A personal loan can be a very good option for us, but the question is whether it is really a good option for us. In this blog, we will look at some very important questions and their answers before taking an unsecured personal loan, which most borrowers face.
What Is a Personal Loan and Why Do People Take One?
First, let us understand the personal loan meaning. A personal loan means when a bank or NBFC gives you money for a fixed period of time at an interest rate for your needs. This interest rate depends on the bank-to-bank. We also call this an "unsecured personal loan. But the question is, why do people take one? So, look, there are benefits of personal loans. A person takes a personal loan to fulfill their financial needs, and if you also have a shortage of funds, an unsecured personal loan can be a good option for you.
How to Apply for a Personal Loan and Get Approved Faster
Nowadays, you can easily apply for your personal loan without visiting a bank and without any difficulty. You can also check your personal loan status. So, let's understand how to apply for a personal loan. We will understand this with the example of Bikesh Finserv. You need to visit www.bikeshfinserv.com, go to the loans section, and click on the Personal Loan option. Then, check your eligibility with our top lenders. After that, enter some important information, such as your mobile number, desired amount, monthly salary, city, PAN, and pincode, and submit it. Then your application request will be submitted. You can also check your personal loan statement from time to time.
Also read: How to Get a Personal Loan in India. 5 Steps To Approval
What Does Your CIBIL Score Mean for a Personal Loan Application?
First, let's understand the CIBIL score meaning. A CIBIL score is a 3-digit number that ranges between 300 and 900 and shows your overall financial profile. It also shows how you handle your debt. If your score is 750 or above, the chances of loan approval are slightly higher, and if your score is below 700, the chances are lower, and sometimes rejection also happens. Now the question is, how does a CIBIL score affect your personal loan application? So, if your CIBIL score is high, your personal loan application can move forward. And if we talk about personal loan for bad CIBIL score, a low CIBIL score generally reduces the chances of your personal loan application being approved.
Also read: Personal Loan and CIBIL Score: Everything You Need to know about it
How can you get a lower interest rate on a personal loan?
Are you also thinking about how to get a lower interest rate on a personal loan?
Before understanding this, you should know that you must have often observed that a bank offers you a 14% interest rate on a loan, but the same bank gives loans to other customers at a 10% interest rate. But why does this happen? Look, banks often check your CIBIL score, your ongoing obligations, and repayment history. If all these are good, the bank gives you a lower interest rate because the bank feels that you will repay the entire loan.
Also read: 7 Tips To Get A Low Interest Rate On A Personal Loan
Some tips through which you can get a personal loan at a lower interest rate:
1. Maintain a Good CIBIL Score
First, check your CIBIL score. If your score is 750 or above, your chances of getting a competitive interest rate may increase.
2. Reduce Your Existing EMIs
Suppose your monthly salary is ₹50,000 and you are already paying an EMI of ₹20,000. Now, if you take another personal loan, the bank may feel that you have a higher financial burden.
3. Talk to the Bank Where You Have Your Salary Account
Make sure to check the personal loan offer from the bank where your salary is credited. The bank has information about your income and banking relationship. Therefore, sometimes existing salary account holders may get special or pre-approved offers. But it is not necessary that the same bank will offer the cheapest loan.
A pre-approved personal loan is another important route; lenders usually create this offer for their existing customers and for those who have strong repayment history, so the rate is often better and the paperwork lighter.
What should you know before borrowing from an NBFC
NBFCs are regulated by RBI and known for their quick approvals. An NBFC loan is often easier to get because of its quick approvals and less paperwork system.
Before choosing an NBFC personal loan, check these bases.
Check | Why it matters |
RBI registration | Confirms the lender is legitimate. Verify it on the RBI website. |
Clear charges | Rate, processing fee, late fees, and prepayment terms should be written down. |
Direct disbursal | Under RBI digital lending rules, money goes straight to your bank account. |
Key Fact Statement | Shows the annual percentage rate, so you see the true cost |
Many people search for NBFC personal loan for bad credit after a rejection. Some NBFCs do lend to low CIBIL applicants, but they price it higher or ask for their co-applicant.
How do you read a personal loan sanction letter?
The personal loan sanction letter confirms your loan is approved; most of the borrowers skim it and sign it. But here is the mistake they usually make.
A typical loan sanction letter format includes.
Section | What it tells you |
Sanctioned amount | The maximum approved, which may differ from what you asked for |
Interest rate | Fixed or floating, and how it is calculated |
Tenure and EMI | Number of months and the monthly installment |
Fees and charges | Processing fee, GST, documentation, and insurance |
Prepayment terms | Any penalty for closing the loan early |
Late payment charges | What you pay if an EMI is missed |
Validity | The date until which the offer stays open |
Conditions | Documents or checks still needed before disbursal |
The exact loan sanction letter format varies by lender, so the order of sections may look different. What matters is that every term is clear; keep the copy of your personal loan sanction letter with you until your loan is closed.
Also read: personal loan sanction letter
How can you download your personal loan statement online
Your personal loan statement shows every EMI paid, the interest and personal split, the balance due, and any charges; it helps you track progress and spot errors.
Also read: Personal Loan Statement Online: How to Download It Easily
Most lenders let you download in a very simple and few steps:
Step | Action |
1 | Log in to the lender's app or portal with your registered mobile number. |
2 | Open "Loan Details." |
3 | Choose "Statement of Account" and select the period. |
4 | Download the PDF or get it by email. |
Borrowers often ask, loan account is which type of account? In accounting, a loan account is a liability account for the borrower, since it shows money you owe. For the lender, it is an asset because it is money to be received.
Are personal loan tax-exempt?
People often ask, is a personal loan taxable? The money is the loan you must repay, so it is not income, and the principle is not taxed.
