Taking a personal loan is one of the quickest and easiest ways to get extra funds for your major expenses or financial needs. But, with so many personal loan types and options available from financial institutions today, it can sometimes get overwhelming to find the right loan product that aligns with your requirements and repayment capability.
To help you make an informed borrowing decision, this comprehensive guide will walk you through the major personal loan types on offer, the hassle-free process to avail personal loan online, competitive interest rates and flexible repayment options you can expect from financial institutions.
Types of Personal Loans in India
Personal loans are typically unsecured, collateral-free loans that can be used for multiple purposes. While regular personal loans are quite common, there are also more specialised personal loan types tailored to specific financing needs. Here are the most common types of personal loans available in India:
Home Renovation Loan
This loan is ideal for those looking to undertake major repairs, renovations or upgrades for their residential or commercial property. It provides financing for substantial renovation work like kitchen remodelling, flooring, structural repairs, painting, etc. One can avail longer repayment tenures to keep the monthly dues affordable. It offers flexibility in the loan amount to cover small enhancements or large-scale improvements. The documentation is minimal and processed more quickly than home loans.
Instant Personal Loans
These are quick approval, short-term personal loans designed to provide urgent access to funds within 24 hours to meet pressing financial needs. The loan amount and tenure are smaller, making approval process and disbursal very fast. Salaried individuals can get instant loans based on income proof alone while self-employed borrowers may need to provide business documents too. The interest rate is higher but convenient for immediate needs like medical bills or emergency travel.
Wedding Loan
This loan is specifically aimed at helping the bride, groom, or their families fund the elaborate and expensive ceremonies that Indian weddings entail. It can cover the cost of venue booking, catering, décor, attire, gifts, accommodation for guests, etc. The financing process is made simple and hassle-free for the wedding party with relaxed eligibility, customised loan amount as per need, speedy approval, and minimal paperwork.
Debt Consolidation Loan
This loan helps consolidate multiple ongoing loans, such as personal loans, car loans, credit cards, etc., into a single loan for easier management. It offers the benefit of combining all your debts into one lower-rate loan to reduce the overall interest burden and simplify debt repayment. The amount sanctioned covers your total outstanding debts, which can be repaid comfortably over a longer tenure.
Personal Loans for Salaried Professionals
This type of personal loan is tailored for salaried employees working in reputed private firms or public sector undertakings. Eligibility and loan amount depends on the applicant's monthly income, employer profile, and credit history. Only basic documents like ID proof, salary slips, and bank statements are needed. The processing is quick, and the tenure is flexible. Interest rates are lower for salaried customers due to stable incomes.
Personal Loans for Self-Employed Professionals
Self-employed individuals like doctors, chartered accountants, and consultants can avail of this unsecured loan designed for borrowers with business income. Eligibility criteria may include annual turnover, number of years in business, profitability, and credit score. The maximum loan amount and tenure depend on the income declared. The interest rate is slightly higher than salaried loans but still competitive.
Medical Loan
This loan is designed to help individuals pay for medical expenses, whether planned procedures like surgeries, treatments or sudden emergencies. The loan amount and tenure depend on the estimated cost provided by the hospital/clinic. Applicants only need to submit basic documents, and processing is done quickly to disburse funds on time. The interest rate offered is competitive since healthcare needs are seen as a necessity. Repayment options are flexible, keeping in mind the recovery period.
Personal Loans for Pensioners
Retired professionals who receive regular pension can avail this loan tailored for their needs in old age. Eligibility criteria is relaxed with simple documentation like ID proof, pension certificate and bank account details. Loan amount sanctioned can cover expenses like health treatments, home repairs or renovations etc. Tenure is kept short up to 5 years considering age. However, the interest rate offered is in line with regular personal loans.
Personal Loan for Students
Students aspiring for higher education can fund expenses related to tuition fees, hostel accommodation, books, laptops, etc. through this loan designed for local and overseas education needs. The loan amount covers the entire cost of study and living expenses. Considering the high cost, a longer repayment period of up to 10 years is provided. Applicants can begin repayment after completing the course once they start earning.
Travel Loan
This loan enables individuals to fund their domestic and international travel plans and vacations. The loan amount, tenure, and repayment schedule can be customised according to the applicant's needs and upcoming travel plans. Many financial institutions also provide complimentary travel insurance when availing a travel loan. Moreover, the eligibility criteria and documentation required are relatively relaxed for this category.
