What is a personal loan : Meaning, types and benefits

What is a personal loan : Meaning, types and benefits

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Key takeaways


Understanding a personal loan can help borrowers make informed borrowing decisions. Review the loan amount, interest rate, tenure, eligibility criteria and repayment requirements before applying.


  • A personal loan is generally an unsecured loan for eligible financial needs.
  • Loan amounts can range from Rs. 40,000 to Rs. 55 lakh, subject to eligibility.
  • Tenures can range from 12 months to 108 months.
  • Compare the interest rate, EMI and applicable charges before choosing a loan.

For complete details about personal loan options, review the lender's terms and assess your repayment capacity before applying.

What is a personal loan?

A personal loan is an unsecured loan that eligible borrowers can use for various personal expenses, such as home improvements, medical needs, education, travel or weddings. Since it generally does not require collateral, borrowers do not need to pledge assets such as a house or car.


A personal loan is usually repaid through equated monthly instalments (EMIs) over an agreed tenure. The interest rate, loan amount, tenure and applicable charges depend on the lender's terms and the borrower's profile.


With minimal documentation and a digital application process, eligible borrowers can apply for a personal loan online. Review the loan terms and repayment obligations before applying.


Why personal loans are popular: Personal loans can provide funds for planned or unexpected financial needs without requiring collateral. Borrowers can choose a suitable loan amount and tenure based on their requirements and repayment capacity.


Ready to explore your options? Check your offer in 2 steps using your mobile number and OTP.


How does a personal loan work?

A personal loan follows a simple process, subject to the lender's policies and the borrower's eligibility:


  1. Application: Submit the personal loan application online or through the available application channel.
  2. Documentation: Provide the required documents and information for verification.
  3. Credit evaluation: The lender assesses factors such as credit history, income and repayment capacity.
  4. Loan offer: If eligible, the lender provides the applicable loan terms, including the loan amount, interest rate and tenure.
  5. Acceptance: Review and accept the applicable terms if they meet your requirements.
  6. Disbursal: Once the applicable requirements are completed, the approved loan amount is disbursed to the borrower's bank account.
  7. Repayment: Repay the loan through 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.



Common uses for personal loan 

A personal loan can be used for various eligible personal needs, depending on the lender's terms. Common uses include managing planned expenses, meeting urgent financial requirements and funding major purchases.


  • Travel costs

    A personal loan for travel can help eligible borrowers manage expenses related to transport, accommodation, food and sightseeing.

  • Wedding costs

    A personal loan for wedding can help eligible borrowers manage expenses such as venue costs, catering, décor and other wedding-related requirements.

  • Education costs

    A personal loan for higher education may help eligible borrowers meet certain education-related expenses, including tuition fees and other applicable costs.

  • Medical expenses

    A personal loan for medical expenses can help eligible borrowers manage medical costs, subject to the lender's applicable terms.

  • Home expenses

    A personal loan for home expenses may be used for eligible home-related expenses, such as repairs, renovation or other planned requirements.


Smart tip: A personal loan can help you meet a range of legitimate financial needs, such as medical expenses, education, home renovation, travel or wedding costs. However, you should use the loan only for purposes permitted under the lender’s terms and applicable laws.


Only 2 steps to check your eligibility

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What are the benefits of availing of a Personal loan

There are several compelling advantages of a personal loan that make it an attractive financing option for many people:

  • No collateral required

    Personal loans are unsecured, meaning you do not need to pledge any valuable asset (like your home, car, or gold) to avail of funds. This protects your assets while giving you access to credit.

  • Minimal documentation

    The documents required for a personal loan are minimal and straightforward. This reduces the overall processing time significantly and helps you get quick access to funds when you need them most.


     

  • Flexible tenure options

    You can pick a repayment tenure that suits your financial capacity and monthly budget. We offer flexible tenures ranging from 12 months to 108 months, allowing you to choose EMIs that feel comfortable.

  • Fixed interest rates

    Personal loans typically come with fixed interest rates, which means your EMI amount stays the same throughout the loan tenure. This makes budgeting and financial planning much easier.

