EMI: ₹5,935.09 / month
Total Payable Amount: ₹7,12,210.61
Total Interest Payable: ₹2,12,210.61
| No. | Year | Opening Balance (₹) | Principal Paid (₹) | Interest Paid (₹) | Total Paid (₹) |
|---|
| 1 | 2025 | ₹5,00,000 | ₹50,000 | ₹37,500 | ₹87,500 |
| 2 | 2026 | ₹4,50,000 | ₹50,000 | ₹33,750 | ₹83,750 |
| 3 | 2027 | ₹4,00,000 | ₹50,000 | ₹30,000 | ₹80,000 |
| 4 | 2028 | ₹3,50,000 | ₹50,000 | ₹26,250 | ₹76,250 |
| 5 | 2029 | ₹3,00,000 | ₹50,000 | ₹22,500 | ₹72,500 |
| 6 | 2030 | ₹2,50,000 | ₹50,000 | ₹18,750 | ₹68,750 |
| 7 | 2031 | ₹2,00,000 | ₹50,000 | ₹15,000 | ₹65,000 |
| 8 | 2032 | ₹1,50,000 | ₹50,000 | ₹11,250 | ₹61,250 |
| 9 | 2033 | ₹1,00,000 | ₹50,000 | ₹7,500 | ₹57,500 |
| 10 | 2034 | ₹50,000 | ₹50,000 | ₹3,750 | ₹53,750 |
Personal Loan: Everything You Need to Know
A personal loan is an unsecured loan offered by banks and financial institutions to meet urgent financial needs. Unlike a home or car loan, it does not require collateral and can be used for various purposes like medical emergencies, weddings, education, travel, or debt consolidation.
How Does a Personal Loan Work?
- Applicants apply online or at a bank by submitting identity, income, and employment details.
- The lender evaluates the credit score (CIBIL), income, and repayment capacity.
- Once approved, the loan amount is disbursed within 24-48 hours in most cases.
- Repayment happens through EMIs (Equated Monthly Installments) over a tenure of 1 to 5 years.
Pros and Cons of Personal Loans
Pros
- No collateral required – easy approval process.
- Quick disbursal – funds are available within a few hours or days.
- Flexible usage – can be used for any personal or emergency needs.
- Minimal documentation – often requires only KYC and income proof.
Cons
- High interest rates compared to secured loans.
- Shorter repayment tenure – higher monthly EMI burden.
- Strict eligibility – low CIBIL score may lead to rejection or higher interest.
- Prepayment charges may apply if closed before the tenure ends.
Interest Rate & Key Factors Affecting Approval
Personal loan interest rates vary based on multiple factors. They typically range from 10% to 24% per annum, depending on the borrower's credit profile. Factors affecting approval and rate include:
- CIBIL Score: A score above 750 improves chances of approval at lower interest rates.
- Income Level: Higher income increases eligibility and lowers risk for lenders.
- Debt-to-Income Ratio: If existing loans take up too much income, approval may be difficult.
- Employment Stability: Salaried individuals with steady jobs get better offers than freelancers or self-employed borrowers.
Who is Eligible for a Personal Loan?
- Indian residents aged 21-60 years.
- Minimum monthly income of ₹15,000 to ₹25,000 (varies by bank).
- CIBIL score of 700+ for best interest rates.
- Stable employment or business income history.
Personal Loan Rules & Regulations in India
- The loan tenure typically ranges between 1 to 5 years.
- Maximum loan amount depends on income and lender policy (can go up to ₹40 lakh for salaried and ₹50 lakh for self-employed).
- Prepayment and foreclosure charges may apply (typically 2-5% of outstanding amount).
- Missed EMI payments affect credit score and lead to penalties.
Tax Benefits on Personal Loans
Personal loans usually don’t offer tax benefits. However, deductions are available in the following cases:
- For Home Renovation: If used for home improvement, interest paid can be claimed under Section 24(b) up to ₹2 lakh.
- For Business Use: If used for business purposes, interest paid can be deducted as a business expense.
Conclusion
A personal loan is a great financial tool for quick cash without collateral, but it comes with high interest rates. It’s best suited for urgent needs like medical expenses, travel, or weddings. Always compare lenders, maintain a good credit score, and choose a repayment plan that fits your financial capability to avoid debt traps.