Purpose of a Personal Loan
One of the biggest advantages of a personal loan is its flexibility in usage. The borrowed amount can be used for various purposes, including:
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Medical emergencies
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Wedding expenses
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Education or tuition fees
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Home renovation or repairs
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Travel and vacations
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Purchasing gadgets or appliances
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Debt consolidation
Lenders do not restrict how the money is used, giving borrowers complete freedom to allocate the funds as per their requirements.
Key Features
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Unsecured Loan: No need to provide any asset as security.
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Fixed Tenure: Generally ranges between 1 to 5 years.
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Loan Amount: Usually varies from ₹50,000 to ₹25 lakhs or more, depending on eligibility.
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Fixed or Floating Interest Rates: Most lenders offer fixed EMIs, but some may provide floating rate options.
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Quick Disbursal: If eligible, the loan can be approved and disbursed within 24 to 48 hours.
Eligibility Criteria
Lenders assess multiple factors before approving a personal loan. These include:
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Age (usually between 21 and 60 years)
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Steady source of income (salaried or self-employed)
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Minimum income level (varies by lender)
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Good credit score (700 or above is preferred)
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Stable employment history
A high credit score increases the chances of approval and helps secure better interest rates.
Required Documents
The documentation process for personal loans is relatively simple. Commonly required documents include:
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Address proof (Utility bills, Voter ID)
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Income proof (Salary slips, bank statements, ITRs)
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Employment or business proof
With many lenders offering fully online processes, applications can be completed and verified digitally.
Interest Rates and Fees
Interest rates for personal loans typically range from 10% to 24% per annum, depending on the applicant’s profile. Additional charges may include:
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Processing fee (1% to 3% of the loan amount)
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Late payment charges
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Prepayment or foreclosure fees
It is important to compare offers from multiple lenders to get the best deal.
Advantages of Personal Loans
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No collateral needed
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Fast processing and minimal paperwork
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Versatile usage
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Improves credit score when repaid on time