Life is not always going to go according to plan. Sometimes you get hit with a sudden medical bill, urgent repair to be done in the house or a wedding expense, or you want to upgrade your house or take that long-awaited trip. For instance, when you have not got enough money in savings, how do you deal with financial surprises?

Personal loans.

Personal loans are one of the most popular financial products of this day and age and for good reason. They’re fast, flexible and can be used to cover just about any need.

• What exactly is a personal loan?
• How does it work?
• Is it safe?
• How much can I borrow?
• Is the interest too high?
• How do I get the best offer?

This simple and realistic guide will help you explain everything you need to know.

Let’s begin!

What Is a Personal Loan?

A personal loan is one that is short to medium term and you can use it for any personal purpose.

You don’t need:

• Collateral
• Property
• Security

It’s a loan that’s not secured, which means that if you need the loan, lender gives it based on your:

• Income
• Credit score
• Repayment history
• Financial stability

Personal loans are flexible. Whether it’s something urgent or something planned, this one loan can help you to manage it all.

Why Do People Go For Personal Loans?

In India, personal loans are quite popular because there are many reasons:

1. No Collateral Required

You are not required to pledge your gold, vehicle or property. Your Creditworthiness is Trusted By the Lender.

2. Fast Approval

Digital lenders, like the ones which are available through CreditMitra, usually approve the loans within minutes.

3. Flexibility of Use

The money can be used for whatever:

• Medical emergencies
• Education
• Wedding
• Travel
• Home renovation
• Debt consolidation
• Business needs
• No restrictions.
• Fixed EMIs

You reasonably pay every month with a single amount by fixed EMI. Planning is easier this way.

4. Digital Process

From application – approval – disbursal

Everything happens online.

• No paperwork.
• No branch visit.
• Just your phone is enough.

How Does a Personal Loan Work?

Let’s break it down:

Step 1: You Apply

Using CreditMitra app you fill in simple data:

• Income
• Employment
• PAN
• Bank statements

Step 2: Lender Analyses your Profile.

They check:

• Credit score
• Repayment history
• Salary or business income
• Existing loans
• Risk category

Step 3: The Loan Is Approved

You receive:

• Sanctioned amount
• Tenure
• Interest rate
• EMI info

Step 4: Money Is Disbursed

The amount is credited directly into your bank account.

Step 5: You Repay in EMIs

There is a facility that every month you have an auto-debit of your EMI.

Simple and transparent.

Can you use a personal loan?

Here are the most common uses:

1. Medical Emergencies

There can be a lot of hospital bills to pay. A personal loan can be used to get quick money without having to deal with a lot of paperwork.

2. Home Renovation

Whether paint, repairs, furniture or interiors everything can be done without breaking the bank.

3. Education

The financial barrier is easy to overcome whether you are taking a short course or on a higher education course.

4. Debt Consolidation

The interest rate on a personal loan can be reduced by consolidating several loans or credit card dues into one.

5. Travel

It is never too late to go on a dream vacation.

6. Business Needs

Personal loans are used by many people who are self-employed for:

• Inventory
• Equipment
• Working capital
• Big Purchases

How Much Loan Can You Get?

Most of the lenders provide 20,000 to 20 lakh based on your profile.

Your approval amount depends upon:

• Income
• Age
• Credit score
• Existing EMIs
• Employer category
• Bank statements

A simple thumb rule is:

 Your EMI must not be more than 40-50% of your monthly income.

Interest Rates on Personal Loans

Interest rates depend on:

• Credit score
• Income stability
• Employer reputation
• Loan amount
• Tenure

Rates usually vary from 10-30% per annum.

Good credit = low interest

Poor credit = high interest

Eligibility for a Personal Loan

All lenders have a bit different rules, however, as a rule, you require:

• Age: 21-60
• Minimum income (varies depending on the city)
• Stable job or business
• A good credit score
• Valid KYC documents
• Bank statements (3-6 months usually)

Documents Needed (Mostly in Digital Format)

Most digital lenders accept:

• PAN Card
• Aadhaar Card
• Salary slips (for salaried)
• ITR / GST (for self-employed)
• Bank statements

The process is now paperless.

