If you are planning to take a personal loan for your marriage or taking a vacation or paying for home down payment and any other reason, then this article will be of immense help to you before you avail the loan. A personal loan as you can see is a multipurpose loan that can be used for any purpose and is very useful during a cash crunch. It is one loan for all your needs.  

What is a personal loan? 

A personal loan is an unsecured loan which means you do not have to provide any collateral to get approval for the loan. As it is unsecured the lenders (banks/NBFCs) provide lesser loan amounts compared to secured loans. This is one of the easiest credit instrument to understand and repay. The loans are provided by the lenders based on their company policy and pre-defined eligibility criteria. The loan amount is usually defined based on the salary that you draw today and lenders look at about having an EMI which is 30-40% of the salary.  

Am I eligible for a personal loan? 

We have earlier chalked out the reasons why you would be looking to take a personal loan, most of the times it could be at short notice and if you do not meet the expectation criteria of the banks it could put you in a spot of bother. To check your eligibility on the personal loans from top lenders check here  

How to choose the right lender? 

Before choosing a lender, you need to be aware of certain factors like 

1. Salary to EMI ratio 

The first thing you as a borrower need to look at is the salary to EMI ratio. This is nothing but the maximum EMI you can pay and manage your monthly expenses. Banks as a rule have set a maximum of 30% to 40% of the monthly income for EMI. i.e. they will calculate your EMI up to only 30% to 40% of your monthly salary, hence your loan amount will be based on your salary. 

2. Tenure and Interest rate 

Tenure and interest rate are inversely proportionate, i.e. the larger the loan tenure the lesser is the interest rate and hence lesser the EMI paid each month. But the problem is that you will need to pay the loan for a longer term and will result in you paying a lot more. 

3. Credit score can be a game changer 

Many banks and NBFCs have openly stated that they will reduce the rate of interest if the borrower has good credit score. A credit score is provided by credit bureaus in India. These credit bureaus are the repositories of credit information in the country.  Using this data, the bureaus will calculate the credit score based on each bureau’s individual proprietary algorithm. It is due to these individual proprietary algorithms that the credit score from each bureau differ. The credit score is calculated based on how consistent you are in repaying your loan, how much available credit you utilize (lower the better), proper management and maintenance of different credit and lastly how often you look for credit.  

Based on these factors your credit score is calculated. Hence having a good credit score can be very beneficial. 

4. Loan charges need to be looked at 

In a loan there are a lot of charges that need to be looked into which include processing fee, pre-closure charges, part prepayment charges, late payment penalties, life insurance etc. are as important as the interest rate and tenure. Most banks levy processing fees of 1% to 3% of the loan amount which can cost the borrower a large amount of money for the borrower.  

There could also be pre-closure charges that come into play when you plan to repay the amount before the agreed upon period.  



What Happens When We Cannot Repay the Loan? 

It is always best to repay your loan on time, but a situation may arise that you could not pay the EMI on time for 1 or 2 months. A late payment penalty will be levied by the bank on the amount due. 

Delayed payments also could have drastic consequences as it could affect your credit score. On-time payments too is one of the criteria which is used by the credit bureaus in calculating the score.  

Hence you need to go through the document carefully before signing on the dotted line and accepting the loan.  

How to avail a personal loan? 

A personal loan is quite easy to avail where with the proper documents and satisfying of lender’s eligibility criteria the loan will be sanctioned within 3 days.  

The process for availing a personal loan is as follows 

Online: On the CreditMantri website or app, any applicant can create their credit profile, along with the credit profile the user will get a credit score from which they can know where they stand with respect to credit. Based on the credit profile you will be matched to personal loans that you have more chances of getting approved. 

Offline: You can also avail a personal loan by visiting the nearest lender (bank/NBFC) branch and meet their loan officer. The loan officer will guide you through the whole process of the loan application. 

What are the documents required for a personal loan? 

Many personal loan applications are rejected due to lack of proper documents. Here is a list of documents that needs to be submitted by you the borrower. Keep them ready. 

Along with a completed loan application, proof of identity, proof of residence, IT returns and passport photographs. These are the ones which are usually required to process any personal loan application.  


A personal loan is quite easy to get once you know the nook and cranny of it. If you have read this article in full then you will have all the documents prepared, checked your credit score and improved it if low which resulted in you getting the loan amount you desire at a lower interest rate.  

We hope this guide would help you get the best personal loans from the market out there.