  • Quick processing and disbursal

    Modern personal loans can be approved and disbursed within 24 hours*, making them perfect for urgent financial needs or time-sensitive opportunities.


    Check if you are eligible for a personal loan and get approved in just a few simple steps.

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Example of personal loan

Suppose an applicant takes a personal loan of Rs. 5 lakh at an interest rate of 12% per annum for 5 years. The approximate EMI would be Rs. 11,122.


The borrower would repay around Rs. 6.67 lakh over 60 months, including approximately Rs. 1.67 lakh as interest. The actual EMI and total repayment may vary based on the applicable interest rate, tenure, and other charges.

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Types of personal loans

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.


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Eligibility criteria for personal loan

To qualify for a Bajaj Finance Personal Loan, you must meet all five criteria below:

NationalityIndian
Age21 years to 80 years
Employed withPublic, private, or MNC.
CIBIL Score650 or higher.
Customer profileSelf-employed or Salaried

 *You must be 80 years or younger at the end of your chosen loan tenure.


You can check your eligibility instantly using just your mobile number and OTP — no branch visit or paperwork needed at the eligibility stage.

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Documents required for personal loan

Documentation requirements for a Bajaj Finance Personal Loan are minimal. Five document categories are required at the time of application:


Document CategoryAccepted Options
KYC proofAadhaar/ passport/ voter’s ID/ driving license/ Letter of National Population Register/ NREGA job card
Identity proofPAN card, Real-time image / photograph
Employment proofEmployee ID card, Letter of Allotment of Accommodation Issued by Employer
Income proofSalary slips — last 3 months, Bank account statements — last 3 months
OthersPension order, Utility bill, Phone bill, Piped gas bill, Property / Municipal tax receipt


 

Know more about the personal loan documents required during application.

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

The interest rate on an online loan app in India varies depending on factors such as your credit profile, income, loan amount, and repayment tenure. Along with the interest rate, borrowers should also review the applicable fees and charges before applying. The table below highlights some of the common charges associated with a personal loan. For the complete schedule of charges, please refer to the existing personal loan interest rates, fees and charges page.


ChargesDetails
Interest rateUsually ranges from 10% to 30.5% p.a. , depending on eligibility and lender policies
Processing feeUp to 4.13% of the loan amount (inclusive of applicable taxes).
Loan tenureTypically ranges from 12 months to 108 months
Bounce chargesRs. 700 to Rs. 1,200/- per bounce
Prepayment/foreclosure chargesUp to 4.72% (Inclusive of applicable taxes)
Stamp duty (as per respective state)Payable as per state laws and deducted upfront from loan amount
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How do you choose a perfect personal loan?

Choosing a suitable personal loan requires comparing the loan terms and checking whether the repayment fits your budget. Consider these factors:


  • Interest rate: Compare rates and understand the applicable interest charges.
  • Loan amount: Borrow only what you need and can comfortably repay.
  • Tenure: Choose a suitable tenure based on your monthly repayment capacity.
  • Fees and charges: Check processing fees and other applicable charges.
  • Eligibility: Review the lender’s eligibility criteria and required documents.
  • Repayment: Use a personal loan EMI calculator to estimate the EMI before applying.

Review the loan agreement carefully before accepting the offer.

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How to apply for a personal loan?

  1. Check loan eligibility – Visit our personal loan page, enter the loan amount you need, select the repayment period, and click on "CHECK LOAN OFFER" to check your loan eligibility.
  2. Enter personal details – Provide your personal, financial, and employment details to receive a personalised loan offer.
  3. Review your loan offer – Check your offer details and adjust the loan amount or repayment tenure, if required.
  4. Complete KYC verification – Verify your identity and bank details to proceed with your application.
  5. Speak to a loan specialist – Once your application is submitted, an executive will contact you with the next steps.
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How to use a personal loan wisely?

