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Personal Loan Guide 2022

Steps to Choose the Best Personal Loan

Last Updated 28th Jun 2022

  • A personal loan is an unsecured loan without collateral and hence, can be easily availed without any security
  • To get the best personal loan, compare personal loan interest rates and other charges like processing fees, foreclosure, & prepayment charges of top lenders.
  • Check the eligibility for a personal loan to repay the personal loan EMI on time.
  • Ensure that total EMI on all your loans is not more than 50-60% of your net monthly income.
  • Always clear your dues and other obligations to maintain a good CIBIL Score.
  • If you have already taken many loans, try and consolidate them into a single loan.
  • Keep your documents handy to get instant approval on personal loans without any hassle.
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Guide For Personal Loans

Currently, there are a lot of banks and NBFCs that offer personal loans in the market. It may thus not be easy to choose a personal loan that offers the loan at the best rates based on your eligibility. However, to pick a personal loan that would suit your financial requirement, you must first check lending institutions' eligibility criteria.

Working with a good organisation, having a stable job, income sources and a good credit history makes you eligible for a personal loan at lower rates. To get the loan at the best rates, you must compare the personal loan rates and other charges such as processing fees, prepayment or foreclosure charges of top lenders.

However, getting a loan through an online marketplace may be the easiest and convenient option as you can easily make a thorough comparison. In addition, you must also compare the EMI of the financial institutions and plan to avail the required finances as per your current financial condition. The paragraphs below explain these factors in detail.

Check Eligibility Before Getting a Personal Loan

Now that you have decided about availing a personal loan, you must first check if you can get a personal loan. Note that the eligibility criteria for every lender may be different, but still, there are some general criteria specific to salaried and self-employed professionals. These are common for every financial institution and must be checked to avoid hassle or delay in personal loans.

  • Work experience: Your work experience assures the lenders that you have a stable earning with specific current and total working experience either as a salaried individual or as a proprietor. If you have a history of switching jobs or just joined a new organisation, or have started your career, your probability of getting a loan at lower rates may be less. Similarly having a good working experience may make you eligible for personal loan at best rates.
  • Salary: Lenders also ask you about the net take salary after all the deductions. The more you earn, the more you may be eligible. Banks and NBFCs want to ensure that you can repay the EMI of your loan on time. So, if you have any other additional source of income, you must always inform the bank provided you have proof of the income source.
  • Employment Type: Personal loans are offered at the best rates if you are a salaried individual. For instance, top public and private sector banks offer the best personal loans to salaried employees working in IT companies like HCL Tech and TCS. In addition, you may also have a chance to avail yourself of voucher and other offers from MyLoanCare.
  • Employer: Clearly, if you work with a reputed organisation, any multinational company or even a government company, you have a fair chance that you can get the personal loan from any bank/NBFC that you wish to and that too at discounted rates.
  • CIBIL score: If you are still a new borrower and do not have a credit history, you can get a personal loan by adding a co-applicant who may have a good credit score. If you don't know about your credit score, you can check for free at online marketplaces. Remember, you must know about your credit score, an essential parameter to get a personal loan.
  • Age: Your age may also be a deciding factor in determining personal loan rates. If you are near the retirement age, your chances of a stable income are less, and thus it is likely that banks may approve your loan but at a higher rate of interest. On the other hand, younger individuals have a better chance of approval of personal loans at a lower interest rate.

Know the Documents

If you are eligible for a personal loan, the next step is to check the list of required documents. If you keep the documents handy in advance, you can get personal loans in less time, with a higher possibility of instant approval. On the other hand, if you do not have the required documents or provide false documents, your application for a personal loan may be rejected. These are the documents that you must collect for a personal loan.

  • Any Identity Proof- A copy of Aadhaar, PAN, passport, Voter ID are some documents you can produce as identity proof.
  • Any Residence Proof- To give your proof of residence, you can submit any documents such as passport, driving license, Election ID cards or utility proof.
  • Income Proofs: Lastly, you need to have documents that can act as income proof. For instance, for salaried, the income proofs could be salary slips, Form 16, bank account statements. On the other hand, self-employed would require additional documents such as Income tax returns for their business, bank account statements, etc.

Choose the Right Bank or NBFC Based on

Multiple lenders offer personal loans in the market. However, the common objective is to get the loan at the lowest cost. It is thus crucial that you choose the right bank or NBFC. We will guide you to decide the right lender for you:

Compare Interest Rates of different Banks or NBFCs
Firstly, know about the personal loan rates of top banks and NBFCs. We know it may be challenging to reach every bank or visit them to know about their rates. However, the easiest way to compare the rates would be to visit an online marketplace like MyLoanCare, where you can know the rates of all banks and NBFCs in place. The rates are updated regularly and can be compared easily.

Choose Between Flat Interest Rate and Reducing Balance Rate
Choosing between a flat interest rate and a reducing balance rate will affect the cost of your loan. Let us first understand the difference between the two. A flat interest rate is the lending rate that remains fixed throughout the tenure. The lenders would thus accordingly determine the interest and monthly EMI on your loan for the entire tenure on the total principal amount. On the other hand, the reducing balance rate changes with the outstanding balance on your personal loan. The interest is thus calculated on the remaining principal amount, thus reducing the EMI amount every time. However, the interest rate fixed for flat interest rates is less. It would help if you thus calculated the difference.

