A personal loan is the easiest loan to get and can also be the trickiest one. If you are not careful, you might end up with hefty interest and other charges. Going through this simple checklist will help you make an informed decision during your ‘personal loan’ shopping. 

Personal Loans in India 2021 

Loan Amount

Rs.50,000 – Rs.50 lakhs

Average Annual Interest Rate

10% - 18% 

Processing Charges

1%– 3% of loan amount

Loan Processing Time

3 – 7 business days

Repayment Tenure

12 months – 60 months

Collateral or Security



Table of Contents: 

  • What is a personal loan? 
  • The Ultimate Checklist for Personal Loan Borrowers
  • Why use CreditMantri’s personal loan shopping checklist?
  • FAQs

What is a personal loan?

A personal loan is an unsecured credit offered by banks, NBFCs and digital lenders. There are no restrictions on the end usage of the loan amount. You can use it to meet any personal need like a medical emergency, holiday expenses, home renovation, child’s marriage and more. There is no constraint on how the borrowed amount is actually used, unlike certain other forms of loan; the borrower has complete freedom to use the money for whatever reason they choose.

A personal loan has two essential properties:

  • Total flexibility on end-use. There are no restrictions to how you can spend the loan amount. Unlike a home loan or car loan where the loan amount can only be used to purchase a house or a car respectively, you're free to use the money in any way that you want.
  • No need for collateral. Personal loans are 'unsecured loans'. This means you do not have to pledge any collateral like a property, assets, etc.

The Ultimate Checklist for Personal Loan Borrowers

The market is flooded with a number of personal loan products. How does one choose the best personal loan to suit their needs and repayment capacity? We have drawn this checklist to help borrowers to go for the most suitable personal loan: 

1. The loan amount you need

Personal loan is given based on your salary. One can get up to 10 times their monthly net pay as a personal loan. However, personal loans are quite expensive in terms of interest rates and processing charges. So, it wouldn’t be wise to borrow more than you require. Calculate the right amount of personal loan you need so that you can repay it on time and escape unwanted interest burden. 

2. Choosing the right lender 

As mentioned before, there are a number of lenders out there waiting to lure you with a personal loan offer. Not all offers are great or right for you. You shouldn’t get carried away by colorful ads and big words that make your personal loan apparently attractive. Take some time to research the lender and the various personal loan products they offer. Compare different personal loan products from different lenders and draw conclusions based on real facts. 

3. Checking the interest rate 

Interest rate is of paramount importance in every loan. Personal loan interest rates start from 10% and go on up to 24%, based on your salary, credit score and other criteria. While shopping around for personal loans, find out the best interest rate they can give you. Then compare this with other lenders and see who gives you the best interest rate. Because, a higher interest rate will result in higher EMI and a very large repayment amount on your loan. 

4. Finding out how much EMI you have to shell out every month 

This is another crucial factor related to your monthly finances. Once you take the loan, you have to repay it via monthly EMIs. You can use Personal Loan EMI Calculators to find out how much you will be required to pay every month. You can then calculate if it will fit into your monthly budget. If the EMI amount is too high and you miss a few EMIs, it will result in unnecessary charges and penalties. So it is better to figure out well in advance if you can bear the monthly EMI costs. 

5. Processing charges and other fees 

Personal loan, or any loan for that matter, comes with processing fees and other administrative charges. These days, many lenders are offering ‘zero processing fee’ loans that can be very economical for you because processing fees can be anywhere between 1% to 5% of your loan amount, which is quite a considerable amount. Then there are other charges like legal charges, documentation charges and more. So, find out in the beginning of the loan process itself as to what are the additional charges and fees that you will be charged. You can then compare it with other bankers while making a decision. 

6. Credit Score Requirement 

Personal loan is an unsecured loan so lenders have some stringent eligibility criteria. Credit score is an important metric that lenders check before processing your loan. Even your interest rate is determined based on your credit score. Higher the credit score, better your loan terms. So find in advance the credit score requirement for the lender. Most lenders prefer a credit score above 700. You can check your credit score first and if it is not up to the mark, you can take some steps to improve it before applying for the loan. 

Additional Read: Low CIBIL™ Score You Can Still Borrow Here’s How

7. Part-Payment and pre-closure options 

Though you are taking a personal loan due to lack of funds at present, you might be able to raise the funds at a later date and would want to pay off the loan. Find out if that option is available. Most personal loans do not allow part payment. Even if they did, they will charge you for that. It’s the same for pre-closure too. 

If you wish to pay off your personal loan earlier, they will charge you a percentage of the outstanding amount as pre-closure charges. Find out what these charges are. Because, if the charges are costlier than paying the loan as per the tenure, there is no point in pre-closing it. It is better to learn about these charges well beforehand so that you can plan your repayments accordingly. 

8. Alternate options 

Though personal loan is the easiest credit option, don’t forget to explore alternatives like borrowing from family or friends, a home-loan top up, gold loan or partial withdrawal from your EPF funds, which are less expensive than a personal loan. We may not know what other options we have unless we put our minds to it.

Though a personal loan is not a bad option, the interest charges are quite high and if you have an alternative that is cheaper, you should definitely go for it. 

Why use CreditMantri’s personal loan shopping checklist?

When a financial emergency arises, many people turn to a personal loan for assistance. With demand for this unsecured loan increasing, it does not come cheap, unlike other loans. The interest rate is usually higher, and a good credit score is essential for obtaining better terms. Personal loans are popular because they are simple to obtain and can be used for any purpose. However, if you keep the above checklist handy, you can be confident that you will get the best personal loan for your needs.

FAQs - The Ultimate Borrower’s Checklist To Get The Best Personal Loan

  1. Can I find out if I'm eligible for a personal loan before applying?

Yes, you can check your eligibility for a personal loan right here on Creditmantri. This will give you a better picture on how much loan amount you could get and an approximate interest rate. 

  1. Is it really advantageous to make partial payments on your personal loan?

Without a doubt. When you make partial payments on your personal loan, the total amount owed is reduced, and thus your interest rate is reduced.

  1. Can I pay off my personal loan at any time during its term?

Personal loans have a restriction that allows you to make prepayments only after you have completed 12 (or 6) EMI payments.

  1. What is a good credit score for obtaining the best interest rates on a personal loan?

If you want a low-interest personal loan, aim for a credit score of 750 or higher.

  1. Is it possible to get a personal loan if my credit score is less than 600?

It might be difficult, but it's not impossible. You may not be able to obtain favorable loan terms. You can apply for secured loans, which do not place a high value on your credit score. If not, you can spend some time improving your credit before applying for a loan.

  1. What is the minimum salary required to qualify for a personal loan?

Most lenders have a minimum salary of Rs. 20,000, but a few private sector lenders may give you a personal loan with a salary of Rs. 15,000 or less.

  1. What are the personal loan repayment options?

You can repay your personal loan in monthly instalments over the loan's term. Once you have completed 12 EMIs, most banks will allow you to make partial payments and pre-close your personal loan.