What is a personal loan : Meaning, types and benefits

Ready to become a smart borrower? Check offer in 2 steps and explore how personal loans work, what they cost, and how to choose the perfect one for your needs. Knowledge is power when it comes to smart financial decisions.

A personal loan is an unsecured loan offered by banks, credit unions, or online lenders to meet various personal expenses like home renovations, medical bills, or emergencies. If you're wondering about the personal loan meaning, it refers to a loan that does not require any collateral (like your house or car) and is repaid in fixed monthly instalments over a set period. It comes with fixed interest rates and a flexible repayment period, making budgeting much easier.

With minimal documentation and a hassle-free application process, Bajaj Finserv Personal Loans provide a seamless borrowing experience that puts you in control of your financial future.

Why personal loans are popular: Unlike secured loans that tie up your assets, personal loans give you quick access to funds without risking your property. This makes them perfect for unexpected expenses or planned purchases where you don't want to drain your savings.

Common uses for personal loan 

Personal loans offer incredible flexibility in usage, allowing you to address a wide range of financial needs based on your personal and professional goals. You can use the funds for managing emergencies, planning dream vacations, renovating your home, funding education, or even expanding your business. The best part? There are no restrictions on how you spend the money – it's your loan, your choice.

Here are some popular ways people use personal loans:
 

Travel Costs

Fulfil your travel dreams with a personal loan for travel to explore dream destinations, whether it's a family vacation to Europe or a solo backpacking adventure across Southeast Asia.

Wedding Costs

Plan a grand celebration by availing a personal loan for wedding and make every moment special without compromising on your vision or draining your savings.

Education Costs

Invest in education effortlessly with a personal loan for higher education to fund tuition fees, living expenses, or study abroad programs that can transform your career.

Medical Expenses

Tackle unexpected medical bills quickly with a personal loan for medical emergency, ensuring you get the best treatment without financial stress during critical times.

Home Expenses

Upgrade or renovate your home using a personal loan for home expenses to cover everything from kitchen remodeling to roof repairs.

Smart tip: Personal loans are also commonly used for debt consolidation, allowing you to combine multiple high-interest debts into one manageable monthly payment at a potentially lower rate.
Only 2 steps to check your eligibility

How does a personal loan work?

A personal loan works in a straightforward manner, similar to most other types of loans, but with some unique advantages:

1. Application: You apply for a loan online or at a branch by filling out a simple application form
2. Documentation: Present the required documentation to verify your identity, income, and address
3. Credit evaluation: The lender evaluates your creditworthiness, income stability, and repayment capacity
4. Loan offer: Based on your profile, the lender makes a loan offer with specific terms
5. Acceptance: If you accept the offer, the cash is deposited directly into your bank account
6. Usage: You can use the money for any legal purpose without restrictions
7. Repayment: You repay the loan through fixed monthly EMIs over the agreed tenure

Pro tip: You can always use a personal loan EMI calculator before availing of a personal loan to understand exactly what your monthly payments will be and plan your budget accordingly.

Why this process works: The entire system is designed to be transparent and borrower-friendly, with clear terms and no hidden surprises.

Here's a fictional example that shows how personal loans can be a financial lifesaver:

Priya obtained a personal loan to cover unforeseen medical expenses for her father's urgent heart surgery. The procedure cost ₹4 lakh, but her family's savings were only ₹1.5 lakh. With Bajaj Finserv's quick approval process, she received ₹2.5 lakh within 24 hours, providing immediate financial relief when every hour counted.

The fixed-rate loan with a 60-month tenure meant Priya could manage repayments comfortably at ₹5,500 per month, easing the financial burden during an emotionally challenging time and ensuring her father received the necessary medical care without any delays.

This example shows how personal loans can bridge the gap between urgent needs and available resources, providing peace of mind during critical situations.

There are various types of personal loan options designed to meet different financial needs and borrower profiles. Understanding these types helps you choose the one that best suits your requirements for a hassle-free borrowing experience.

Unsecured personal loan

An unsecured loan doesn't require any collateral, making it accessible purely based on your creditworthiness and repayment capacity. Borrowers qualify based on their financial history, credit score, and income stability. Interest rates may be slightly higher than secured loans due to the lack of collateral, but you don't risk losing any assets.

Secured personal loan

A secured personal loan is backed by collateral, typically an asset like a home, car, or fixed deposit. The collateral reduces the risk for the lender, potentially resulting in lower interest rates and higher loan amounts. However, the borrower risks losing the pledged asset if they fail to repay the loan as agreed.
 

Which should you choose? Unsecured loans offer more flexibility and peace of mind, while secured loans may offer better rates if you're comfortable pledging an asset.

Maximum Personal Loan Amount that You Can Borrow

The maximum personal loan amount you can borrow depends on various factors such as your income, credit score, employment type, and repayment capacity. You can avail personal loan amounts up to Rs. 55 lakh.

How to get a personal loan?

To apply for a personal loan , you must meet all the eligibility criteria mentioned by the lender. You can also use our personal loan eligibility calculator and compare various lenders, interest rates, repayment terms, and fees among different offers to find terms that suit your needs. Apply through the lender's website and complete the application accurately. The lender will review your application, credit history, and financial stability before approving or denying the loan.

Eligibility criteria for personal loan

• Nationality: Indian
• Age: 21 years to 80 years.
• Employed with: Public, private, or MNC.
• CIBIL Score: 650 or higher.
• Customer profile: Self-employed or Salaried

*You should be 80 years or younger, at the end of the loan tenure.

Documents required for personal loan

• KYC documents: Aadhaar/ passport/ voter’s ID/ driving license/ Letter of National Population Register/ NREGA job card
• PAN card
• Employee ID card
• Salary slips of the last 3 months
• Bank account statements of the previous 3 months
• Piped gas bill
• Pension order
• Letter of Allotment of Accommodation Issued by Employer
• Property / Municipal tax receipt
• Utility bill
• Phone bill
• Real-time image / photograph
• Ration card

Check your eligibility for personal loan using just mobile number and OTP – 100% online process. 

What is the interest rate and repayment tenure of a personal loan?

• Interest rates on personal loans: Personal loan interest rates vary based on factors like credit history, income, tenure, and occupation. Personal loan interest rates remain fixed.
• Repayment tenure: The loan tenure can be chosen to align with your requirements. Loan repayment happens through equated monthly instalments (EMIs), which are consistent amounts comprising principal and interest and depend on the loan amount, tenure, and interest rate.
   

How do you choose a perfect personal loan?

Choosing the perfect personal loan involves assessing factors like interest rates, loan terms, and fees. Consider your credit score, financial goals, and the loan's purpose. Compare offers from various lenders, review terms and conditions, and ensure the loan aligns with your repayment capacity.