Also read: Personal Loan Tax Exemption—Everything You Need to Know
The topic of personal loan tax is interesting when you look at how you use the money. The tax treatment of the interest depends on the purpose.
How you use the loan | Interest deduction |
Buying or building a home | May be eligible, subject to limits and your tax regime |
Home renovation or repair | A limited deduction may be available. |
Business or profession | Usually claimed as a business expense |
Buying an asset or investment | May be deductible against related income in some cases |
Travel, wedding, medical bills | Generally no deduction |
Rules on personal loan taxes change with each budget, and the new tax regime allows fewer deductions. So if you ask, is a personal loan taxable or deductible in your own case? Check current rules or speak to a tax professional. Keep your loan statement and interest certificate as proof.
How Can You Use a Personal Loan for Travel or Family Expenses Responsibly?
Flexibility is a big reason people choose this product. Common personal loan uses include medical bills, weddings, home repairs, education, debt consolidation, and travel. Since it is unsecured and costs more than a secured loan, use it only for a genuine need with a clear repayment plan.
Also read: Make Every Family Vacation Special With a Personal Loan
A personal loan for travel can help with a planned trip, such as a family holiday. Others prefer travel on EMI schemes from travel portals and card issuers. Both spread the cost, but compare the total interest, because a low EMI can hide a high overall bill.
To borrow responsibly for travel on EMI or family needs:
Rule | Why it helps |
Borrow only what you need. | A trip need not be financed to the last rupee. |
Keep EMIs within about 40% of income. | Leaves room for daily expenses |
Pick a tenure you can manage. | The longest tenure is not always best. |
Keep a separate emergency fund. | One missed paycheque won't derail repayment. |
Compare with saving first. | If the trip can wait, saving costs no interest. |
Among all personal loan uses, holidays need the most thought, since they add no asset or income. For essential family needs, a well-planned loan can be a sensible bridge. Compare a personal loan for travel with saving for a few months first.
What Are the Common Personal Loan Mistakes to Avoid?
Here are some of the common personal loan mistakes to avoid.
Also read: 10 Hidden Personal Loan Mistakes That Can Cost You Big in the Future
# | Mistake | Better approach |
1 | Borrowing more than you need | Take only what the purpose requires. |
2 | Ignoring the total cost | Add the processing fee, GST, and insurance to the rate. |
3 | Not comparing lenders | Check at least three offers. |
4 | Applying to many lenders at once | Each inquiry can lower your score, so apply selectively. |
5 | Skipping the fine print | Read prepayment, late fee, and rate-reset clauses. |
6 | Choosing the wrong tenure | Too short strains your budget; too long raises interest. |
7 | Missing EMI dates | Set up auto-debit or reminders. |
8 | Sharing documents carelessly | Upload only to verified apps and sites. |
9 | Repaying one loan with another, with no plan | Fix the cash flow problem first. |
10 | Forgetting to track the loan | Check your statement and collect a no-dues certificate. |
How Can You Avoid a Debt Trap While Repaying a Personal Loan?
Look, a debt trap means that you keep taking new loans to repay old loans. If you do this, you slowly fall into a debt trap.
Also read: How to Avoid a Debt Trap While Managing Your Personal Loan
Habit | How to do it |
Set a firm limit. | Keep all EMIs within 40 percent of income. |
Build an emergency fund. | Save three to six months of expenses. |
Clear costly debt first. | Pay off the highest-interest loan or card balance first. |
Part-prepay | Use bonuses or extra income after checking for charges. |
Avoid fresh credit. | Skip new loans while one is running, unless truly needed. |
Talk to your lender early. | Ask about restructuring before you miss payments. |
Keep a simple budget. | List every EMI date and amount. |
How Can You Spot Personal Loan Scams in Mumbai?
Personal loan scams are very common in the market, and we need to stay away from them. RBI advises you from time to time to stay away from unknown loan applications and websites and not to share your OTP with anyone. If you do this, you may become a victim of phishing, and scammers may harm you.
Also read: Personal loan scams in Mumbai
Here are some of the red flags.
Red flag | What it looks like |
Upfront payment demand | You are asked to pay a "processing" or "insurance" fee before the loan is released. |
No credit check | Real lenders always assess your ability to repay |
Pressure and urgency | "The offer ends in minutes." |
OTP, PIN, or screen-share requests | No genuine lender needs these. |
Unknown apps | They ask for access to your contacts, photos, and gallery. |
Personal payment accounts | Money is requested to a personal UPI ID or an individual's account. |
Threats or harassment | Messages sent to your contacts over small dues |
Can You Get a Personal Loan With Zero Processing Fees?
When you take a personal loan, the bank normally charges a processing fee to process the loan. This fee varies depending on the lender.
Also read: How to Get a Personal Loan With Zero Processing Fees
Example:
Suppose you are taking a personal loan of ₹5 lakh.
Loan amount: Rs. 500,000
Processing fee: 2% = ₹10,000
18% GST on fee: Rs. 1,800
Total deduction: Rs. 11,800
If the bank deducts these charges from the loan amount, you will receive ₹4,88,200.
But if the bank offers a genuine zero processing fee, then the processing fee and GST on it will not apply.
If you are searching for a personal loan with zero processing fees, then keep these things in mind.
Check | What to look for |
Interest rate | A waived fee may come with a higher rate, so compare the total cost. |
Other charges | Documentation, insurance, foreclosure, and late fees may still apply. |
Offer conditions | The waiver may cover only certain amounts, tenures, or dates. |
Written proof | The sanction letter should show the processing fee as nil. |
Negotiation | With a good score and steady income, ask for a reduction or waiver |