What is a personal loan?
A personal loan is money you borrow from a bank or NBFC without pledging any asset. You repay it in fixed monthly instalments over a chosen tenure. It is one of the most common ways Indians fund weddings, medical treatment, travel, or consolidate expensive credit-card debt.
Last updated: 15 June 2025
How a personal loan works
You apply with a bank, submit KYC and income proof, and the bank approves an amount based on your salary, credit score, and existing obligations. Once approved, the full amount is credited to your account and you repay through equated monthly instalments (EMIs) that include both principal and interest.
Key features to know
- Unsecured: no collateral required
- Fixed EMI over the tenure (usually 1 to 5 years)
- Interest rates from about 10.5% to 24% p.a. depending on your profile
- Loan amount ranges from ₹50,000 to ₹40 lakh at most banks
- Processing fee of 0.5% to 2.5% of the loan amount
Common uses
- Wedding or family functions
- Medical emergencies not fully covered by insurance
- Travel or education-related expenses
- Consolidating higher-cost credit-card debt
- Home renovation or one-off large purchase
Costs beyond the interest rate
The advertised interest rate is not the full cost. Add processing fee, GST on processing fee, potential foreclosure or part-payment charges, and any bounce charges on missed EMIs. Always ask for a written schedule of charges and compute the annual percentage rate (APR).