How to apply for a personal loan| North Loop Official Blog
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17 Sep 2020

How to apply for a personal loan

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Personal loans come in clutch for those in financial distress, with interest amounts significantly lesser than what is charged on credit cards. Most banks offer personal loans without collateral/ security and even to individuals with low credit scores as long as they satisfy the terms and conditions of the bank.

What are loans?

Loans are financial instruments offered by banks and other Non-Banking Financial Companies (NBFCs) in exchange for repayment of the principal amount coupled with an accumulated interest amount, which is a profitable source for banks. Loans are offered to people with immediate financial needs/emergencies, offering flexibility to people to repay the entire amount on a later date or in flexible monthly installments.

Most banks require individuals to provide collateral as a security of repayment. Banks also look into credit scores (CIBIL scores) of individuals to check their creditworthiness and then take a decision to sanction loans. In India, loans are conventionally offered to individuals with CIBIL scores over 700 points, whereas some banks also take a risk to sanction loans to people with low credit scores in exchange for an exorbitantly high-interest amount.

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Types of Loans Offered-

Banks and other financial institutions offer two types of loans: secured loans and unsecured loans.

Secured loans-
These are the type of loans offered with a requirement of a collateral or security of repayment. These could be any assets such as a house, commercial property, land, gold articles, vehicles such as cars, etc. If the borrower of the loan defaults on repayment, the bank has every right to repossess the asset pledged.The types of secured loans are car loans, home loans, gold loans, etc.

Unsecured loans-
These are the types of loans offered without a requirement of loans. The amount of loan sanctioned is also significantly lesser than secured loans as they would majorly depend on the credit scores/CIBIL scores of individuals.The type of unsecured loans offered are credit cards, bank overdrafts, personal loans, etc.The rate of interest charged would vary across banks and other financial institutions and would also majorly depend on the creditworthiness of individuals.

What are Personal Loans-

In simple terms, personal loans are unsecured loans sanctioned to individuals without collateral, which would cater to one’s personal expenditure during financial emergencies. The rate of interest charged would vary depending on the bank and one would require to have a very good credit history or credit score (ideally over 700 CIBIL score) to get a personal loan sanctioned.
Some banks even take a huge amount of risk by sanctioning loans to people with low credit scores in exchange for high-interest amount.

Personal loans sanctioned are calculated based on an individual’s monthly income/ annual income and offer loans in such a way that the individual’s monthly outgo in the form of repayment does not exceed more than 40-50% the borrower’s monthly income.
In the case of self-employed individuals/businessmen, the loans sanctioned are calculated based on the average profits made by the business as recorded in the financial records.

Banks offering personal loans in India-

Given below is the list of major banks offering personal loans at competitive rates.

Major Banks offering personal loans in India
Bank NameInterest rate P.ALoan amount offered
AXIS Bank12% to 24%Rs. 50,000 to Rs. 15 Lakhs
Bank Baroda10.5% to 12.5%Rs.1 Lakh to Rs. 10 Lakhs
Citi Bank9% to 14.24%Rs. 10,000 to Rs. 30 Lakhs
ICICI Bank12.75% to 19%Rs. 50,000 to Rs. 20 Lakhs
HDFC Bank10.75% to 22%Rs. 50,000 to Rs. 15 lakhs
HSBC Bank10.50% to 17.84%Upto Rs. 30 Lakhs
SBI9.60% onwardsUpto Rs. 20 Lakhs
Kotak Mahindra Bank10.75% onwardsRs. 50,000 to Rs. 20 Lakhs
Punjab National Bank8.80% onwardsRs. 50,000 to Rs. 5 Lakhs
Yes Bank10.75% onwardsRs. 1 Lakh to Rs. 40 Lakh

How to apply for a personal loan?

Applying for a personal loan is a rather quick and easy process across major banks in India. One can simply download the online loan app and apply for a personal loan on the same.

Once the online loan app of a preferred bank is downloaded, one would need to login and enter their personal details as well as employment details. After that, one needs to select the loan amount as well as the tenor, followed by the provision of all necessary government-issued documents, such as a PAN card and AADHAR card. After verifying the documents and the credit scores of the individual, a representative from the bank will get in touch with the borrower and verify and confirm the same. After this, the loan amount gets disbursed.
In India, various banks and NBFCs offer comprehensive personal loans for various needs, up to the discretion of the borrower.

Banks generally offer loans at competitive interest rates, however, the loan amount that would be disbursed varies from bank to bank as well the tenors.
One would need to carefully research their alternatives and shortlist the best-suited personal loan options.

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.