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Loan Details

Loans in India

An act of lending property, money or other material goods to another person in exchange of future repayment of principal amount plus interest or any other type of finance charges is known as loan. It is a contract agreed by two parties and the terms and conditions, rate of interest and other charges along with the principal is informed at the initial stages. Most loans have a limit for the loan period, loan amount and interest rate. Loans are provided by banks, NBFC, government and corporations. Interest generated from these loans and fee received are the main source of income for those who give money as loan. More about types of loans, interest rate factors, eligibility and documentation is explained below.

Types of Loans in India

The main two types of personal loans available in India are secured loans and unsecured loans.
a. Secured Loans: Secured loan is where there is a need for guarantee or security against the sum borrowed like a fixed or movable asset. In case of default of the loan amount, ownership of the security will be taken over by the bank. Usually car loans and mortgage loans are secured loans. The interest rate of these types of loans will be comparatively less as the risk for the lender is low even though there are many other factors that decide the rate of interest.
b. Unsecured Loans: Unsecured loan does not require any security, but the lender will charge a high rate of interest on the money borrowed. In case of default, the lender will seek legal assistance for the loss incurred. It is just as higher the risk of the loan, higher will be the rate of interest.

Secured Loans v/s Unsecured Loans

Factors Secured Loan Unsecured Loan
Meaning The loan which is secured by an asset is known as a Secured Loan. Unsecured loan is the loan in which there is no asset mortgaged as security.
Basis Collateral Credit-worthiness
Pledging of Asset Yes No
Risk of Loss Very less High
Tenure Long period Short period
Expensive No, due to low interest rates. Yes, because the interest rate is high.
Borrowing Limit High Comparatively less
Right of Lender in case Borrower fails to Pay Forfeit the asset. Can sue him for the money.

Secured Loans

Loans that are protected with a collateral or asset are known as Secured loans. Any asset such as car, home or property can be used as collateral for the purpose of loan. The title or deed of such assets will be held by the bank or financial institution until the borrower fully repays the loan amount which includes fees and interest charges. Apart from home or car other assets that can be used for collateral purposes are bonds, stock, personal properties and so on. If you are looking for large amounts of loan then the best option is secured loans. Only with a collateral bank will be ready to offer loans for higher amounts with low interest rate. As they have a security back-up, banks and financial institutions will be ready to offer risk free or low risky loans.

Some of core benefits of secured loans is you will get higher loan amounts for low rate of interest. Plus the tenure of secured loans will be longer as compared to unsecured loans.  Secured loans is merely a type of loan which has security offered by the borrowers and confirms the lender i.e. banks or financial institutions that they agree to the terms and conditions of repayment of the loan completely along with interest and other related charges.

Purposes of Secured Loans:

  • Mortgage
  • Home Equity Line of Credit
  • Auto Loan (New and Used)
  • Boat Loan
  • Recreational Vehicle Loan
  • For business needs.

Features and Benefits of Secured Loans:

  • Adjustable Repayment terms are available from 3 up to 30 years.
  • Secured Loans can be used for any Purpose.
  • Quick loan approval with low arrangement fees
  • Low interest rates and other charges
  • Best option for Home owners who have poor credit history
  • Easy way to borrow large amounts as loan
  • Secured loan are offered usually for longer tenure by banks thus the EMI amount will be low
  • Greater flexibility is offered to the borrower
  • Lender’s funds are at minimal risk as they have collateral to recover the funds in case if borrower defaults

Eligibility Criteria for Secured Loans:

Here are some of the important eligibility criteria for secured loans. Without meeting these requirements it will be very difficult for borrowers to get loans from banks. This is general information; few of this may vary from bank to bank according to their policy, procedure, rules and regulations.

Salaried Individual

  • The applicant should be a permanent employee with government or reputed company.
  • The minimum age to apply for secured loan is 25 years.


  • The individual can be professional in fields such as engineer, architect, doctor, chartered accountant and so on.
  • The maximum age for professional applicant is 65 years.

