What is Personal Loan?

Last Updated: 15 Oct 2024

A personal loan is a loan that is provided with little to no documentation and without the need for security or collateral. A personal loan is simple to obtain because no collateral is needed to be pledged and there are minimal limitations on how you can utilize the funds.

You must pay it back according to the terms set forth by the bank, just like any other loan. Typically, this can be paid in simple equivalent monthly installments over a period of a few months to a few years.

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What is a personal loan used for?

You are free to utilize the money you receive from a personal loan any way you see fit, including to pay for a wedding, finance your children’s education, fund a vacation, purchase a gadget, cover medical expenses, renovate your home, etc.

Personal loan are provided without end-use restrictions, thus they can be used for a variety of needs both personal and professional.

How do personal loans work?

The majority of loans function in a similar manner as personal loans. You apply for a loan, the bank verifies your creditworthiness and then extends an offer to you. The money is deposited to your bank account when you accept it, where you can use it however you like.

You must pay back the loan in equal monthly installments (EMIs), the size of which will vary depending on the loan’s term, amount, and interest rate.

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What about interest rates, tenure, etc?

Interest rates for personal loans might vary depending on factors like tenure, income, occupation, and credit history.

Loan duration and repayment options: You can acquire a loan for a duration that works for you. The loan must be repaid in equal monthly instalments, or EMIs, of a certain amount each month. The loan amount, term, and interest rate will affect the EMI.