What Is a Personal Loan? Meaning, Types, & Benefits

Need to get your home interiors done, cover unforeseen medical bills, or plan a wedding? Worry not! A personal loan can be your safety net. One of the most accessible forms of credit available today, a personal loan can provide the financial support required without going through the hassle of lengthy approval processes.

Understanding a personal loan

An individual can borrow an unsecured loan from banks, non-banking financial companies (NBFCs), or digital lenders without pledging any asset. That unsecured loan is called a personal loan, meaning there’s no need for security. The eligibility is assessed by the lenders based on income, credit history, employment status, and repayment capacity.

Over a preset tenure, the borrowed amount is repaid in fixed monthly installments, also known as EMIs (equated monthly installments).

Uses of a personal loan

We have heard about specific purpose loans like home or car loans; however, personal loans are multipurpose. Personal loans can be taken for education-related expenses, wedding costs, medicinal emergencies, travel, debt consolidation, appliance or other necessary household purchases.

Primary features

• Since it’s an unsecured loan, no collateral is required.
• The best part about it is the quick disbursal; often processed within 24 to 48 hours.
• It has a flexible tenure, ranging from 12 to 60 months.
• Due to fixed EMIs, the monthly payments remain consistent throughout the term.

Types of personal loans

Personal loan can be of various kinds. Although the basic structure remains the same, the purpose of the loan, however, can differ, and several lenders also offer specific variants. For instance: Travel Loan to fund your domestic or foreign trips; Medical Loan for unplanned health-related expenses; Educational Loan that can be used for short-term certifications; and Wedding Loan for covering high-budget bills.

Some people also opt for Debt Consolidation Loan which means it gives you the liberty to combine multiple debts into one manageable EMI. In case of additional funds requirement, one can seek a Top-Up Loan on their existing personal loan.

Calculating your EMI

It’s always wise to understand how much your monthly repayment will be before applying for personal loans online. You can download a personal loan app. Using tools like a personal loan EMI calculator can help calculate your EMIs based on several factors like total loan amount, tenure, and interest rate.

For example: If the loan amount is INR 5,00,000 for a period of 3 years with an interest rate of 12% per annum, your EMI would roughly be around INR 16,600.

Advantages of a personal loan

Minimal documentation: Lenders usually require basic KYC documents, income proof, and bank statements.

Swift approvals: You get approvals within minutes, thanks to instant loan apps.

No end-use barriers: You can utilise the money for anything you need; there are no restrictions.

Improves credit profile: When you take and repay a personal loan responsibly on time, it can boost your credit score.

Eligibility criteria for personal loans

The criteria may vary across lenders; however, the general benchmarks are as below:

Your age should be between 21 and 60 years.

You should have a stable employment with regular income.

Lenders will specify a minimum income requirement. It differs by city and lender.

A good credit score, which is ideally above 750.

Factors affecting personal loan interest rates

Credit score is an important factor. The higher your credit score is, the better rates you attract.

Employers profile is also taken into consideration. Employees of reputed companies may receive better terms.

Higher income may lower risk for lenders.

What many people don’t know is larger amounts or longer duration can influence rates.

Application process

First and foremost, check your personal loan eligibility and then compare offers from banks or NBFCs. As suggested above, use an EMI calculator to know your monthly repayment ability.

Finally submit your personal loan application and documents, and wait for the approval and disbursal.

Tips before applying

It is important to check your credit report always. Do not borrow more than your repayment capacity. It might land you in trouble. To save more, compare lenders’ terms and conditions, processing fee, and personal loan interest rates. Last not the least, read the fine print carefully.

Why Kissht

Digital lending platforms like Kissht offers unsecured instant personal loan through its simplified digital procedure, without the need for any documentation. Whether you are a salaried professional, gig worker, or first-time borrower, the loan approvals and disbursals are swift, making it ideal for time-sensitive needs. Their flexible EMI options and transparent policies make it a preferred choice. Kissht also integrates with retail merchants, allowing easy EMI-based purchases alongside standard loan services.

FAQs

1. How quickly can I get a personal loan?

Personal loans can be approved and disbursed within 24 to 48 hours, sometimes even faster. Platforms like Kissht offer a fully digital process with minimal documentation.

2. Who is eligible to apply for a personal loan?

Eligibility criteria vary across lenders, but generally, applicants must be between 21 and 60 years old, have a stable income, and maintain a good credit score, preferably above 750.

3. How can I calculate my EMI before applying?

You can use a personal loan EMI calculator available on most lender websites or apps. By entering the loan amount, interest rate, and tenure, you’ll get a clear idea of your monthly repayment.