What is a Personal Loan? Definition & Benefits

Today, an increasing number of people are applying for Personal Loans to meet their larger expenses. One of the reasons for the significant rise in the growing popularity of Personal Loan is that being an unsecured loan, it does not require any collateral and the processing time is quick. You can easily avail of a Personal Loan from any bank or a non-banking financial company of your choice. With the advent of the online services offered by the financial institutions, you can get the money within 48 hours.

What Is Personal Loan?

Personal Loan is an unsecured credit provided by financial institutions based on criteria like employment history, repayment capacity, income level, profession and credit history. Personal Loan, which is also known as a consumer loan is a multi-purpose loan, which you can use to meet any of your immediate needs.

How Do Personal Loans Work?

A Personal Loan allows you to borrow a specific amount from the bank to meet various financial needs. The process starts with submitting a loan application through ICICI Bank website or the iMobile app. After the bank verifies your eligibility and approves the application, the loan amount is credited to your Savings Account.

Repayments are made through fixed EMIs covering principal and interest. This simple Personal Loan definition highlights how borrowing works for various financial needs.

What are the Types of Personal Loans?

Here are the key types of Personal Loan that you can get from ICICI Bank:

1. Personal Loan for Travel

Fund your dream vacation with a travel loan. It can cover flights, hotels, and other travel costs. This loan helps you explore the world without dipping into your savings, making your trip stress-free and enjoyable. This gives you clarity about Personal Loan information for travel needs.

2. Personal Loan for Medical Emergency

When a medical emergency strikes, this loan provides quick cash for hospital bills, treatments, or medicines. It acts as a financial safety net, ensuring you get the care you need without worrying about the immediate cost.

3. Personal Loan for Home Renovation

This loan helps you pay for home upgrades, repairs, or redecoration. It gives you the freedom to create your perfect living space. Whether it's a new kitchen or a fresh coat of paint, a Personal Loan can bring your vision to life.

4. Personal Loan for Education

A Personal Loan for students can help with university fees, books, and living expenses. It provides the financial support you need to focus on your studies and achieve your academic goals without money being a worry.

5. Personal Loan for Marriage

Planning a wedding can be expensive. A Personal Loan for marriage helps cover costs like the venue, catering, and decorations. This way, you can enjoy your special day without the financial stress. This is a practical Personal Loan definition in action.

What Are the Benefits of Availing of a Personal Loan?

• Unlike other types of loans like Home Loan or Gold Loan, where you must provide several documents, Personal Loans require minimum documents and the approval process is quick.
• With various financial institutions offering Personal Loan online services, the loan amount is disbursement within a few hours provided the lender is convinced of your repayment capacity.
• Another significant feature of Personal Loan is that the lenders offer you the flexibility to choose your loan tenure. Usually, Personal Loan tenure ranges from one to five years. So, you can select the loan term based on your repayment capacity. You should opt for a shorter loan, so that you can save on the interest payment and repay the amount faster.

What Is the Maximum Amount That You Can Borrow?

The maximum amount that you can avail depends on your income level, your profession and the lender’s assessment of your loan application. Generally, the lenders sanction the loan based on their calculation, so that the EMI is not more than 40% - 50% of your monthly income. Also, the lenders consider if you have any dues while calculating the loan amount.

If you are a business owner or self-employed, the lender will determine the loan amount based on the profits earned and recorded in the profit and loss statement. If you are a salaried professional, the lender will determine the amount based on your salary and other liabilities.

Is It Possible to Apply for a Joint Personal Loan?

Yes, you can apply for a Personal Loan jointly with your spouse, or any other family members like parents or siblings. One of the benefits of applying for a Personal Loan with a co-borrower is that the lenders will consider both the applicants’ income while determining the loan amount. This means that you can apply for a higher loan. However, you must know that if the co-borrower has a poor credit history, there is a risk that the lender might reject your loan application.

Things to Consider Before Taking a Personal Loan

Below are some of the important things to know while taking out a Personal Loan:

• Check the EMIs for the loan, so that you can be clear whether you can afford it. Make sure the EMI fits comfortably into your budget without causing financial strain.
• Check all costs and don't just look at the interest rate. Consider all fees and charges to know the total cost of the loan.
• Ask yourself if the loan is for an essential need, like an emergency, or a luxury. It's best to use it for important things.

What are the Interest Rate & Tenure for a Personal Loan

ICICI Bank offers a Personal Loan with attractive interest rates. The actual rate you get depends on your credit profile and financial history. You can also choose a flexible repayment tenure between 12 and 72 months, allowing you to select a plan that fits your budget perfectly. This makes managing your loan and monthly payments much easier. You can check the interest rate and tenure for the loan on the Personal Loan section on the ICICI Bank website.

What Are the Documents Required for Personal Loan Application?

Although the documentation varies from lender to lender, some of the essential documents you must provide along with your application form include:

• Proof of income (salary slip, bank account statement, ITR forms)
• Proof of residence and identity proof
• Certified copy of your degrees and licence (this is applicable only for self-employed applicants).

Are There Any Foreclosure Charges?

If you decide to prepay the loan before the end of the actual term, the lender may levy penalty charges known as foreclosure fees. This penalty usually ranges from one to two percent of the outstanding amount.

Now that you know about Personal Loans, you can compare the loan offers from different lenders and apply for a Personal Loan online, and get the amount you need to meet your expenses.

Apply for Personal Loans online to fulfil your financial needs.

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FAQ’s

What is the definition of "Personal Loan"?

A Personal Loan definition can be understood as an unsecured loan that provides a lump sum of cash. You repay this amount with interest over a fixed period, usually through EMIs.

How does a Personal Loan work?

You apply for a Personal Loan from a bank, which evaluates your credit and income. If approved, the money is deposited into your bank account. You then pay back the loan in fixed instalments called EMIs over a set term.

Why do people take out a Personal Loan?

People apply for a Personal Loan for various reasons, including medical emergencies, consolidating high-interest debt, home renovations, or covering major life events like a wedding or an urgent travel plan.