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What Is A Personal Loan & How To Get One

What is Personal Loan?

A personal loan is a smaller loan than a mortgage and is generally used to finance a car or other vehicle, renovations to a home, consolidation of debt, to finance a vacation of one kind or another, and a great number of other things.

Personal loans are sanctioned for a variety of purposes; be it for a dream vacation, child’s education or home renovation. Moreover, the good part is that you don’t have to disclose the purpose of your expenditure. It can help you get out of a tight spot or make that long-standing dream come true. This type of loan program is available for both salaried and self-employed individuals. Banks have a fairly easy procedure for applying a personal loan. Nowadays, you can also go to online portals to fill the form. Personal loans are offered anywhere between the range of 1 lacs to 15 lacs depending upon your requirement and fulfilment of eligibility criteria.

Types of Personal Loans

Personal loans are categorised into two domains, namely, secured personal loan and unsecured personal loan.

Secured personal loans are loans which are allotted against a collateral security. These schemes are better suited for you if you want to take a bigger loan amount and a longer repayment schedule. Hence, this kind of loan program gives you quick and sufficient monetary assistance in regard with your needs. The interest rates are also on the lower side as compared to the unsecured variant. Another nice thing about this type of loan is that you can get a quick and easy sanction owing to the fact that you have already placed a collateral security. Banks are more assured of their investment while sanctioning a secured loan application.

Unsecured loan program is the opposite of the secured one on almost all counts. In this type of program, you are not required to pledge anything as a collateral though a high credit score is desirable. Unsecured personal loans are ideal for those who can’t place a guarantee against their loan claim. Since there is no security involved, this scheme is generally lent out for a shorter repayment tenure and with a slightly higher interest rate. However, you can get your application sanctioned just as quickly as the secured type once you fulfil the necessary criteria.

Tenure and Interest Rates

In both variants, secured and unsecured, the repayment schedule varies according to the loan amount, interest rate and other factors. Repayment schedule usually varies between 12 to 60 months across different banks. You could also ask for an even longer schedule but that would entail a higher interest amount too. It would be helpful to evaluate different offers across various banks before choosing an appropriate loan program. Personal loans are provided at a higher interest rate than other types of loan programs. Thus, the research becomes all the more important in order to find an offer which does not become a burden on your monthly budget.

Personal loans are one of the easiest forms of finance that are available today. The advantage of personal loan lies in solving unsorted personal expenses. Just make sure you are familiar with your needs and budgetary limitations before availing such a loan.

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