How to apply for a personal loan?

​As with any other kind of loan (i.e., home loan, auto loan and so), your creditworthiness plays an important role in the personal loan getting approved. Lenders gauge the creditworthiness of borrowers by looking at their income details and the cr...

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Most lenders will require your income to be at a certain level to approve a personal loan.
When you apply for a personal loan or any other type of loan for that matter, it is important to know the process and have all the necessary documents handy. This will improve the chances of your loan getting approved quickly and getting a lower interest rate on the loan.

Here is the information you have to provide to a lender while applying for a personal loan and how to apply for one online.

What is a personal loan?

A personal loan is an unsecured loan taken from a bank or a non-banking financial company (NBFC) by individuals to meet their personal needs. A personal loan can be availed to meet any personal requirement such as medical expenses, home improvement, lifestyle and consumption expenses, education or professional needs, etc.

Gaurav Aggarwal, Director, said, "Personal loans are short to medium term unsecured loans without any restriction on end usage of funds. They involve quick disbursal and minimal documentation, with interest rates usually ranging widely from around 9 per cent a year to 24 per cent a year, and tenure of mostly up to 5 years. Loan amount of personal loans generally range between Rs 50,000-25 lakh. However, few lenders claim to sanction personal loans of up to Rs 40 lakh."

Interest rates payable on personal loans are generally higher than those payable on secured loans such as car or home loans.

Prerequisites for applying for a personal loan
The lender gives the loan on the basis of key criteria such as income level, credit and employment history, repayment capacity, etc.

As with any other kind of loan (that is, home loan, auto loan and so), your creditworthiness plays an important role in the personal loan getting approved. Lenders gauge the creditworthiness of borrowers by looking at their income details and the credit score.

Most lenders will require your income to be at a certain level to approve a personal loan.

"One government bank needs your monthly income to be at least Rs 15,000. A private bank asks that your monthly income be at least Rs 25,000 and you should be working for at least one year with your current employer. The eligibility criteria may be relaxed if you have ongoing relations with the bank in the form of a salary account, loan, or credit card which helps the bank establish your credentials better," says Adhil Shetty, CEO,

Your credit score also plays an important role in determining your creditworthiness.

A credit score is a three-digit number that typically ranges between 300 and 900, with 900 being the highest score possible. It is prepared by credit bureaus like TransUnion CIBIL, Experian, CRIF High Mark and Equifax.

According to the CIBIL website, the closer your score is to 900, the higher are the chances of your loan application getting approved. Generally, a credit score of 750 and above is considered to be a good score.

Other than providing details of your income and credit score, lenders also require you to complete the know-your-customer (KYC) procedure.

A salaried person will be required to provide these documents while applying for the loan:

  • Proof of Identity such as passport, driving license or PAN Card, etc.
  • Proof of address such as utility bill (not more than 3 months old), Aadhaar or Passport.
  • Income proof such as salary slips for last 3 months and latest 3 months bank statement (where salary income is credited).
  • You also need to provide 2 passport size photographs

Let us now look at how you can apply for a personal loan online.

Steps to follow while applying for a personal loan online
Most banks allow you to apply for a personal loan online through your Net banking account. Further, if you have a Net banking account, you could be eligible for a pre-approved loan as well. Generally, banks nowadays provide a pre-approved personal loan based on your credit score, income level, credit card payment history, etc.

For instance, if you are applying to ICICI Bank for a personal loan , you can follow these general steps:

Step 1: Visit the ICICI Bank's website If you are an existing ICICI customer, you can choose net banking under personal banking section and proceed to apply for a loan. You need to have a Net banking login ID and password to open your Net banking account.
Step 2: However, if you are a new customer then click on the 'Loans' tab on the website and proceed further. You will be redirected to ICICI's loan website New customers can log in via Facebook, Twitter or LinkedIn account.
Step 3: Once, you are in the loan section (either through Net banking or new customer mode), choose personal loans and click on the 'apply now' option.
Step 4: Enter all the details step by step in the personal loan application online form, upload documents and submit the same.
You must also know that the bank will assess your eligibility and may request you to submit KYC and income documents if required. Once the applicant is found eligible, the bank will credit the loan amount to the bank account of the applicant.

Step 5: If approved, the loan will get credited in the existing customer's registered bank account. For new customers, the loan amount will get credited in the bank account for which you have provided details while submitting the application form.

Steps to follow if applying for a personal loan offline
Step 1: Visit the branch office of the bank, NBFC/financial lender.
Step 2: Get the personal loan application form from the bank, NBFC/financial lender and enter all the required details.
Step 3: Submit relevant documents including your income statement, age, address and identity proof.
Step 4: The lender will verify the documents and check the eligibility of the applicant.
Once the applicant is found eligible, the loan amount will be transferred to the bank account given in the applicantion form.

Here is the table showing personal loan interest rates of top 5 banks

Personal Loan Amount


Interest rates (%)


Up to 15 Lacs

12 - 60 Months

10.75% - 21.30%


Up to 20 Lacs

60 Months

11.25% - 21.00%

State Bank Of India

>=25000 and <=20 Lacs

06 - 72 Months

9.60% - 15.65%

Punjab National Bank

Up to 10 Lacs

Up to 60 months

6.90% - 11.65%

Bank Of Baroda

>=50000 and <=10 Lacs

48 - 60 Months

10.25% - 15.25%

As on September 24, 2020| Source: ETIG Database

When you should you apply
Given that personal loans carry high-risk for the lender which is reflected in the form of a higher interest rate, this kind of loan should be your last resort once you have exhausted all other options.

Shetty said, "For instance, you may have an ongoing home loan on which you can take a top-up loan and that would likely be cheaper than a fresh personal loan, or you may have a credit card that can bridge the liquidity gap without requiring you to take a loan. It's when these options don't exist that you should consider taking a personal loan."

Those having adequate collateral can consider secured loan options like gold loans, loan against securities, etc. Aggarwal said, "Being backed by adequate collaterals, the interest rates of secured loans can work out to be lower than that of personal loans, especially for those with a poor credit score or credit profile."

Points to note
  • Compare loan options from various lenders on parameters such as interest rate, loan size, eligibility, processing fees, and other charges.
  • Many times, lenders offer personal loans at "attractive" interest rates. In such cases, do go through the fine print, i.e., you must look for hidden charges such as processing fee, application fees, and other charges applicable.
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