Different Types of Personal Loans in India

You must be wondering about the soaring popularity of personal loans in India in recent times. It has become the most preferred choice of financing by the middle-class population in the country. It is no longer an elaborate affair to avail a personal loan. Many non-banking financial institutions and private lenders have opened the door of personal finance for people with different earning classes. They have covered a huge market segment with competitive interest rates and simple lending criteria.

Nowadays, you can avail an instant loan without a perfect CIBIL score. NBFCs offer several types of personal loans that cater to a wide group of people. Personal loans ease the financial burden of an individual and give a sense of relief at crucial times.

Table of Content:

• Personal Loan Eligibility and Accessibility
• Types of Personal Loans
• Conclusion

Personal Loan Eligibility and Accessibility

In the event of an immediate fund requirement, an individual can apply for a personal loan with minimal documentation. Whether a person is living in India or an NRI, personal loans are available for everyone.

However, there is an upper cap on the personal loan amount that can be availed by NRIs. Several factors affect the personal loan eligibility of a person, like the source of income, existing debt, credit score, and age. All these factors have a cumulative impact on the amount that will be approved by the lender and the interest rate. Let's see the types of personal loans available in India:

Types of Personal Loans

Personal loans are among the most versatile financial products that can be used for a variety of purposes. There are various loan schemes designed to suit the diverse financing needs of individuals. Depending on factors like intended purpose and suitable applicants, these loans can be divided into several different types, with each one having its unique features and benefits.

Let's see a few common types of personal loans:

Medical Emergency Loan:

Key Highlights:

• Quick fund disbursal
• No complex documentation required

Debt Consolidation Personal Loan:

Key Highlights:

• Lower rate of interest
• Flexible loan tenure
• Helps in streamlining finances

Home Renovation Loan:

Key Highlights:

• Quick processing
• Tax benefits
• Easy eligibility
• Higher loan amount

Education Loan:

Key Highlights:

• Can be availed by a student or his/her parents.
• Easy repayment
• Flexible loan tenure

Travel Loan:

Key Highlights:

• Complete flexibility in terms of fund usage
• Loan tenure ranging from 1 year to 5 years

Wedding Loan:

Key Highlights:

• Can be availed by either the bride/groom-to-be or any family member
• Loan amount determined by the applicant's repayment capacity
• Longer loan repayment period

Pension Loan:

This type of loan is available for individuals who receive a monthly pension as their primary source of income. Unlike other popular financing options, these loans usually have specific terms and conditions tailored to meet the requirements of pensioners.

Key Highlights:

• Lower rate of interest
• Simplified application process
• Minimal documentation
• Quick turnaround time

Secured Personal Loans:

A secured personal loan is backed by some kind of collateral, such as a car, home, etc. Since there is less risk involved for the lender, the average loan amount is comparatively higher. Like other personal loans, these funds can also be used for a variety of purposes.

Key Highlights:

• Lower interest rates
• Can borrow larger sums
• Option to choose between fixed and variable interest rate

Unsecured Personal Loans:

An unsecured personal loan is a personal loan that does not require collateral. Loan approval solely depends on the creditworthiness and repayment capacity of the borrower. As compared to secured loans, these loans have a slightly higher rate of interest.

Key Highlights:

• No fund-usage restrictions
• Flexible repayment terms

Salary-Based Loans:

A salary-based personal loan is a financial product designed for salaried individuals. These loans can be availed for a variety of purposes. In these loans, the applicant's monthly salary is among the key determinants for loan approval. For this, the applicant needs to submit documents like their income proof, bank statements, etc.

Key Highlights:

• Ease of application
• Faster processing
• Attractive interest rates

Self-Employed Loans:

These personal loans are designed to offer financial aid to self-employed individuals who have a fluctuating income. Anyone who doesn't have a traditional employer can apply for these loans. As compared to regular personal loans, these loans may require some additional paperwork to check the borrower's creditworthiness.

Key Highlights:

• Flexible terms and conditions
• Quick processing
• No collateral requirement
• Convenient loan tenure

Balance Transfer Loans:

A balance transfer loan is usually obtained to transfer existing debt from one account to another. Anyone with an existing loan can apply for a balance transfer loan. These loans help individuals repay their ongoing loans with a higher rate of interest. Since these loans are made available at a lower rate of interest, one can save a significant amount of money while paying interest.

Key Highlights:

• Lower interest rates
• Extended loan tenure
• Lower EMI

Festival Loans:

A festival loan is a financing solution, specifically designed to help an individual cover the expenses associated with a certain festival. Generally, these are unsecured personal loans and have a specific limit on the loan amount. This limit can vary from one lending institution to another.

Key Highlights:

• Quick access to funds
• Minimal processing fee
• Attractive interest rates

Startup or Business Expansion Loans:

These loans are specifically designed for individuals who are planning to start a business or already running one. The funds obtained from this type of loan can be used for any business-related purpose. You can cover expenses like day-to-day operations, employee salary payments, business infrastructure, etc. 

Key Highlights:

• Improved business credit
• Tax benefits
• Competitive interest rates
• Working capital support
• No profit sharing

Loans for Senior Citizens:

Generally, senior citizens face a lot of challenges in obtaining a loan because of a lack of steady monthly income and factors like age, etc. This type of personal loan emerged as a solution for such individuals. These loans can be availed by individuals who are above the age of 60 years.

Key Highlights:

• Low rate of interest
• Flexible loan tenure
• Customised terms and conditions

Loans for Women:

These personal loan schemes are specifically designed for female borrowers. These loans come with a number of benefits, like lower interest rates, flexible repayment options, etc. Like regular personal loans, the applicant's creditworthiness and repayment capacity are two key determinants for the approval.

Key Highlights:

• Instant disbursal
• Extended loan terms
• No defined end-usage

Agriculture Loan:

These loans are designed to offer financial assistance to individuals who are involved in the agriculture industry. The loan amount can be used for a variety of purposes, like equipment purchase, operation expansion, new technology investments, etc.

Key Highlights:

• Long-term financing
• Collateral-free loan
• Convenient repayment

Loans for NRIs:

As the name suggests, these personal loans are designed to help non-resident Indians meet their financial requirements. These loans can be availed for a variety of purposes like medical emergencies, travel expenses, etc. As compared to other financing options available for NRIs, these personal loans have a lower rate of interest.

Key Highlights:

• Quick turnaround time
• Minimal processing fees
• Flexible tenures

Conclusion

Many lenders keep competitive rates of interest for personal loans. You can use an interest rate calculator to compare the interest rates of different lenders.Muthoot Finance offers personal loans at competitive interest rates. We understand the financial needs of our customers and provide them with the best solution for their financial needs. We also provide customization options to suit customers' requirements.

Some of the benefits of getting a personal loan with Muthoot Finance are quick application processing, easy documentation, and quick loan disbursal. A person can use the personal loan EMI calculator to know the monthly instalment and apply for a loan amount accordingly. It is very convenient to apply for the loan, the person can visit the nearest Muthoot Finance branch or opt for the online application process. It's time you ease your financial responsibility by getting a personal loan at competitive interest rates.