What is Personal Loan: Meaning, Benefits and How to Get One

We often hear that a Personal Loan works as a lifesaver during financial needs. Be it medical bills or covering college tuition fees, applying for a loan is sometimes the only possible way to arrange for the necessary funds. These loans are unsecured, giving you the advantage of getting access to funds instantly and often paperless without pledging any collateral. 

This is why 67% of Indians prefer and rely on unsecured personal loans to cover financial expenses and funding needs. The features and benefits of a Personal Loan, however, go way beyond being an unsecured loan. In this blog post, we understand what a Personal Loan is, how it works, and the process to get one. Read on!

What is Personal Loan?

A Personal Loan is a credit that allows you, as a borrower, to borrow funds for specific purposes such as travel, education or home renovation. As no collateral is required, lenders process the loan by considering the borrower's credit history, monthly income, and existing loans. These factors greatly influence your Personal Loan eligibility and interest rate. Many borrowers prefer a Personal Loan online because of its speedy approval, minimal documentation, and quick loan disbursement.

Features of Personal Loans

The market for personal loans in India hit ₹8.80 lakh crore in 2025, an 8.3% increase from 2024. 56% of these borrowers are under the age of 30 (Gen Z and Millennials). Here are the top features of a Personal Loan that make it popular among borrowers:

Features	Description
Loan Type	Unsecured (No collateral required)
Loan Amount	₹50,000 - ₹50 lakh (Commonly offered by lenders)
Interest Rates	9.99% - 24% p.a.
Loan Tenure	12 - 84 months (1 - 7 years)
Processing Fees	1% - 2.5% (Based on the lender's internal criteria)
Eligibility	Salaried/Self-employed/Freelancer
Documents Required	Aadhaar Card PAN Card Salary Slips

 

How Does a Personal Loan Work?

Once you have applied for a Personal Loan, the lender verifies all your details. After going through all the details and documents carefully, the lender disburses the loan amount to your bank account. You must repay this loan amount with the agreed interest rate on equated monthly instalments (EMI) over a tenure. 

Different Uses of Personal Loan

A Personal Loan helps you borrow money from a bank, NBFC, credit union, or online lender for a wide range of financial needs. Here are some common uses of the Personal Loan:

• Emergency Expenses: You can use the Personal Loan to cover medical bills, emergency repair of your house, and other urgent needs.
• Debt Consolidation: Utilise it to consolidate multiple loans/debts into one and pay them off. This helps in reducing your debt burden at lower interest rates.
• Home Renovation: You can fund home renovation, improvements, repairs, or upgrades. You can also buy new home appliances, such as refrigerators, washing machines, TVs, ACs, etc.
• Medical Treatments: Medical emergencies such as accidents, critical illnesses, or serious injuries often come without warning. A Personal Loan helps you cover the cost in these situations without adding to your financial stress.
• Business Finance: As formal business loans can be difficult to obtain, you can use a Personal Loan to improve cash flow, buy machinery, purchase stock, and more.
• Education Costs: Whether it’s tuition, accommodation, or study materials, a Personal Loan can help you stay financially stress-free during your own or your children's academic journey.
• Wedding Costs: A Personal Loan makes it easier to host a wedding as it provides the funds needed to cover the various expenses involved.
• Upgrade to the Latest Gadgets: Smartphones and laptops have become a part and parcel of our lives. A Personal Loan makes it easier to get your required gadgets without worrying about their high costs.
• Travel and Vacation: You can fulfil your travel goals without dipping into your savings by opting for a Personal Loan.

Why Choose a Personal Loan for Your Financial Needs?

Here are the benefits of personal loans that make them a popular choice among borrowers:

• Unsecured Loan: No security or collateral requirement. Means you don't need to pledge anything to avail of the loan amount. 
• No End Usage Restrictions: You can use the loan amount for any reason, including a wedding, travel, medical emergency, home renovation, or business requirements.
• Instant Access to Funds: Most lenders provide a quick loan disbursal, with some lenders being able to disburse the loan within minutes, particularly in the case of pre-approved loans.
• Easy processing: Fast and easy application procedure with minimum documentation and in many cases entirely online or via digital channels.
• Easy Repayment Options: You can select an appropriate tenure, which can often range from 1 to 7 years, depending on the lender, to ensure it doesn't burden your budget.
• Improves Credit Score: Repayment of personal loans on time helps to increase your credit score, which makes it easier to secure loans in the future.

Things to Keep in Mind Before Applying for a Personal Loan

Here are some important factors that you must keep in mind before applying for a Personal Loan:

1. Analyse Your Funding Needs

Before you apply for a Personal Loan, it is essential to know how much money you need. Evaluate your current financial situation and how much you can afford to borrow. Borrow only what is needed, as excessive borrowing can increase your monthly payments for EMIs and may cause unnecessary financial burden.

2. Compare Different Interest Rates

Every lender levies a different interest rate on personal loans. The average interest rate for Personal Loans is between 9.99 and 24% per annum. Poonawalla Fincorp, for example, offers Personal Loans at competitive interest rates starting at 9.99% p.a.

