Personal Loan – Interest Rates, Eligibility, Features, and Factors Affecting Eligibility

A personal loan is a loan availed by individuals to meet their financial commitments or requirements. This type of loan comes in handy if you have unexpected expenses to take care of.

Individuals use the funds received through a personal loan to make big purchases, consolidate high-interest debts, meet wedding expenses and educational expenses, go on a trip, and many other reasons.

The loan is usually taken from a bank or a non-banking financial company (NBFC) at a pre-agreed rate and terms and conditions.

Features and Benefits of Personal Loans

  • Personal loans are unsecured loans that do not require the applicant to pledge any asset as collateral.
  • Personal loans are provided based on the borrower’s creditworthiness analysed based on their credit report/history.
  • In the case of a home loan or car loan, you can use the funds only to purchase a house or a car. Funds from a personal loan can be used for any purpose.
  • Loan tenure can range from 12 months up to 60 months based on your convenience.
  • Minimal documentation, such as proof of identity, address, and income, is enough to apply for a personal loan.
  • There are many instant loan disbursement schemes where the lender hands the cash to you in a matter of a few hours.
  • The loan amount depends on many factors, such as repayment capacity, income source, and more.
  • The loan amount can range from Rs.10,000 up to a few lakhs.

Credit Score?

A credit score is a 3-digit number that represents your creditworthiness to the lender. It describes how you have managed your finances and bills in the past. The lower the score, the lesser are your chances to get a good deal on your loan application.

Many lenders even deny financing to individuals with lower scores as they think that the borrower may default on their loan repayments. To improve the chances of getting the loan, it is recommended that you check your credit score beforehand, and if it is low, you can work on building it before you apply for the loan.

Monthly Income

Since collaterals do not back up personal loans, your monthly income and repayment capacity become important. The income requirements vary based on the location you live in, i.e. it may vary across metro cities, tier-1 cities, tier-2 cities, towns, and villages.

Work Experience

Applicants who have recently got employed or started their business are not considered financially secure by the lenders. Applicants with adequate work experience are more likely to get their application approved as the lenders think that they have relatively secure financial plans and savings.

A minimum of 2-3 years experience is favourable; the applicant should be employed with the current employer for a minimum of 1 year.


If you are already paying huge credit card bills, home loan EMIs, car loan EMIs, and other debts and if you have applied for a personal loan, the lender will weigh your debt-to-income ratio and may decide not to approve the application.

This is because most of your monthly income may go towards loan repayments, which may not leave you with enough money for your domestic expenses.


The age of the applicant plays an important role in the approval of the loan. Lenders check for their age to ensure that the borrower has enough working time to repay the loan.

Therefore, salaried applicants must be in the range of 23-58 years, and self-employed non-professionals must be in the range of 28-65 years at the time of applying for the loan for easy acceptance.

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