Personal Loans - Meaning and Definition

What Is Personal Loan & How It Works?

Personal loans: Meaning & definition

At present, people are opting for personal loans to suffice their fund crunch, if any, to spend on something important to an individual. Personal loans help people borrow money from lenders, banks or financial institutions and pay it in instalments with set interest rates.

This article will walk you through the meaning, definition, and how personal loans work in detail.

As the name suggests, a Personal loan meaning is simple and easy. It is a loan that an individual takes which does not require any collateral or security. It is also offered to people with limited documentation and is fast in the process.

These funds can be used for any financial need that a person feels. Weddings, travel, and higher education are some of the examples that come under personal loans. These can be settled in estimated monthly instalments, also commonly known as EMI.

What can you use a personal loan for

Personal loans can opt for different purposes as needed by the people. After you know what is a personal loan you must also know some of the common types of personal loans that one can opt for as per their needs and wants as follows

  • Wedding Loan
  • Travel Loan
  • Home Renovation Loan
  • Pension Loan
  • Personal Loan for Students
  • Festival Loan
  • Small Personal Loan
  • Personal Loan for Women
  • Personal Loan for Salaried Employees
  • Personal Loan for Government Employees

How does a personal loan work?

The majority of loans function similarly to personal loans. After receiving your loan application and supporting documentation, the Bank evaluates your creditworthiness and extends an offer. The money is deposited to your bank account when you accept it, where you can use it however you like.

Depending on the loan amount, term, as well as interest rate, an individual must return the loan in equivalent monthly instalments (EMI).

Can you get a personal loan instantly?

Yes, we can get a personal loan instantly. In India, various lenders, financial institutions, and banks offer instant loans with minimum documentation. All we need to do is apply online from these portals, submit some of our documents, including a salary slip, Aadhar card, and Pan card, and then get your loaned amount in your bank account with the rate of interest as decided by the institution.

You can do your research and know the banks and financial institutions that offer such loans on an instant basis if you feel funds crunch in some money matters.

Everything about personal loan interest Rates, tenure and repayment

Things you need to know about personal loans before you opt for the same are as follows-

1. Interest rates for personal loans: It might vary depending on factors like tenure, income, occupation, and credit history. The rates are not fluctuating; they are fixed. Also, it is decided by Institution in accordance with regulatory guidelines by RBI.

2. Ways to get a personal loan: It is simple to obtain a loan from a renowned Indian Bank, especially if your paperwork is in order and you have a solid credit history. It is advantageous if you are an existing client of the Bank. Applying for a loan is possible through Net Banking, the Bank’s website, an ATM, or a local branch near you.

3. Loan duration and repayment options: You can acquire a loan for a duration that works for you. You must pay back the loan in equal monthly payments, sometimes known as EMIs, of a certain amount each month.

What are the documents required for a personal loan

There is a simple process of documentation that needs to be fulfilled when applying for a personal loan. The documents that you will need are as follows -

Even though each lender has its requirements for documentation, here are a few that you must include with your application:

  • Evidence of income (salary slip, bank account statement, ITR - Income Tax Return forms).
  • Identification and residency documentation.
  • Authenticated copies of your diplomas and licenses (this is applicable only for self-employed applicants).

Final words

A personal loan is a financial tool that helps people when they feel a financial crunch in matters that require instant money. it is a helpful way to empower people to finish tasks that require more money than the saved amount of an individual.