What Is the EMI & How Is It Calculated?

The monthly amount of payment is referred to as EMI (Equated Monthly Instalment).

It depends on:

• Loan amount
• Interest rate
• Tenure

Longer tenure = lower EMI

Shorter tenure = High EMI and less amount of total interest

Example:

1 lakh loan – 12% interest – 12 months

EMI 8,885

CreditMitra helps you to calculate this at an instance.

Fixed Interest vs Floating interest

Most personal loans are available at fixed rates of interest, i.e. your EMI remains constant.

Floating interest is not common with personal loans.

How to Increase Your chances of Approval

Here are practical tips:

• Maintain a Good Credit Score
• 750+ is ideal.
• Avoid Making Too Many Loan Applications
• Multiple inquiries result in fewer scores.
• Keep Your Loan Ratio Low
• If there are too many EMIs already running, your application may be rejected by the lenders.
• Stable Income Helps
• More stability = Better offers.
• Choose the Right Lender
• Pick lenders that suit you, CreditMitra.

Common Mistakes People Make

Avoid these:

• Taking greater loans than required
• Ignoring the interest rate
• Missing EMIs
• Taking out loans without determining if you can afford them
• Making loans from unregistered apps
• Not comparing lenders
• These mistakes result in debt traps, watch out.

Pros of Personal Loans

•  Quick and easy
•  No collateral
•  Multi-purpose
•  Flexible tenure
•  Transparent EMIs
•  Digital documentation

Cons of Personal Loans

•  Higher interest rate than secured interest rate
•  High Penalties in case of missing EMIs.
•  Bad credit score= expensive offers

That’s why it is important to choose the correct lender.

How to Apply for Personal Loan at CreditMitra

The whole process is made easy and swift with CreditMitra.

Step 1: Log in to the App

Please enter your Mobile number and verify the same.

Step 2: Complete Basic Details

Loan purpose, income, employment & PAN.

Step 3: Upload KYC Documents

Paperless and quick.

Step 4: To receive real-time loan offers.

Compare:

• Interest rate
• Tenure
• EMI
• Charges

Step 5: Select the Best Loan & Making an Application

Minutes upon approval, the money is deposited in your bank account.

Borrow Smart with CreditMitra.

In addition to comparing loans, CreditMitra provides an entire financial solution.

Using the app, you can:

• Check your credit score
• Answer Improvise your score with insights
• Compare personal loans
• Get instant offers
• Track your EMIs
• Avoid late payments
• Learn financial concepts in an easy manner

This means: More effective decisions, better offers, and more effective money management.

Loans Tip: Safeguards While Taking Personal Loans

•  Borrow only those lenders that are registered by RBI. 
•  Never share your OTP 
•  Read terms carefully 
•  Avoid high interest rate loans that you cannot afford 
•  Do not take loans to pay off other unnecessary loans

Frequently Asked Questions

• Is it possible to get a personal loan with a low credit score?
• Yes, but the rate of interest will be higher.
• What happens if I miss an EMI?
• Your credit score will drop and you will have to pay penalties.
• Can self employed get personal loans?
• Absolutely, with the proof of income.
• Is there a prepayment charge?

CreditMitra shows clearly, some of the lenders are charging it while some are not.

Conclusion: Personal loans bring you freedom – use it wisely

A personal loan is one of the most flexible forms of financial tool available. You can use it for:

• Emergencies
• Life events
• Purchases
• Travel
• Education
• Business needs

But responsible borrowing is the key.

Borrow what you need. Choose a trusted lender. Pay EMIs on time. Research your options.

CreditMitra gives you full guidance, transparency and smarter financial decisions – All in One.