If you search “how many types of loans” online, you may find a list of loans, but if you search “different types of personal loans,” you may find loans from various financial institutions that fall into the secured and unsecured categories.
Secured Personal Loans demand collateral or security from the borrower. In contrast, unsecured Personal Loans are the ones whereby the financial institution lends money based on your creditworthiness, without collateral or security. However, because of the amount of risk involved in providing the sum, Personal Loan interest rates are higher than any other loan, including a Housing or Educational Loan.
Personal Loans start at 50,000 and go up to 30 lakhs or even higher. Here is exactly what you need to know about types of Personal Loans in India to make an informed decision.
What is a Personal Loan?
It is an unsecured loan that you could use for any purpose, including consolidating debt, financing a large purchase, or paying for unexpected expenses.
Your loan amount, interest rate, and repayment period are based on your creditworthiness. Personal Loans are usually repaid via fixed monthly instalments.
Also Read: What is the Ideal/Minimum CIBIL Score for Personal Loan
What are the different types of Personal Loans?
There are different types of Personal Loans available in India, they could be named slightly differently based on their end-use:
Marriage Loan:
In India, it is common for families to take out loans to cover the costs of weddings. Lenders often offer special rates and repayment periods for wedding loans.
Home Improvement Loan:
If you plan on renovating your home, you can apply for a Home Improvement Loan.
Education Loan:
Students pursuing higher education can apply for an Education Loan. These loans usually have low-interest rates and more extended repayment periods.
Travel Loan:
You can apply for a Travel Loan if you plan a trip. This loan can help you finance your travel expenses.
Consolidation Loan:
If you have multiple debts with different interest rates, you can consolidate them into one loan with a lower interest rate. This will make managing your debt easier and save money on interest payments.
Pension Loan:
Pensioners can apply for a Personal Loan against their pension. These loans typically have lower interest rates and more extended repayment periods.
Car Loan:
You can use a Personal Loan to finance a car purchase. These loans mostly have higher interest rates than Auto Loans, but the repayment period is shorter.
Personal Loans for Self-Employed:
Self-employed individuals can apply for a Personal Loan. These loans have higher interest rates than standard Personal Loans, but the repayment period is shorter.
Medical Loan:
You can use a Personal Loan to finance medical expenses. These loans typically have higher interest rates than standard Personal Loans, but the repayment period is shorter.
Process of applying for different types of Personal Loans in India
The process of applying for a Personal Loan is simple. You can apply online or visit your nearest financial institution.
If you are applying online, you must fill in an online application form with your personal and financial details. The lender will process your application and disburse the loan amount within a few days. To get a Personal Loan online today, you can visit the lender’s website and apply for one.
If you are applying for a Personal Loan at a financial institution, you will need to fill in a physical application form and submit it along with the required documents. The lender will process your application and disburse the loan amount within a few days.
What is the eligibility for a Personal Loan?
The eligibility criteria for Personal Loans vary from lender to lender, but there are some general guidelines that all lenders follow. Note that the eligibility criteria may differ depending on the types of Personal Loans in India.
- You must be at least 22 years of age and no older than 58 years of age when the loan term ends.
- You must be employed and have a regular income.
- You must have a good credit history.
- You should have an ID and proof of income.
- You need to have a bank account in your name.
Documents required for Personal Loans
The documents required for Personal Loans vary from lender to lender, but there are some key documents that all lenders will require.
- A completed application form with your signature
- Proof of identity (passport, PAN card, Voter ID, Driving License, etc.)
- Proof of address (utility bill, ration card, rent agreement, etc.)
- Proof of income (salary slips, Form 16, bank statements, etc.)
- Bank statements for the last six months
- KYC documents (Aadhar card, PAN card, etc.)
- How much can you borrow with the help of a Personal Loan?
- The amount you can borrow with a Personal Loan depends on your income and creditworthiness. Most financial institutions offer Personal Loans starting from ?50,000 to ?15 lakhs.
What is the interest rate on Personal Loans?
The interest rate on Personal Loans in India ranges from 10.99% to 24%. The exact interest rate will be based on your income, employment history, and credit score.
What are the charges associated with Personal Loans?
Several charges are associated with Personal Loans, including processing fees, prepayment charges, and late payment charges. These charges can vary from one financial institution to another, so compare the fees before applying for a loan.
How do you repay a Personal Loan?
Personal Loans are usually repaid via fixed monthly instalments. The repayment period is from 12 to 60 months. You can make payments through post-dated cheques, ECS, or auto-debit from your account.
What are the benefits of Personal Loans?
There are several benefits of Personal Loans, including:
- Quick and easy approval
- No collateral required
- Flexible repayment options
- Competitive interest rates
- Can be used for several purposes
- Risks of Personal Loans
There are some risks associated with Personal Loans, including:
- You may be tempted to spend more than you can afford if you have a high loan amount.
- If you miss a payment, you will be charged a late payment fee.
- You may have to pay a prepayment penalty if you repay your loan early.
- Your interest rate could increase if you make a late payment or miss a payment.
- You could damage your credit score if you default on your loan.
Conclusion
Now that you know the types of Personal Loans in India, you can choose the one that best suits your needs. You can check and compare the best loan providers online, finalize one and fulfil their criteria, and get instant approval on your Personal Loan.
Some Frequently Asked Questions:
1.What are the types of Personal Loans available in India?
There are different types of Personal loans available in India which includes wedding loan, travel loan, home renovation loan, pension loan, education loan, medical emergencies loan, etc. Moreover, you can always choose other types of Personal Loans available in India.
2.What type of Personal Loan is easier to obtain?
As you must be already aware that there are different kinds of Personal Loans with different Personal Loan interest types. As a borrower, you can obtain any Personal Loan easily. While you apply for Personal Loan, you must ensure that you fit into the eligibility criteria set by the lender.
3.Is it wise to take a loan for a wedding or a vacation?
Both weddings and a vacation can be expensive events, and at times there can be various unexpected and unwanted expenses that can impact your budget. Taking a low-interest Personal Loan in India will surely help you manage all your expenses during events like weddings and vacations. Also, you can always choose different Personal Loan categories to deal with similar events and occasions.
