Know These 7 Key Features of Personal Loans

Personal loan is a go-to credit financing option for many individuals, especially during financial emergencies. Both salaried and self-employed individuals can avail this loan for any purpose, except for speculative activities, without pledging any security or collateral. Personal loans also come with minimal documentation and quicker loan disbursal compared to most other credit alternatives. To know more, we have listed below some of the key features of personal loans:

Unsecured nature

Personal loans are an unsecured credit facility because those planning to avail this loan need not furnish any security/collateral at the time of loan application. Therefore, lenders offering personal loans assess their applicants primarily on the basis of their credit scores, monthly income, occupational profile and other aspects of their credit profiles.

The unsecured nature of personal loans makes its processing quicker. However, it also increases the lender’s credit risk, leading them to take a more stringent approach during the personal loan evaluation process.

No end-usage restriction

Personal loan comes with zero restrictions in terms of end usage of fund proceeds. Hence, borrowers can use the loan to meet their personal or business requirements, except for speculative activities. For example, they can use the fund proceeds to finance their children’s education, wedding, travel, urgent medical expenses, home renovation, consolidate their high-interest debts, manage their day-to-day expenses, etc.

Pre-approved personal loan offers

Many banks and NBFCs offer pre-approved instant personal loan online to their select existing customers depending on their credit profiles. As lenders give such loan offers to their select existing pre-qualified customers, they require minimal to no documentation. Such pre-approved loans are also disbursed instantly or within a few hours of making the loan application. Therefore, those eligible for such pre-approved instant personal loans should apply for the same in case of any financial exigencies.

Quick loan processing

The loan approval and disbursal time for personal loans is usually quicker than for secured loan options like home loans or car loans. Many lenders claim to disburse personal loans within one week of receiving the loan application. The loan disbursal time for personal loans offered through online channels are quicker than personal loans availed through the offline channels. With many banks/NBFCs adopting the digital end-to-end onboarding process, the turnaround time for personal loan disbursal has reduced to a few days.

Fixed & floating interest rate options

Lenders offer personal loans at both fixed and floating interest rates. While public sector banks usually offer floating interest rates on their personal loan schemes, many private sector lenders offer personal loans at fixed rates of interest. As the interest rates on floating rate personal loans mirror the movements of linked external benchmark rates like the repo rate, T-Bill, etc., they can change anytime during the loan tenure. However, the interest rates of fixed rate personal loans remain stable throughout the loan repayment tenure.

Minimal documentation

As personal loan is an unsecured credit facility, most lenders do not need an exhaustive list of documents to process the loan application. Lenders usually require their loan applicants’ KYC, income and address proof documents. Lenders usually require last 3-6 month salary slips and bank account statements as income proof of their salaried loan applicants. In the case of self-employed loan applicants, lenders usually require their income tax returns (ITR), bank passbook/statements of their current/savings account(s) and the audited financial statements of the last 1 year.

Flexible repayment period

The personal loan tenure usually goes up to 5 years. However, some lenders offer a maximum tenure of 6-7 years. They usually fix their loan applicants’ personal loan tenures after determining their repayment capacity. Lenders usually prefer approving the personal loan applications of individuals having their existing debt obligations (including the EMI of the proposed personal loan) within 50-55% of their net monthly income. Those exceeding this limit can increase their loan tenure and/or amount of their proposed personal loan. Doing so will reduce their EMI burden and improve their chances of availing the proposed personal loan.


Personal loans come with several features and benefits for both salaried and self-employed loan applicants. However, those seeking personal loans should check and compare the interest rates, tenure, loan amount, fees & charges and other features of personal loans offered by multiple lenders before making the final loan application. They should apply for a personal loan scheme that suits their requirements the best in terms of overall borrowing cost, repayment capacity and loan disbursal time.


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