Many times, people are faced with unexpected and unpredictable financial demands. Whether you need money for an urgent medical expense, a home improvement, a travel expense, or a wedding ceremony, a personal loan offers an instant and effective financial solution.
However, understanding what it is, along with its benefits and eligibility factors, is essential before applying for a personal loan. In this article, we discuss in detail what a personal loan’s meaning is, its benefits, features, eligibility criteria, and the documents required to apply for it.
What is a Personal Loan?
A personal loan definition generally refers to an unsecured loan that can be utilised to finance any of your immediate needs. Unsecured loans refer to borrowings that do not require individuals to offer assets as collateral. Personal loans are also often termed multipurpose loans.
That is because, unlike a vehicle or a home loan designed for a specific purpose, a personal loan can be used for any financial need without any restrictions on how the borrower spends it. Some common personal loan uses include medical emergencies, wedding expenses, home renovations, or travel expenses.
What Are the Features of Personal Loans?
Different kinds of features associated with personal loans are:
1. Unsecured nature
Personal loans are unsecured, meaning the borrower does not have to pledge an asset as collateral. Collateral guarantees that the borrower will repay the loan in time. Personal loans are approved based on credit history and employment status. No collateral requirement also ensures that many borrowers can access them.
2. Multipurpose
Personal loans offer the flexibility to support a variety of expenses rather than being restricted to a specific domain, as is the case with a vehicle loan, home loan, or education loan. The loan can finance medical emergencies, weddings, vacations, funerals, and home redecorations.
3. Fixed interest rates
Most of the personal loans have a fixed interest rate. This means that the interest rate remains fixed throughout the loan’s tenure. This helps the borrowers better plan their loan obligations as they can predict the interest rates.
4. Quick approval of applications
Many lenders offer personal loans through online applications with minimal documentation. This results in instant decisions and swifter approval of loan applications. After approval, the loan is also disbursed instantly, making it highly convenient during financial emergencies.
How Does a Personal Loan Work?
A personal loan works similar to any other loan. Once the required documents are submitted, the lender will evaluate your credit history and creditworthiness. The chances for approval are high in personal loans, and your loan terms will also be more favourable.
To determine your Equated Monthly Instalment for repayment of your personal loan, consider using a personal loan emi calculator. With the help of an EMI calculator, you can do better financial planning based on your income and expenses and choose loan terms that better suit your financial ability. It will also ensure that your repayment is done regularly.
What Are the Benefits of a Personal Loan?
Some benefits associated with a personal loan include:
1. The application process for a personal loan requires minimal documentation, making the whole process hassle-free.
2. Borrowers can also apply for a personal loan online, where the loan amount can be easily disbursed into the borrower’s account after the loan is approved.
3. With a personal loan, you can even decide the duration of your loan based on your repayment capacity. Usually, a personal loan lasts from one to five years.
What Are the Eligibility Criteria For a Personal Loan?
To be eligible for a personal loan, you should come under the following criteria:
1. You must be an Indian citizen.
2. Your age must be between 21 to 58 years.
3. You should have a minimum monthly income of INR 15,000.
4. You are also required to have a minimum of one year of work experience.
What Are the Documents Required For a Personal Loan Application?
The following documents are necessary when you are applying for a personal loan.
1. Identity Proof: It may include your Voter ID, Driving License, Passport, or Aadhaar Card.
2. Address Proof: Your Voter ID, Driving License, Passport, or Aadhaar Card.
3. Employment Certificate: A Certificate that confirms at least one year of employment.
4. Proof of Income: Your salary slips or Income Tax Returns forms can be used.
5. Bank Statement: A review of your bank account transactions in the last three months.
Final Thoughts
Personal loans can cater to any of your unexpected financial needs. With its flexible nature, easy accessibility, and lack of collateral requirements, a personal loan definitely provides a realistic solution for those seeking financial assistance. However, careful financial planning and comparing different loan options can help borrowers secure the best loan terms and avoid financial stress during their loan tenure.
If you are looking to apply for a personal loan, consider Tata Capita. We offer instant personal loans with attractive terms, such as flexible tenure without collateral and a hybrid term loan facility. Visit the Tata Capital website or download the app today to learn more.
FAQs
The maximum personal loan amount depends on a person's creditworthiness, income, and financial profile. The lenders determine the amount of the loan based on the borrower's eligibility and risks.
Yes, personal loans have different kinds of fees, such as processing fees, prepayment fees, late payment fees, and origination fees. These are recorded in the loan agreement.
With Tata Capital, a personal loan can be instantly approved, and the amount can be immediately disbursed online to the borrower's account.
Two standard personal loans include:
- Secured personal loan, which requires collateral.
- Unsecured personal loans, which do not require collateral.
Some examples of personal loans include loans for home redecoration, medical expenses, wedding expenses, vacations, and more.
18 March 2025
5 mins read
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