Self-Employed Individual

  • The applicant should regularly file income tax returns.
  • The applicant should have the same business for at least 3 to 5 years depending on the business type.

Property Eligibility

  • The property to be shared as collateral should not have any type of legal bindings. All property titles should be clear and the same should be registered in the borrower’s name.
  • Property which has co-applicants will also have to consent to share the titles with bank until the loan is repaid. Documents will not be released by banks unless the loan is completely repaid including fees, charges, interest and principal amount.

Documents Required for Secured Loans:

The below documents are essential to apply for a secured loan in India with any bank. Banks will scrutinize these documents before approving the loan. In case of any legal issues related to these documents of property to be used as collateral, banks have all rights to reject the loan application.

  • Valid proof of residence address, it could be any ration card or utility bill
  • Valid government identity proof which is approved such as voter ID or passport
  • Salaried individuals should furnish previous 6 month’s salary slips
  • Self-employed individuals should furnish certified financial statement including balance sheet and PNL account statements for immediate previous 3 years.
  • Latest bank statement copy is required
  • Application form should be duly filled with photographs and signature.
  • Self-employed individuals should give additional documents such as proof of business existence and its profile.
  • Self-employed individuals should provide details related to educational qualifications.
  • Latest Income tax returns copy is required
  • Cheque should be given to the bank to deduct Processing fee
  • Property documents including approved building plan and Katha should be shared with banks to conduct detailed check on the collateral property.

Types of Secured Loans:

There are many types of secured loans. Here are some of the commonly used ones listed below.

Loan against Property:

It’s a known fact that if a property is secured as collateral for a loan application then the rate of interest will be very low plus loan can be availed for longer tenure. Loan amount is calculated on the basis of the property value. Depending on the bank you are borrowing loan from upto 90% of the property value will be offered as loan.  The loan amount is decided on the basis of few other factors such as income of the applicant, credit scoring, repayment capacity, age and so on.

If you are salaried employed then loan against property is available for upto the age of 60 years and if you are self-employed then the age limit is 70 years. Loan percentage from different types of properties is listed below for comparison:

Residential Property

Commercial Property

 Self-Occupied – 65%

 Self-Occupied – 50%

 Vacant - 55%

 Vacant - 40%

 Rented - 55%

 Rented - 40%

Loan against Property Interest Rate Comparison of Top Banks/NBFC (updated 21 Mar,2019)


Institution Type

Minimum Loan Amount

Maximum Loan Amount

Minimum Tenure

Maximum Tenure


Fees & Charges

Aditya Birla Finance Ltd.


₹ 3,00,000

₹ 2000,00,000

3 Years

20 Years

10% - 12%

0.50% + GST as applicable

Capital First


₹ 5,00,000

₹ 1000,00,000

3 Years

20 Years


1% to 2% + GST as applicable



₹ 5,00,000

₹ 1000,00,000

1 Year

15 Years


1% to 2% + GST as applicable

Edelweiss Financial Services Ltd.


₹ 5,00,000

₹ 2500,00,000

1 Year

15 Years


2% + GST as applicable

Fullerton India Credit Company Ltd.


₹ 10,00,000

₹ 500,00,000

1 Year

15 Years

13% to 24%

Up to 6.5% + GST as applicable

HDB Financial Services Ltd.


₹ 1,00,000

₹ 800,00,000

1 Year

15 Years

12% - 36%

1% + GST as applicable



₹ 5,00,000

₹ 500,00,000

1 Year

10 Years

8.5% - 9.54%

Up to 2.00% + GST as applicable



₹ 5,00,000

₹ 500,00,000

1 Year

15 Years

11.50% - 15.00% 

Up to 2.00% + GST as applicable

Kotak Mahindra Bank


₹ 10,00,000

₹ 500,00,000

1 Year

15 Years


Up to 2% + GST as applicable

Orix Leasing & Financial Services India Ltd.


