How to Get Personal Loan in India? Eligibility Criteria

A personal loan is one of the most popular unsecured borrowing options available today. Its simplicity (you don’t have to pledge any assets as collateral or security) is what makes it appealing. A personal loan has the freedom to be used for almost anything, in contrast to loans that have particular uses, such as housing or vehicle loans.

Whether you’re planning a home renovation, covering an unexpected medical expense, or simply navigating a financial rough patch, a personal loan can be a reliable financial ally.

However, before you start the personal loan process, there are some key factors you should consider to ensure you secure the best deal. This article will walk you through how to get loan in India, helping you understand the essential aspects and making the process smoother for you.

What is a Personal Loan?

A personal loan is an unsecured loan offered by banks and non-banking financial institutions (NBFCs) to meet various financial needs. Unlike loans for specific purposes like a mortgage or car loan, a personal loan doesn’t require any collateral or security. This implies that you won’t have to put up assets like real estate or gold to get the loan.

Lenders take on more risk when offering personal loans since they are unsecured, which frequently leads to higher interest rates than secured loans. However, if you default on a personal loan, the consequences can impact your credit history and make it harder to secure future credit cards or loans.

What Are the Types of Personal Loans Available in India?

In India, personal loans come in various forms to cater to different needs:

1. Wedding Loan

India’s grand wedding traditions can be costly. For families looking to make the wedding day memorable without straining finances, a wedding loan can provide the necessary funds.

2. Travel Loan

Planning a dream vacation? Travel loans cover travel expenses and often include complimentary travel insurance to make your trip worry-free.

3. Home Renovation Loan

If your current home needs updates, a home renovation loan can finance repairs and improvements, enhancing both comfort and property value.

4. Education Loan

For additional educational expenses beyond what secured loans cover, unsecured education loans help with tuition and other academic costs.

5. Pension Loan

Retirees facing financial strain, especially from medical bills, can benefit from pension loans, specifically designed to support them during their retirement.

6. Consumer Durables Loan

Need to buy appliances like refrigerators or washing machines? Consumer durables loans provide the funds to purchase these essential items.

7. Personal Computer/Mobile Phone Loan

As technology becomes integral to daily life, these loans help cover the cost of computers and mobile phones, often with added insurance.

8. Medical Emergency Loan

In urgent medical situations, these loans offer immediate financial support for hospital and treatment costs, providing relief in critical times.

How to Get a Personal Loan in India?

Here’s a detailed five-step guide on how to get personal loan, covering everything from understanding your needs to the final approval:

Step 1: Determine Your Loan Requirements

Start by defining the purpose of your personal loan. Are you planning to fund a major event like a wedding or need funds for home renovation? Determine the exact amount you need—whether it’s ₹1 lakh or ₹10 lakhs. Knowing the purpose and amount will help streamline the process and ensure you borrow what you need without overshooting your budget.

Step 2: Check Your Eligibility

Before applying, assess your eligibility to understand what you qualify for. Use an online eligibility calculator to estimate the amount you can borrow based on your income and credit profile. Knowing your eligibility helps you better plan your financial commitments.

Step 3: Calculate Your Monthly Installments

Once you know the loan amount, use an EMI calculator to figure out your monthly repayments. Online tools like the Angel One Personal Loan EMI Calculator can help you adjust the interest rate and loan tenure to fit your monthly budget.

Step 4: Apply for the Loan

You can apply for a personal loan through various channels. To get the best deal, choose the loan with the lowest interest rate. Whether you apply through NetBanking, the bank’s website, or by visiting a branch, each method ensures a smooth and efficient personal loan process.

Step 5: Submit Required Documents

To complete your application, gather and submit the necessary documents. Typically, you will need to present proof of income (such as bank statements, salary slips, or income tax returns), address proof, and identity proof. Submit these documents either online or at the bank branch where you are applying. After submission, wait for the bank to process your application and transfer the funds to your account.

Eligibility Criteria for Personal Loans

Personal loans, being unsecured, require thorough scrutiny by banks to assess your ability to repay. Here’s what you need to know to determine your eligibility:

1. Age Limit

For salaried individuals, the age range is typically between 21 and 58 years. If you’re self-employed, the age range is generally between 25 and 65 years.

2. Monthly Income

Your monthly income plays a crucial role in securing a personal loan. While some lenders set a minimum requirement, many banks prefer a monthly income of at least ₹25,000.

3. Nature of Employment

Personal loans are available for various employment types, including professionals, self-employed individuals, and salaried employees.

4. Employment History

A stable employment record is important. Generally, lenders look for at least 2 years of work experience, with a minimum of 1 year at your current job. Self-employed individuals should have a minimum of 3 years of experience. Some lenders also consider your overall employment history.

5. Credit Score

Your credit score, which reflects your borrowing history, is crucial for loan approval. Your chances of getting a loan and negotiating better conditions increase with a higher score. Many banks require a CIBIL Score of at least 700, with some preferring a score of 750 or higher. Scores between 700 and 900 are considered excellent.

Documents Required for a Personal Loan

To apply for a personal loan, you’ll need to provide the following documents:

Income Proof: Salary slips, Form 16, and bank statements.
Bank Statements: Recent statements showing financial stability.
Income-Tax Returns: Latest returns to verify income.
Credit Report: Provides insight into your credit history.
Age Proof: Documents such as a birth certificate, passport, Aadhaar card, or PAN card.
Address Proof: Utility bills, Aadhaar card, or passport.
Photo ID: Aadhaar card, passport, voter ID, or driving license.

You will need to submit these documents along with your loan application form and a few photographs. Many banks and financial institutions now offer online loan applications, simplifying the process.

Conclusion

Personal loans are a flexible solution for immediate financial needs, whether for emergencies, home renovations, or other personal expenses. Understanding the personal loan process and knowing how to get a loan can help you secure the funds you need efficiently. By exploring various options and assessing your eligibility, you can find the best personal loan suited to your requirements in India.