· What is a Personal loan?

A Personal loan is a type of unsecured loan that you can borrow from a bank or financial institution if you require funds to pay for your financial needs.

· How does a personal loan work?

You borrow a loan when you require credit. Once you submit your loan application to a lender for a personal loan, the lender verifies and approves it. Post this, the loan amount is disbursed into your bank account. Once you receive the loan amount, you will need to repay the lender via EMIs for the loan repayment tenure.

· What is the maximum amount of loan I can get?

The maximum amount of loan depends on your monthly income. In India, there are lenders who offer up to Rs. 1 Crore.

· What is a prepayment and how does it help in repaying my loan?

If you happen to get some extra money, you can pay it towards your loan even before the EMIs are due. This is called a prepayment. Every prepayment you make goes towards reducing the outstanding principal component of your loan. And since the principal reduces, your interest cost will also reduce. Also, your tenure gets shortened this way, helping you pay off the loan ahead of time.

· What is the CIBIL score required to avail a personal loan?

Usually, banks will require your CIBIL score to be above 720 to provide a personal loan. In case your credit score is less, your application may be rejected or the personal loan will be provided with high interest rates.

· What should I do if my personal loan application is rejected?

If your personal loan application is rejected, then it is mostly either due to your low credit score or you not meet the eligibility criteria. If you meet the eligibility criteria and improve your credit score, your personal loan application will not be rejected.

· Can you get a mortgage loan if you have a personal loan?

Yes, you can, but it depends on your income and your ability to pay the EMIs of both the home loan and the personal loan.

· What can a personal loan be used for?

A personal loan can be used for holidays, to start a small business, purchasing consumer goods, to purchase a vehicle, to pay friends and family, to pay medical bills, and debt consolidation.

· What is pre-approved personal loan?

A pre-approved loan is one where the customer can apply for a loan and possibly doesn’t need to submit documents or go through the verification process as he/she shares a healthy relationship with the bank as an existing customer and has a clean repayment record.

· Do personal loans offer tax exemptions?

Personal loans only offer tax exemptions if you are using the loan amount for renovation of your house, to pay for educational expenses, or to expand your business.

· How is my prepayment fee calculated?

This depends on your lender. Some lenders charge you a fixed fee for each prepayment. Others may charge you a percentage of the amount outstanding or a percentage of the amount prepaid.

· How is my prepayment fee calculated?

This depends on your lender. Some lenders charge you a fixed fee for each prepayment. Others may charge you a percentage of the amount outstanding or a percentage of the amount prepaid.

· What is the minimum salary that an individual is required to earn to apply for a personal loan?

The minimum salary requirement will vary from lender to lender. Most lenders, however, will require you to earn at least Rs.15,000. If you reside in a metropolitan city, you may have to earn between Rs.20,000 and Rs.25,000.

· What should I do if I want to repay my loan (partially or in full) during the loan repayment term?

Most lenders will allow you to make pre-payments or pre-close your loan during the loan repayment term. You will, however, have to pay a nominal charge to the lender for doing the same. Keep in mind that most lenders will only allow you to prepay or pre-close your loan after 1 year of borrowing the loan. If you want to prepay/pre-close your loan, ensure that you inform your lender of the same.

· How do I cancel my personal loan after the loan is disbursed?

You can cancel your loan application before the loan amount is disbursed into your account by submitting a written application for the same. You will also need to pay the loan cancellation fee to the lender. Once the loan amount has been disbursed into your account, most lenders will not allow you to cancel it. You can, however, pre-close the loan. If you are thinking of cancelling your loan because you pay a high interest rate on your loan, you can consider transferring your outstanding loan balance to another bank or financial institution.

· How often should I repay my Personal loan?

This depends on the lender you choose. Normally, every personal loan repayment is calculated on the basis of a monthly repayment pattern. It includes the principal and interest components that you’re expected to repay each month.

· Are there any charges for prepaying my personal loan?

Some lenders may ask you to pay a fee if you want to prepay a part of your loan. Others may either waive the fee or may not have prepayment charges at all.

· When will a bank reject my personal loan application?

A bank can reject your personal loan application if you apply for a loan for which you are not eligible. It can also reject your application if you fail to submit the documents it requires.

· What happens if a personal loan is not paid?

If the borrower fails to pay the EMI, the bank charges a penal interest on the overdue amount. Financial lenders usually charge a penal interest of 2%-3% per month of the overdue amount.

· Where can I get a personal loan with bad credit and no checking account?

It could be hard to get a traditional personal loan from a bank with a poor credit score and no checking account. However, certain lenders offer types of personal loans such as payday loans for those with a poor credit score. That said, the interest charged will be quite high.