on Process

What are the key steps in the loan approval process?

The key steps in the loan approval process are checking eligibility criteria, comparing lenders, selecting lender, submitting documents, verification of documents and sanctioning of amount. Once you have submitted the documents and the verification process is completed it can take up to 48 hours to 72 hours for the loan amount to get credited to the account.

How long does it take for a personal loan to be disbursed?

If all your documents are in place then your personal loan will get disbursed within 48 hours to 72 hours. However, if your loan is a pre-approved loan or an instant loan then the loan amount can get credited to your account within 24 hours also.

Personal Loan FAQs based on Balance Transfer

Is there any Balance Transfer offer on a personal loan?

Yes, most of the lenders in the market have the facility of the balance transfer. If you opt for a balance transfer then you can transfer your current loan amount to a new lender. This is done if you are getting a lower interest rate with a new lender or you are unhappy with the customer service of your current lender. In such a case a new lender pays your current outstanding loan amount to an old lender and you owe all the remaining payments to a new lender.

What are the benefits of this balance transfer?

A personal balance transfer can reduce your EMI if you get a lower interest rate with a new lender. However, there are few charges like balance transfer fee, processing and pre-payment charges which you will have to incur. So, calculate all the costs properly if you are saving money or not.

Personal Loan Other FAQs

What are the benefits of a personal loan?

The benefits of a personal loan are as follows:-

  • Minimal documentation
  • Loan sanctioned within few days
  • No end usage restriction
  • No collateral required
  • Flexible EMI repayment option

Can I avail of tax benefits while I avail of a personal loan?

You can not avail of tax benefits if you avail of a personal loan. However, if you take a loan for the home renovation then you can avail benefits under section 24. Remember, the tax benefit is only applicable to the interest amount.

Are there any advantages to applying for a personal loan online?

There are numerous benefits of applying for a personal loan online:-

  • Save time during an emergency
  • Minimal documentation required
  • Service is available 24*7

What is a touchless personal loan?

A personal loan available at a digital platform or probably on an app by lenders is a touchless personal loan. These loans require minimal documentation, you are only required to submit KYC documents, and the loan amount is sanctioned in your account within 24 hours.

Is it a good option to take a personal loan from apps?

Yes, you can definitely take a loan from a personal app like Early Salary, MoneyTap and more. It is convenient to avail finances and the interest rate is lower than the commercial banks and NBFCs. When you take a loan from such apps then you pay interest only on the used amount.

Are personal loan applications safe?

Personal loan apps are safe but always be careful. However, to save yourself from frauds you should keep the following points in your mind:-

  • Do not share sensitive personal information
  • Make sure the website you use is preceded by https://
  • Never share OTP (One Time Password) with anyone

Is the touchless personal loan a costly affair?

It is a myth that touchless and digital personal loans are expensive. Believe us, depending on a few factors like borrower’s income, employer name, credit score, and a few others; such loans can be less expensive because they do not have higher processing fees or higher interest rates. Therefore, to get the best offer, always compare the interest rate and other charges.

How to get a personal loan for CIBIL defaulters?

You can’t apply for a personal loan if you are a CIBIL defaulter or have a low credit score. However, you can apply for a secured loan, apply with a co-applicant, or add an income source.

Why should you go for a personal loan to finance education?

A personal loan for education is a good option because it covers all expenses under one loan, flexible loan amount and tenure is available. Also, in the personal loan, minimal documentation is required and the loan is approved within no time.

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