Whether a sudden hospital bill, a dream wedding, higher education, or an impromptu travel plan, such unexpected expenses can come about at any time. Then, a Personal Loan can come to your financial rescue. At Gullak, we make personal finance easy for all Indians. What You Need to Know about Personal Loans: their functioning, when to borrow one, and how to select the right one.
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What is a Personal Loan?
Personal Loan presents the lending of money in an unsecured form by finance companies, banks, and online lending companies without collateral or security. A lump sum amount can be borrowed and can be paid in EMIs (Equated Monthly Installments), depending upon a predetermined tenure, which is normally 1-5 years.
- Unsecured: No assets or guarantors required.
- Flexible Usage: No restrictions on how you use the loan amount.
- Quick Disbursal: Often within 24-48 hours.
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Where Can You Use a Personal Loan?
You can use a personal loan for any purpose, such as:
- Medical Emergencies
- Wedding Expenses
- Higher Education
- Travel or Vacation
- Home Renovation
- Debt Consolidation
- Business Expansion
- Big Purchases (mobile, electronics, furniture)
Unlike home or car loans, you’re free to use the amount as per your needs.
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How Do Personal Loans Work?
Here’s a quick breakdown:
- Apply Online or Offline
- Submit KYC Documents (Aadhaar, PAN, Income Proof, Bank Statements)
- Loan Amount Approval based on credit score and income
- Disbursement to your account
- Repayment in EMIs over the chosen tenure
The interest rate is fixed or reducing, and you repay through auto-debit or post-dated cheques.
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Key Features of Personal Loans
| Feature | Details |
| Loan Amount | ₹10,000 to ₹40 lakhs+ |
| Tenure | 12 months to 60 months |
| Interest Rates | 9% to 24% p.a. (varies by profile) |
| Processing Fees | 0.5% to 2.5% |
| Collateral Needed | None |
| Approval Time | 1 hour to 2 working days |
| Credit Score Needed | 650+ preferred |
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Benefits of Taking a Personal Loan
1. No Collateral Needed
There is no need to put your property, gold, and assets on the pledge. It is premised solely on your income and being creditworthy.
2. Quick Processing & Disbursement
A variety of providers provide paperless processing and real-time approvals through apps and websites.
3. Multipurpose Utility
The loan can be applied to any personal need, be it for a wedding or a hospital bill.
4. Fixed Interest & EMI
You will be able to make budget plans, as you know the amount you will pay every month.
5. Improves Credit Score
The payment of Personal Loans on time will increase your CIBIL score, and you will be ready to get Personal Loans in the future with a higher score.
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Eligibility Criteria
Although the criteria differ slightly in each bank or NBFC, the following are the common requirements of banks:
- Age: 21 to 60 years
- Employment: Salaried or self-employed
- Minimum Income: ₹15,000–₹25,000/month
- Credit Score: Preferably 650+
High credit scores and steady income increase your chances of approval and lower interest rates.
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Required Documents
Keep these ready for a smooth process:
- Aadhaar Card
- PAN Card
- Last 3–6 Months’ Salary Slips or ITR (for self-employed)
- Bank Statement (Last 3–6 months)
- Passport-size Photo
- Employment Proof / Business Proof
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Best Personal Loan Providers in India (2025)
Here are some of the top-rated lenders and their features:
| Lender | Interest Rate | Processing Time | Max Amount |
| HDFC Bank | From 10.5% | 24 Hours | ₹40 Lakhs |
| ICICI Bank | From 10.99% | 1–2 Days | ₹25 Lakhs |
| Axis Bank | From 10.49% | 48 Hours | ₹15 Lakhs |
| Bajaj Finserv | From 11% | 24 Hours | ₹25 Lakhs |
| PaySense | From 12% | Same Day | ₹5 Lakhs |
| Navi App | From 9.9% | Instant (App) | ₹20 Lakhs |
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Personal Loan vs Credit Card Loan
| Feature | Personal Loan | Credit Card Loan |
| Interest Rate | 9% – 24% p.a. | 24% – 36% p.a. |
| Repayment Tenure | 1 – 5 years | Short, 1 – 24 months |
| Usage Flexibility | High | Limited |
| Loan Amount | Higher (up to ₹40 L) | Lower (based on the limit) |
| Best For | Big planned expenses | Urgent small purchases |
Mistakes to Avoid When Taking a Personal Loan
- Ignoring the Fine Print – Always check processing fees, foreclosure charges, and late payment penalties.
- Overborrowing – Take only what you can repay easily.
- Defaulting on EMI can severely damage your credit score.
- Multiple Loan Applications – Reduce your credit score.
- Not Comparing Options – Don’t go with the first lender you see.
Personal Loan EMI Calculator
Want to know how much EMI you’ll pay? Use the Gullak EMI Calculator:
EMI Formula:
CopyEdit
EMI = [P x R x (1+R)^N] / [(1+R)^N – 1]
Where:
- P = Principal Loan Amount
- R = Monthly Interest Rate
- N = Loan Tenure in Months
For example:
- Loan = ₹5,00,000
- Interest = 12% p.a.
- Tenure = 3 Years
EMI = ₹16,607 approx.
When Should You Take a Personal Loan?
- When you have urgent and essential needs (medical, emergency)
- When other low-cost options (gold loan, PF advance) aren’t available
- When you have a stable income and repayment ability
- Avoid it for investing in stocks or speculative purposes
Alternatives to Personal Loans
If you’re unsure, consider these alternatives:
- Gold Loan: Lower interest and secured.
- Loan Against FD: Borrow without breaking your deposit.
- Salary Advance: Offered by employers in many organizations.
- Buy Now, Pay Later (BNPL): For small online purchases.
Smart Tips Before You Apply
- Check your CIBIL score before applying.
- Compare interest rates across lenders.
- Choose a shorter tenure to save on total interest.
- Read all terms carefully.
- Don’t default – set up auto-debit if needed.
Final Thoughts: Personal Loans as a Financial Tool
Personal Loan is not a bad concept, it is only a great financial tool when a right use of a Personal Loan is finding enough ways to allow it. It is quick, accommodating, and does not even need any security. But do keep this in mind, it is easy to get money on loan, but the hard part is to pay it back.
At Gullak, not only do we help you with borrowing, but we help you borrow smartly.
- Compare lenders
- Understand eligibility
- Calculate EMIs
- Learn financial discipline
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Don’t miss our guides on:
- SIPs
- Mutual Funds
- SWPs
- Stocks & Equity
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