Personal Loan - Take it or Kick it?

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Personal Loan - Take it or Kick it?

Praveen Sharma
Friday, February 22, 2019

We all dream of going to a good getaway somewhere in Santorini or Goa or Sikkim. At some point in time, we dream to purchase our dream car or buy our own dream home. But that dream remains a dream because of a lack of financial conditions, and when we do not have enough money we go for a loan. Yes, personal loan it is.

Whether you want to repair your home or want to spend it on luxury items, a personal loan is here as a savior. Apply for a loan, take it and spend it. Sounds simple, isn't it? But as a proverb says "all that glitters is not always gold". But the question arises here is how to improve my cibil score? So before dreaming to purchase your dream thing with a personal loan or getting wanderlust with that lump sum, let us know everything we can know about this "golden card".

Continue Reading: Credit bureaus in India

What is a personal loan?

Any loan that you take for yourself comes under a personal loan. If you are finding difficulty in meeting both ends with your current financial status, you can take a personal loan. But let me make a point clear that this is usually the unsecured loan because the lenders give you their money on the basis of your promise that you will pay it back with interest.

This loan is sanctioned to you without any security and with minimum documents.

How does personal loan work?

Well, the mechanism is very simple. You go to any financial agency or lender or bank for a loan. They provide you money that you require with some interest rate that you need to pay in a given period of time called as installments. The rate of interest is determined by the quality of your credit score. Better your credit score is, lesser are the interest rates and higher are the chances for you to sanction a loan.

Before applying for a personal loan, make sure you clear all your doubts regarding this. Some basic questions that need to be cleared before are

i. What is the interest rate?

ii. What is the charge of late fees (installment)?

iii. What is the timeline of this loan?

iv. Is the rate fixed or does it vary?

Make sure to clear all things before signing for a personal loan. Interest rates and terms of loan varies from bank to bank.

When to opt for a personal loan?

Usually, personal loans are the easiest loan to take, but they have a high-interest rate than other loans. But the rate is lower than for credit cards. A personal loan is called personal because you can use it the way you want. Many people use this loan as consolidation or I must say to repay their remaining loans or any remaining debts. Before buying a loan, check out rates at every place possible and then choose the best one.  So if you want to use it as a consolidation or to pay your credit card debt or for your medical emergency go for a personal loan.

What things should be taken care of?

While applying for a personal loan, be cautious. Sometimes precaution is better than cure. When any financial institute insists you to buy another product such as insurance or anything else with a personal loan, try to apply it at other banks.

Also when they charge you fess for prepayment, better look for other banks. These type of schemes only costs you more money no benefit.

What is considered for applying for a personal loan?

Generally, all the banks rely on your credit report for sanctioning your personal loan. So make sure that your credit report is excellent. The score is usually around 750 for loan eligibility. But in case of a personal loan, it is advisable to score better than this, as the banks very much rely on this in this case.

Make sure the quality of your report and score is as good as possible. If it is not good, try to boost your score.

When not to go for this loan?

As you have now seen that when you can opt for a personal loan, we will put some light on when not to go for a personal loan.

i. Credit reconstruction

It happens sometimes that we find difficulty in repaying our debts that indirectly affect our credit score. But do not go for a personal loan if you want to boost your score because of this. Instead, try to make all the due pay payments on time to increase the score.

ii. Heavy purchasing

You are a shopaholic and cannot resist shopping for anything you see. Taking a personal loan for heavy purchases or shopping is not all advisory. Instead, try to save and spend as much as you can from savings. If possible try to reduce your expenditure to avoid the situation of taking a personal loan.

Applying loan for such reasons is not forbidden, but it can show your immaturity to bankers if they came to know which eventually affects your quality of credit report.

From where can I get a personal loan?

Getting a personal loan is not a tough task if done rightly. Almost every bank provides a personal loan. Banks like HDFC Banks, Axis Bank, ICICI Banks that are private can give you a loan. Even some online financial companies like SoFi and Avant provides you this facility.

At what time can I get my loan?

This varies from bank to bank and scheme to scheme. Some get funds in 4 hours while some get funds in 4 weeks. That depends on the bank and their policies.


Opting for a personal loan or not is all on you, but you should know when to apply for a personal loan. Some lenders may feel risky to lend money and hence that you take utmost care while lending your money to a borrower if you are lending. Give it to a trustworthy person. If you are a borrower make sure that lender does not harass you afterward.

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