What is a Personal Loan?
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Overview
A personal loan is one of the easiest ways to arrange funds when you need money for important personal expenses. It can help you manage planned needs like home renovation or travel, and also urgent situations like medical emergencies. Since it is usually an unsecured loan, you do not need to pledge any collateral such as gold, property, or a vehicle.
In this guide, you will understand what a personal loan means, how it works, its benefits, maximum amount, common uses, and what to know about interest rates and tenure.
Key points to understand:
- No collateral is required in most cases
- Loan amount is disbursed directly to your bank account
- Repayment happens through EMIs
- Loan can be used for multiple personal needs
How does a Personal Loan work?
The personal loan process is simple and mostly digital today. Here is how it typically works:
- Step 1: ApplicationYou apply online or offline by sharing basic details like name, age, income, employment type, and required loan amount.
- Step 2: Document submission You upload or submit documents such as ID proof, address proof, and income proof.
- Step 3: Eligibility and verificationThe lender checks:
- Your income stability
- Your credit score
- Your existing loans or EMIs
- Your repayment history - Step 4: Approval and loan offerIf eligible, you receive a loan offer that includes:- sanctioned amount
- interest rate
- tenure
- EMI amount
- charges and fees - Step 5: Disbursal- Once accepted, the loan amount is credited to your bank account.
- Step 6: EMI repayment- You repay the loan through monthly EMIs until the loan is fully closed.
What are the Benefits of a Personal Loan?
Quick access to funds
Personal loans can be processed quickly, which makes them useful during emergencies.
No Collateral Required
Get an unsecured instant personal loan without collateral
Flexible usage
You can use the amount for different personal needs like medical costs, travel, wedding, or repairs.
Easy repayment through EMIs
You can repay through monthly instalments, making it easier to manage big expenses without using all your savings at once.
Flexible tenure options
You can choose tenure as per your affordability, so that the EMI fits your monthly budget.
Helps in credit building
If you repay on time, personal loans can improve your credit score and strengthen your financial profile.
What is the Maximum Personal Loan Amount You can Avail?
The maximum loan amount depends on your profile and eligibility. Lenders generally decide your personal loan eligibility based on factors such as:
- monthly income
- employment type (salaried or self-employed)
- credit score and repayment history
- existing EMIs and liabilities
- job stability or business vintage
In many cases, personal loan amounts can start from Rs. 50,000 and go up to Rs. 20 lakh or more, depending on the lender and your eligibility. At Piramal Finance you can apply for Personal loan up to Rs. 25 lakh.
A simple way to estimate maximum eligibility is to check:
- how much EMI you can afford monthly
- your monthly income and fixed expenses
- your existing loan obligations
- you can always use online personal loan eligibility calculator for better understanding
Types or Uses of Personal Loan
- Medical emergenciesHospital bills, surgery, tests, medicines, and post-treatment care can be expensive. A personal loan can help arrange funds quickly.
- Travel and holidaysMany people use personal loans to finance trips, flights, hotels, visas, and experiences.
- Home renovationRepair work, painting, interior improvements, furniture, or kitchen upgrades can be financed through personal loans.
- Wedding expensesWedding-related costs like venue booking, jewellery, shopping, catering, and photography can be managed using a personal loan.
- Education expensesTuition fees, short-term courses, professional certifications, or skill-based learning can also be funded.
- Buying gadgets or appliancesSmartphones, laptops, TV, refrigerator, or AC purchases can be financed, especially when you want to upgrade without disturbing your savings.
- Debt consolidationIf you have multiple EMIs or high-interest credit card dues, you can consolidate them into one personal loan for easier repayment.
Interest Rates and Tenure on Personal Loan
Personal loan interest rates
Personal loan interest rates may be fixed or floating, depending on the lender, but most personal loans come with fixed rates. Your final rate depends on:
- credit score
- monthly income
- employment type
- debt-to-income ratio
- lender’s internal policies
Applicants with higher credit scores and stable income often get better rates.
Personal Loan Tenure
Tenure refers to the time given to repay the loan. It is usually flexible and may range from 9 months to 60 months (or more, depending on lender policies).
Understanding EMI impact
- A longer tenure reduces EMI but increases total interest paid
- A shorter tenure increases EMI but reduces overall interest burden
It is always better to choose a tenure where EMI stays comfortable without straining your monthly budget.
Personal Loan Rates and Tenure at Piramal Finance
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Row 1
- Feature & fees
- Details
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Row 2
- Loan Amount
- Min ₹ 50,000 to max ₹ 25,00,000
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Row 3
- Interest Rates
- 12.14%* p.a onwards
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Row 4
- Loan Tenure
- 9 - 60 months tenure
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Row 5
- Processing Fees
- Up to 5% of the loan amount + applicable taxes
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Row 6
- Pre-Closure & Part Payment Fee
- 3% of the principal amount + applicable taxes
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Row 7
- Part Pre-Payment of Personal Loan
- 3% of Principal Paid+ GST