A personal loan can help you manage planned expenses or meet urgent financial needs without pledging collateral. However, responsible borrowing starts with understanding how much you need and how comfortably you can repay it. Before taking a loan, assess your income, regular expenses and existing EMIs. Borrow only the amount required for your financial need and select a repayment tenure that suits your budget. You can use a personal loan EMI calculator to estimate your monthly EMI and compare different repayment options. Reviewing the applicable interest rate, processing fees and other charges can also help you understand the total cost of borrowing. Using the funds for a clear financial purpose and maintaining timely repayments can help you manage the loan responsibly.


  • Borrow only what you need: Avoid taking a higher loan amount than your actual requirement.
  • Plan your EMI: Check whether the monthly repayment fits comfortably within your budget.
  • Compare repayment tenures: Consider the EMI and total interest payable before choosing a tenure.
  • Review loan costs: Check the applicable interest rate, processing fees and other charges.
  • Use the funds for a planned purpose: Direct the loan towards a genuine financial requirement.
  • Repay on time: Make your EMIs on schedule to maintain responsible repayment behaviour.
  • Keep existing obligations in mind: Consider your current loans and other financial commitments before borrowing.

Using a personal loan wisely means borrowing responsibly, understanding the repayment obligation and keeping the loan within your financial capacity. Review the applicable terms and conditions before accepting the loan offer.

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Key offerings: 3 loan types

  • Flexi Hybrid Loan
  • Flexi Dropline Loan
  • Term Loan

  • Withdraw and prepay – no extra charges
    You can withdraw from your limit and prepay as many times as you want, without extra charges.

  • Instalment pattern
    You can pay interest-only EMIs for up to 36 months, after which, the EMI will consist of both, the principal and the interest. EMI is applicable only on the withdrawn amount.

  • Flexi facility charges
    Flexi facility charges applicable based on your loan amount.

  • Withdraw and prepay – no extra charges
    You can withdraw from your limit and prepay as many times as you want, without extra charges.

  • Instalment pattern
    Fixed EMIs that cover both the principal and interest on the loan amount you withdraw.

  • Flexi facility charges
    Flexi facility charges applicable based on your loan amount.

  • Amount disbursed in one go
    The entire loan amount is disbursed at the start.

  • Instalment pattern
    Fixed EMIs that cover both the principal and interest.

  • Flexi facility charges
    No Flexi facility charges.

Personal loan interest rate and applicable charges

Type of fee

Applicable charges

Rate of interest per annum

10% to 30.5% p.a.

Processing fees

Up to 4.13% of the loan amount (inclusive of applicable taxes).

Flexi Facility Charge

Term Loan – Not applicable

Flexi Loans –Up To Rs 1,999 To Up To Rs 18,999/- (Inclusive Of Applicable Taxes)

Will be deducted upfront from loan amount.

Bounce charges

Rs. 700 to Rs. 1,200/- per bounce

“Bounce charges” shall mean charges for (i) dishonor of any payment instrument; or (ii) non-payment of instalment (s) on their respective due dates due to dishonor of payment mandate or non-registration of the payment mandate or any other reason.

Part-prepayment charges

Full Pre-payment:

  • Term Loan: Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount as on the date of full pre-payment

  • Flexi Term (Dropline) Loan: Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount, as on the date of full prepayment.

  • Flexi Hybrid Term Loan: Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount, as on the date of full prepayment.

Part Pre-payment

  • Up to 4.72% (Inclusive of applicable taxes) of the principal amount of Loan prepaid on the date of such part Pre-Payment.

  • Not Applicable for Flexi Term (Dropline) Loan and Flexi Hybrid Term Loan.

Penal charge

Delay in payment of instalment(s) shall attract Penal Charge at the rate of up to 36% per annum per instalment from the respective due date until the date of receipt of the full instalment(s) amount.

Stamp duty (as per respective state)

Payable as per state laws and deducted upfront from loan amount.

Annual maintenance charges

Term Loan: Not applicable

Flexi Term (Dropline) Loan:

Up to 0.295% (Inclusive of applicable taxes) of the Dropline limit (as per the repayment schedule) on the date of levy of such charges.


