Personal Loan 101: Learn the Basics

It is a fact that the need for quick funds can arise at any given time and to anyone. Suppose you are already among the uber-rich or have been adding to your financial nest, keeping in mind any emergency. In that case, there is a high possibility that you can manage your trouble at that time.

However, some are still in the fund accumulation or savings stage and may not have enough money during an emergency, and others would not wish to break open their savings. What would or rather should you do at a time like these?


You can apply for a loan so that your immediate needs are met. Now, loans take time to be disbursed, and emergencies wait for no one. Instead of having a panic attack at this moment, what you can do is take a personal loan instead. Lenders like Tata Capital are some of the known financial institutions that can help you with a personal loan in times of need.

Yes, all loans have implications as well as their own rules, and before you avail of a personal loan, you must have the basics in place:

  • Unsecured and safe: While loans generally tend to give you the idea that you will need to keep some collateral, this is not the case with personal loans. A personal loan is an unsecured loan where you don’t provide any collateral or security against the loan. It is as simple as that.
  • The long and short of it: There are long-term loans, and then there are short-term loans. Typically, a personal loan can be taken for a short duration to meet some urgent financial requirements you may have.
  • Paperwork: You can apply and get sanctioned for a personal loan with the minimum of basic formalities that include submitting your KYC documents, proof of income, and proof of your creditworthiness, including your CIBIL score.
  • Eligibility: You are eligible for a personal loan if you can show proof of your income to repay the loan you have availed. You need to be a salaried person between 21-58 years of age or a self-employed person between 25-65 years of age to apply for a personal loan subject to other terms and conditions imposed by the lender. Depending on your income and repaying capacity, you can be eligible for a personal loan up to a maximum of Rs 25 lakh. You can check your eligibility online to see if you fall in the eligibility bracket.
  • Purpose of loan: You can use your loan amount for legal purposes. Be it a wedding, a travel plan, a medical emergency, or any other purpose, you can use the funds from the personal loan, as there are no lender restrictions, unlike in different types of loans.
  • Tenure: Nothing lasts forever, and neither will your loan. Now, it is imperative to know beforehand the term of the loan. Financial institutions like Tata Capital typically offer you a period from 1 to 7 years. Since the interest rate is high, it does not make sense to be bound by a personal loan for longer tenures. You must realize that personal loans are good if you use them to tide over a difficult financial situation and not use them for longer terms.
  • Payback options: There is no such thing as a free lunch. You will have to repay the personal loan that you have taken. Yes, this is an additional outflow from your monthly spending, and you may need to prioritize a few expenditures. However, there are easy repayment options that you can choose from. First and foremost, you should check your monthly EMI before you take the loan. Online EMI calculators will give you an idea about the principal amount you must repay. Once you understand that aspect, many NBFCs offer easy EMI options suitable to match your repaying capacity; you can also prepay with attendant conditions, which many lenders waive. Remember that longer tenures mean lower EMIs, but equally, longer tenures for personal loans can affect your borrowing capacity for other secured loans such as home or car loans. So, use the personal loan carefully.
  • Interest rate: If there is a loan, there is interest. Since the personal loan is unsecured, your lender will charge you a higher interest rate. For instance, Tata Capital charges you a minimum of 10.99% interest for your loan, whereas, for a home loan, the interest rate would be 8.7%. Interest rates can be high if the lender below a certain threshold fixes your credit score. On the other hand, if you have a good relationship with a lender with a high credit score, you can get the loan at the lowest interest possible.
  • Disbursal of loan: The process for a personal loan is quite simple. Lenders such as Tata Capital offer online strategies that allow you to receive the funds within 72 hours or less if you satisfy all the terms and conditions imposed by it to grant the loan. These may include your credit score, KYC documents, relationship with the lender, ability to repay the loan, and interest.

Now that you have the basics, securing a person is easy. It is up to you to use the facility carefully, considering all aspects of financial planning before you avail of the personal loan. After all, a stitch in time saves nine!

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I work for WideInfo and I love writing on my blog every day with huge new information to help my readers. Fashion is my hobby and eating food is my life. Social Media is my blood to connect my family and friends.
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