What is a personal loan?

A personal loan is a type of unsecured loan which does not require any collateral or security. It is a loan that is offered with very minimal documentation. Even the borrowers are not at all restricted in terms of usage of funds generated in the form of personal loans. They can use the funds freely as and when they want. The fund can be used for paying for medical treatment, use on home renovation, spending on a wedding, financing the education of children, etc.

Unlike other loans, it is not required to spend the amount only for the purpose for which the amount is borrowed. But it is a must to repay the amount according to the agreed terms with the banks. It can be paid for a few years or months in easy equal monthly installments.

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Working on a personal loan

The working of personal loans is pretty much similar to most of the other loans. The borrower can apply for a loan, submit the necessary/asked documents, the banks will further check their creditworthiness and will make a loan offer. If the borrower accepts the loan offer then the funds will be transferred to the bank account, which the borrower needs to repay in equal monthly installments.

Interest rates on personal loan

The rate of interest on a personal loan completely depends on the credit history, tenure, income stability, occupation, etc. of the borrower. The interest rate on these loans is fixed in nature, banks or financial institutions charge a fixed interest rate, not a floating rate.

Procedure to get a personal loan

Getting a personal loan from any bank or financial institution is easy. You can avail of loans much easier if the needed documents are in order and the borrower has a good credit track record. With the increase in technology, you can apply for a personal loan via NetBanking, on the website of the concerned bank, at an ATM,  or visiting a nearby bank or institution.

Tenure and repayment of a personal loan

The best feature of a personal loan is that a borrower can get a loan for tenure that suits his needs.  The repayment of a loan can be done in equal monthly installments or EMIs in a fixed sum of amount every amount. The EMI will be decided on the basis of the amount of loan availed, tenure or the loan, interest rate.

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