Compare Processing Fees
Along with the personal loan rates, a one-time fee is also levied on your loans. The fee is known as processing fee. Again, this is different for every lender. Thus, it would be best if you compared these charges as well.

Compare Prepayment and Foreclosure Charges
A personal loan is repaid using the monthly EMI for a fixed-term period for which you have availed the loan. However, if you have ample funds, you can prepay a specific portion of your loan at a certain point in time. This, in turn, will reduce the outstanding balance, thus the monthly EMI as well. Moreover, you can even close your account entirely before the determined loan tenure. There may, however, be a problem as the lenders would charge a penalty for part payment and foreclosure. You can compare these charges of various lenders before availing of a loan and secondly know about the difference of availing prepayment and foreclosure at that specific point of time.

Plan Your EMI as per Your Financial Condition

A personal loan is available for loan amounts upto ₹ 75 Lakh. However, you should not avail of a maximum loan amount because the lenders are ready to provide. It is crucial that the loan is availed per the usage and, most importantly, your financial condition. If you are confident that you can pay the EMI as per your income sources, you should get a personal loan.

Compare EMI of Different Lenders
Along with the personal loan amount, the interest rate and cost of a personal loan will affect your loan. It would be best if you thus compared the EMI of different lenders at the prevailing rate of interest. You can always use an online personal loan EMI calculator to calculate and compare the EMI of different lenders error-free in less time.

Offers
Banks and NBFCs provide voucher, discounts and offers such as slashed rates, waiver of processing fees based on your eligibility and relationship with the lender. It would help if you always negotiated with your lender to reduce the cost of a personal loan.

Apply Now, If everything is as per your Criteria.

Once you have checked your eligibility, calculated EMI and compared the personal loan rates and charges, you can apply now for the personal loan. While you may apply through both online and offline modes such as visiting the bank, calling their customer care, through the lender's website. The easiest way is to fill an online application at an online marketplace like MyLoanCare, as you can avail the benefits of lower personal loan rates, voucher offers and much more.

Personal Loan for Different Loan Amount

Common Terms Used While Choosing or Applying for a Personal Loan

What is a lender?
A lender is any financial institution, say a bank or NBFC, that offers loans/ credit directly to you, and is to be repaid. In addition, the repayment for the credit includes the interest or other charges.

What is NBFC?
NBFC or Non-Banking Financial Company are financial institutions that provide financial services and products such as loans and advances, acquisition of debentures, shares etc. However, they are not officially recognised as a bank with a full license, and neither can they draw cheques of their own nor accept demand deposits.

What is collateral?
A collateral is a security that is pledged to avail of credit and can be forfeited at the time of default. It may be a house, property, gold or a car against which you get credit from a bank or NBFC.

What is CIBIL?
A credit score is a three-digit number in the range of 300 to 900, which determines the creditworthiness of an individual. It is a quantified assessment of the creditworthiness based on the financial records of the individual.

FAQs

What credit score is needed for a 50000 personal loan?

You need to have a credit score of 650 or above if you want to avail a personal loan of upto Rs. 50,000 at a lower rate of interest. In case you do not have the required credit score, take steps to improve your credit history. For instance, you can clear any debts or add a co-applicant.

How much personal loan can I get if my salary is 30000?

Let us assume that you do not have any other financial obligations such as a running EMI or debt; thus, you can get a personal loan of upto 27 times your salary. However, to get a loan of this amount, you must have a good CIBIL score and work with a good organisation.

How can I get a personal loan of 2 Lakh?

To get a personal loan of Rs. 2 Lakh, you need to fill the personal loan application form by submitting your personal and financial details. Then, enter the required loan amount and tenure. If you are eligible, you can get a personal loan once you submit all the required documents.


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Personal Loan News - Jun 2022
  • 2022-05-13 : Punjab National Bank Increases Personal Loan Rates
    The bank has increased the rates by 40 basis points, and after the revision, the bank offers personal loans starting from 8.85% to 14.85%.
  • 2022-05-13 : South Indian Bank Posts all-time High Net Profit in Q4
    The Bank has posted an all-time high net profit of ₹272 crores for Q4 in FY 22 against ₹6.79 crores during the corresponding period of the previous year.
  • 2022-05-13 : Ujjivan Small Finance Bank Profit Falls by 7% for Q4
    The bank has reported a 7 percent fall in its net profit to Rs 126.5 crore. Earlier, the bank had posted a net profit of Rs 136 crore in the same quarter of the preceding fiscal year 2020-21.
  • 2022-05-12 : Indian Bank Revises Personal Loan Rates
    Indian Bank has increased the rates on personal loans, and as a result, the bank offers the lowest rates starting at 8.90% to upto 9.40%.
  • 2022-05-10 : Canara Bank Hikes Personal Loan Interest Rates
    The bank has increased the lowest personal loan rates from 12.40% to 12.80%.
*Terms and conditions apply. Credit at sole discretion of lender, which is subject to credit appraisal, eligibility check, rates, charges and terms. Information displayed is indicative and collected from public sources. Read More
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