Personal Loan

Loans & Credit

A personal loan is an unsecured loan (no collateral) available from banks and NBFCs for any purpose -- medical emergency, wedding, travel, debt consolidation. Carries the highest interest rates among retail loans (11-24%) due to no collateral.

In detail

Interest rates: PSU banks 11-14%, private banks 13-18%, NBFCs 16-24%, digital lenders/apps 20-36%. Always calculate total interest paid, not just monthly EMI.nnWhen personal loan is acceptable: medical emergency, one-time wedding expense, consolidating higher-cost credit card debt (at lower personal loan rate). Never for: vacation, phone upgrade, daily expenses -- these indicate budgeting failure.

Formula

Total interest = (EMI x months) - Principal On Rs 3L at 14% for 3 years: EMI Rs 10,248. Total paid Rs 3,68,928. Interest Rs 68,928 (23% of principal).

Real-life example

🇮🇳 India example

Meera consolidates Rs 1.5L credit card debt (42% rate) into a personal loan at 14%. Monthly saving: credit card minimum payment Rs 7,500 (mostly interest) vs personal loan EMI Rs 5,141 (all principal+interest). She saves Rs 2,359/month and pays off debt in 3 years vs 7+ years on credit card minimum payment.

Frequently asked questions

Personal loan or loan against property -- which is better? ▼

LAP: 8-11%, requires property, longer process, higher amounts. Personal loan: 14-22%, instant, no collateral, smaller amounts. For large amounts where property is available: LAP wins clearly on cost. For Rs 5L and below: personal loan for simplicity.