Flexi Hybrid Term Loan:

Up to 0.472% (Inclusive Of Applicable Taxes) Of The Dropline Limit During Initial Tenure. Up to 0.295% (Inclusive Of Applicable Taxes) Of Dropline Limit During Subsequent Tenure

Credit guarantee scheme feeUp to 1.18% p.a. (pro-rated daily till 31st March) (inclusive of all applicable taxes) of the loan amount
Credit guarantee scheme renewal feeUp to 1.18% p.a. (inclusive of all applicable taxes) on the outstanding loan amount as on April 01 of the subsequent Financial Year.
*Renewal Fee to be collected only for 3 subsequent financial years.
 
**If the Remaining Tenure is less than 12 months, the CG Fee in subsequent years shall be charged prorated.

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Frequently asked questions

Overview

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Personal loan details

Personal loan

What do you mean by a personal loan?

A personal loan is an unsecured loan that provides quick funds for various needs without requiring collateral. The personal loan definition covers its flexible usage, while details about personal loans highlight eligibility, interest rates, and repayment terms.

Yes, personal loans may have fees associated with them, such as origination fees, prepayment penalties, late payment fees, and sometimes annual fees. It's essential to carefully review the terms and conditions before borrowing.

With a Bajaj Finance Personal Loan, you can get the funds within 24 hours* of approval. Check your offer in just 2 steps and apply online to get our loan.

*Terms and conditions apply.

Yes, some personal loans have foreclosure charges, also known as prepayment penalties, which are fees charged for paying off the loan before the agreed-upon term.

Yes, you can apply for a joint personal loan with a co-borrower. This improves your chances of approval and may also qualify you for a higher loan amount.

Personal loan risk refers to the chance of defaulting on repayments, which can harm your credit score and financial health, impacting future borrowing ability.

Personal loans can be expensive if interest rates are high. The cost depends on your credit score, loan amount, and repayment term, but it is manageable with careful planning.

The minimum salary typically required to qualify for a personal loan differs based on the lender's criteria. Check your eligibility in just 2 steps and plan your expenses comfortably.

With a Bajaj Finance Personal Loan, you can get funds up to Rs. 55 lakh. Check your eligibility for personal loan using just mobile number and OTP – 100% online process.

Salary requirements can vary. It’s important to review the eligibility criteria and terms and conditions before submitting your personal loan application.

Yes, taking a personal loan can be useful for managing planned or unexpected expenses when you need additional funds. It can help cover needs such as medical costs, education, travel or home repairs. Before applying, compare the interest rate, EMI, tenure and applicable charges to ensure comfortable repayment.

A personal loan can have a fixed or variable interest rate, depending on the lender and loan agreement. A fixed rate generally remains unchanged during the agreed tenure, while a variable rate may change based on applicable terms. Borrowers should check the loan agreement for the applicable interest rate structure.

Taking a personal loan can be advisable when it meets a genuine financial need and the repayment fits comfortably within the borrower’s budget. Before applying, consider the loan amount, interest rate, tenure, EMI and applicable charges. Borrow only what is required and review the loan terms carefully.

A personal loan may help consolidate existing debt, depending on the interest rate, repayment terms and your financial situation. Before applying, compare the total cost of the new loan with your existing debt and ensure the EMI fits your repayment capacity.

A second personal loan may be considered if you have a genuine financial need and can comfortably manage the additional EMI. Before applying, review your existing loan obligations, income, credit profile, interest rate, tenure and applicable charges. Borrow only what you can reasonably repay without straining your finances.

Check-off in a personal loan is a repayment arrangement where the loan EMI is deducted directly from the borrower’s salary by the employer and paid towards the loan. This facility may be available only for eligible borrowers, based on the lender’s policies, employer arrangement and loan agreement.

Personal loans may be considered unsuitable when the borrowing is unnecessary or the EMI is difficult to manage. They can involve interest and other applicable charges, increasing the overall repayment cost. Borrowers should assess their financial needs, compare loan terms and ensure they can comfortably repay the loan before applying.

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Bajaj Finance Limited has the sole and absolute discretion, without assigning any reason to accept or reject any application. Terms and conditions apply*.
For customer support, call Personal Loan IVR: 7757 000 000