A personal loan is an amount of money you borrow to use for a variety of purposes. For instance, you may use a personal loan to consolidate debt, pay for home renovations, or plan a dream wedding. Banks, credit unions, and online lenders can offer personal loans. The money you borrow must be repaid over time, typically with interest. Some personal loan lenders may also charge fees for their loans

Key Takeaways

• Personal loans are loans that can cover a number of personal expenses. 
• You can find personal loans through banks, credit unions, and online lenders. 
• Personal loans can be secured, meaning you need collateral to borrow money, or unsecured, with no collateral needed. 
• Personal loans can vary greatly when it comes to their interest rates, fees, amounts, and repayment terms. 

How a Personal Loan Works?

A personal loan allows you to borrow a lump sum of money to pay for a variety of expenses and then repay those funds in regular payments, or installments, over time. For example, you might use a personal loan to cover:

• Moving expenses
• Debt consolidation
• Medical bills
• Wedding expenses
• Home renovations or repairs
• Funeral costs
• Vacation costs
• Unexpected expenses

Personal loans are different from other instalment loans—such as student loans, car loans, and mortgage loans—that are used to fund specific expenses like education, vehicles, or homes.

Types of Personal Loans

Personal loans may be secured or unsecured. A secured personal loan requires some type of collateral as a condition of borrowing. Comparing the rates for secured loans from the best lenders is advisable. For instance, you may secure a personal loan with cash assets, such as a savings account or certificate of deposit (CD), or with a physical asset, such as your car or boat. If you default on the loan, the lender could keep your collateral to satisfy the debt.

An unsecured personal loan requires no collateral to borrow money. Banks, credit unions, and online lenders can offer both secured and unsecured personal loans to qualified borrowers. Banks generally consider the latter to be riskier than the former because there’s no collateral to collect. That can mean paying a higher interest rate for a personal loan.

Documents

• Passport Size photographs
• Last 1 months’ salary slip
• Proof of Identity and residence: Voter ID, Passport, Driving Licence, Job card issued by NREGA, Letter from National Population Register, Proof of possession of complete Aadhaar number (Any One)
• Bank statement for last 3 months with income/salary credits