What is the Process to Avail Personal Loan?
The process of availing a personal loan is simple and quick in today's digital era:
- Check eligibility: Banks and NBFCs have online eligibility calculators on their websites. Enter details like income, employment, credit score, etc., to check the maximum loan amount and tenure you can get approved for.
- Apply online: You can submit your loan application online by providing basic personal and financial information along with the required documents. KYC can also be completed online.
- Get in-principle approval: If you meet the criteria, you will receive loan approval in principle, which indicates your loan eligibility.
- Documentation and verification: Submit signed physical copies of documents for verification. A bank representative will also call your office or home to verify your income.
- Loan approval: After completing due diligence, the bank will approve your loan application and provide a sanction letter detailing loan terms.
- Sign agreement: Accept loan terms, sign the agreement and return it to the bank.
- Loan disbursal: After the documentation is completed, the loan amount will be credited to your bank account within 2-7 working days.
Interest Rates on Personal Loans
Personal loan interest rates vary from 5% to 42% p.a. depending on these factors:
- Your credit score: The higher your score, the lower the rate.
- Your income: A higher income means lower risk for the financial institution.
- Your employment profile: Salaried individuals get better rates.
- Relationship with the bank: Existing customers may get lower rates.
- Loan amount and tenure: Longer tenures and high amounts attract higher rates.
- Lender: Compare interest rates offered by banks, NBFCs, fintech firms, etc., before applying.
- Special offers : Banks, NBFCs, and other financial institutions offer promotional rates sometimes.
Ensuring a high credit score and a stable income and applying for the right loan can help you secure a competitive interest rate.
What are my Repayment Options on Personal Loans?
Personal loans offer flexible repayment options. You can choose the scheme as per your cash flow:
- EMI: Make fixed Equated Monthly Instalments (EMIs) for the entire loan tenure. EMI consists of principal and interest components.
- Part-prepayment: Pay lump sum amounts over and above EMIs to close the loan faster. This reduces interest outgo. Financial institutions allow part-prepayment without charges after the first six months.
- Top up: If you used only part of the sanctioned loan amount initially, you could withdraw the remaining as per your need later.
- Balance transfer: To reduce your interest burden, you can transfer an outstanding loan from another lending institution to a new one at a lower interest rate. The new lender pays off the old loan.
- Moratorium or EMI holiday: Option to pause EMIs for a few months during emergencies. Interest accrues during this period, but the tenure is extended.
- Online account management: Login online anytime to make payments, track repayments, get e-receipts and account statements.
Evaluate your income, cash flows and repayment capacity to choose the suitable repayment structure.
Conclusion
In summary, personal loans are easy to obtain and offer flexibility in tenure, amount, and repayment options. Shop around to get the lowest interest rate for your specific personal loan types. Assess the total repayment burden, including processing fees and pre-closure charges, before applying to make an informed borrowing decision.
Check Shriram Personal Loan to enjoy compelling features, low interest rates and flexible repayment options. Get started today!
FAQs
1. How quickly can I get an instant personal loan?
Instant personal loans are designed for quick access to funds, often within 24 hours. Some digital lenders may even disburse funds in a matter of hours. However, the exact time can vary depending on the financial institution and the completeness of your application.
2. Is it possible to get a personal loan for debt consolidation?
Yes, debt consolidation loans are a specific type of personal loan. They're designed to help borrowers combine multiple debts into a single loan, potentially lowering overall interest payments and simplifying the repayment process. This can be an effective strategy for managing multiple high-interest debts.
3. Are there any charges other than interest on personal loans?
In addition to interest, personal loans may come with other charges. These can include processing fees, pre-closure charges (if you want to close the loan early), late payment fees, and cheque bounce charges. It's important to carefully review all applicable fees before committing to a loan.
4. How does my credit score affect my personal loan application?
Your credit score plays a crucial role in your personal loan application. A higher score (typically 750* or above) generally means better chances of approval, lower interest rates, higher loan amounts, and more favourable terms. Banks and NBFCs use your credit score as a key indicator of your creditworthiness and ability to repay the loan.
5. Can I get a personal loan if I'm self-employed?
Yes, many financial institutions offer personal loans specifically designed for self-employed professionals. Eligibility typically depends on factors like annual turnover, years in business, profitability, and credit score. While interest rates might be slightly higher than for salaried individuals, these loans provide a valuable financing option for business owners and freelancers.