3. Processing Fee

The personal loan processing fees vary from lender to lender. It directly affects your EMI and total interest. This is why you must compare different lenders before choosing a personal loan that fits your needs.

4. Choose Wisely for Debt Consolidation

The right Personal Loan streamlines your finances by consolidating all your debts into one easy-to-manage payment, and at a potentially lower interest rate than the current debts you have. Not only does this reduce your monthly EMI, but it also enables you to raise your credit score by making timely repayments and payments.

5. Prepayment or Foreclosure Charges 

Lending institutions like Poonawalla Fincorp allow you to foreclose or prepay your loan without any extra charges if paid from your sources. This helps in reducing the debt and interest burden.

6. The Credibility of the Lender

When applying for a Personal Loan, choose a credible and trustworthy lender. Choosing a credible lender will ensure you are secure against any legal or financial hassles that may arise during the loan term.

7. Availability of Paperless Loan

Personal loans nowadays are available with just a click and from the ease and comfort of your home. Hence, when assessing a Personal Loan lender, check if they offer a paperless online application, approval, and disbursal loan process.

8. Minimal Documentation

To ensure that the process and approval are both fast and convenient, you must choose a lender that requires minimal documentation.

9. Instant Cash Loan

Assessing the approval time and disbursal of the Personal Loan is crucial. Choose a lender with a quick and easy loan approval and disbursement process so you can access the funds as soon as possible.

10. Repayment Tenure

The loan tenure has a significant impact on your monthly instalments. The longer the loan term, the lower the amount of the monthly instalments. Alternatively, the shorter the Personal Loan tenure, the higher the monthly instalments. Before applying for a personal loan, check the tenure specifications of the personal loan, and the equated monthly instalments preferably, choose a loan term that suits your financial situation.

Also Read: Should You Consider a Personal Loan for Business Use?

How to Get an Instant Personal Loan?

Follow these simple steps to apply for a Personal Loan with Poonawalla Fincorp: 

1. Check Your Eligibility

Start by reviewing the Personal Loan eligibility criteria, such as age, citizenship, employment, work experience, income requirement, etc. 

2. Choose the Loan Amount and Tenure

Know your financial needs well and decide on the right loan amount and tenure. Personal loans typically have fixed interest rates and adjustable periods ranging from 12 to 84 months. 

3. Apply Online

Fill out the personal loan online application form on the official Poonawalla Fincorp website or app. You’ll experience a smooth, quick approval process and fully digital onboarding.

4. Provide the Required Loan Documents

Documents required for a loan include PAN, Aadhaar, address proof, salary slips, and latest bank account statements.

5. Get Approval and Disbursal

Once your application is reviewed and approved, the loan funds are directly disbursed to your loan account. With Poonawalla Fincorp, the process is effortless and designed for instant access to funds in case of medical expenses, travel, or debt consolidation.

You may also receive pre-approved personal loan offers via email or post from various personal loan lenders. These offers typically let you check your loan amount, personal loan interest rates, and eligibility instantly, often without affecting your credit score.

Also Read: Why is a Personal Loan One of the Best Short-Term Loans?

To Conclude

A Personal Loan has proven really helpful when in need of urgent funds. It offers easy and quick access to funds without providing any assets or properties as collateral. As with any loan, it comes with an obligation to pay EMI monthly. This is why you must consider everything from interest rate to processing fees, as it directly affects your loan repayment.

At Poonawalla Fincorp, we offer a Personal Loan with a high loan amount and attractive interest rate and favourable terms and conditions. With interest rates starting at as low as 9.99% p.a., you can save on the total interest paid over time, especially if you have a good credit score. The flexible repayment tenure, on the other hand, makes it easy to repay the loan. Apply for a Personal Loan today to take control of your finances with confidence.

Frequently Asked Questions

Can I get a Personal Loan for a longer period?

Yes, Poonawalla Fincorp offers a Personal Loan with a flexible repayment tenure of 12 to 84 months.

How will prepaying a Personal Loan affect my credit score?

Prepaying your loan improves your credit score by lowering your existing debt, but make sure there are no prepayment charges before doing so.

Can I use a Personal Loan for business or investment purposes?

Yes. While personal loans can be used for business purposes like buying equipment to purchasing stocks, using them for high-risk activities like starting a business should be done carefully.

What happens if I don't pay my loan EMI on time?

Missing an EMI might result in late payment fines, lower your credit score, and affect your future loan eligibility. In such a case, it's important to notify the lender ahead of time and seek potential solutions.

Can I take a joint Personal Loan?

Yes, you can take a joint Personal Loan in India. Your co-applicant's income and credit score are added to yours when you apply for a Personal Loan together. A combined Personal Loan can be obtained with your parents, siblings, and spouse. 

What is the minimum credit scores required for availing of a Personal Loan at good terms?

The minimum credit scores required to avail of good loan terms are 750 and above.