A personal loan is a good option if you are in immediate need of money and want to repay it within a short time. There are two main advantages of a personal loan:

i. You need not provide any collateral: Personal loans do not require any security or collateral so they are a good idea if you do not own any asset (like a home) to pledge as collateral.

ii. No restrictions on how to use the money: There are no questions asked regarding the end use of money. The lenders are not interested in what you spend the money on but more about your ability to make repayments on time.


1. Research the various offers available in the market, even if the number of offers seems confusing. Make sure that the personal loan product that you choose is best suited to your needs and requirements.

2. Check the interest rates offered. Personal loans are the most expensive loans to take in terms of interest payments. Since there is no collateral involved, lenders try to cover the risk of customer default by charging higher interest rates.

3. Check if you are eligible for the loan in terms of income and employment status. If you apply for a loan that you will not be able to sustain on your income, your application will be rejected.

4. Check your credit score. Since there is no collateral, lenders look at your credit score to see if you are a responsible borrower. Make sure that you have a score of 750 or above when you apply for a personal loan to avoid the chance of rejection.

5. Check your credit report for accuracy. It is important that all the details in your credit report including personal and credit details are correct as lenders rely heavily on these documents when deciding on your loan application. If there are any discrepancies, it is important that you get them corrected immediately.

6. Examine the possibility of prepayment of the loan.  If you feel that you will be able to repay the loan early and save on the high interest payments, then it is better to search for a lender who offers you early repayment facility on good terms.

7. Do not apply to multiple lenders for the same loan. If you apply for too many loans at the same time or in the same year, lenders think that you are short of credit and will not be able to be able repay the loan. Multiple loan applications without corresponding approvals can lead to a drop in your credit score which will make it even more difficult to be approved for loans in the future.

8. If you have been rejected for a loan recently, wait at least six months before you apply again. Use this time to make all your repayments and try and rebuild your credit health. If you have been recently rejected for a loan, it is unlikely that your application will be approved by other lenders. Each further rejection will only cause your score to drop further.

9. Even if you are able to get a personal loan with a relatively lower score, be warned that it will be accompanied by much stricter term and conditions including a higher interest rate or smaller loan amount. It is best to improve your score so that you are eligible for the most attractive offers and save money on interest payments in the long run.

10. Use your personal loan productively if you can since it is an expensive loan. While you cannot do much about medical emergencies or wedding expenses, in general it is a good idea to utilise at least part of the money towards improving your finances.