₹ 5,00,000

₹ 400,00,000

1 Year

15 Years


1% Or RS. 10,000 + GST as applicable

RBL Bank Ltd.


₹ 5,00,000

₹ 1000,00,000

1 Year

15 Years

13.1% - 14.1%

1.25% - 1.5% + GST as applicable

Reliance Home Finance Ltd.


₹ 5,00,000

₹ 500,00,000

1 Year

20 Years

10% - 14%

Up to 2% + GST as applicable

Standard Chartered Bank


₹ 5,00,000

₹ 200,00,000

1 Year

15 Years


Up to 1% + GST as applicable

Shriram City Union Finance


₹ 1,00,000

₹ 150,00,000

1 Year

12 Years


Up to 2.00% + GST as applicable

Tata Capital Financial Services Ltd.


₹ 10,00,000

₹ 300,00,000

1 Year

15 Years


Up to 2.00% + GST as applicable

Vastu Housing Finance Corporation Ltd.


₹ 5,00,000

₹ 50,00,000

1 Year

15 Years

14.5% – 18.5%

Up to 2% + GST as applicable

Loan against Equities:

Loan amount lent by a bank or financial institution against pledge of security such as equities is known Loan against Equities. The loan value will be determined by the value of the equity and the company profile. If the equity submitted as security is of a high value company then the loan amount will be accordingly higher.

Loan against equities is a Secured Loan. Debentures, bonds, preference shares are also offered as collateral for loans against securities. The tenure of loan against equities is just one year, however it can be renewed. The interest rate ranges from 12 % to 15% from one bank to another bank. Processing fees are charged at 2% of total loan amount and the amount depends of the security offered by the borrower.

In most cases, there will be no prepayment charges for loan against equities. However, the age group of such borrowers such is between 18 – to 65 years. There is fixed period for repayment of such loans and in case of failure or default- lender has all rights to file a case for recovery and can make use of the collateral equities for recovery of the loan amount.

Loan against Mutual Funds:

Loan amount lent by a bank or financial institution against pledge of security such as mutual fund is known Loan against Mutual funds. Apart from mutual funds, loans are even sanctioned on security deposits such as:

  • Insurance Policies
  • NABARD Bonds
  • Non-convertible Debentures
  • UTI Bonds
  • Demat Shares
  • Mutual Fund Units
  • National Savings Certificate

In this case, loan is not just offered on the credit worthiness of the applicant but also based on the securities value. The higher the mutual funds value is; higher will be the loan amount. In case of loan against mutual funds the rate of interest will be comparatively lower than unsecured loan but rate of interest will be higher than loan against property. The reason for this is, recovery of a property value is reliable and stable as compared to mutual funds. The value is subject to drastic change as per market value fluctuations.

Loan against Fixed Deposit and Time Deposits:

Loans are offered by banks on fixed deposits amounts of its customers. Banks will make use of the fixed deposit as the collateral for sanctioning the loan amount and in case if the borrower defaults, bank have all the right to take the loan breaking the term, time or fixed deposits. On domestic fixed deposits banks will offer loan upto 90% of the fixed deposit value. Some of the top banks to offer loan against fixed deposit and time deposit for domestic fixed deposits are SBI, ICICI Bank, Axis Bank and HDFC Bank.

The other type of fixed deposit loan is loan against NRI fixed deposits. On such fixed deposits upto 85%-90% of the fixed deposit value is offered as loan. This percentage varies from one bank to another. HDFC bank offers Loan against NRI Fixed Deposit upto 90% but Axis bank offers Loan against NRI Fixed Deposit only upto 85%. Some of the other banks in India that offer this type of loan are SBI, ICICI and Citibank.

Loan against LIC Policy:

Though not many are aware, even Life Insurance Corporation policy will help in getting a loan. Based on the policy value, loan can be taken by the individual upto the tenure of the policy maturity. The loan value on such LIC policy will be calculated on the basis of the Surrender Value of the policy. Thus it is important to know the cash value of the policy before applying for a loan against it.

Surrender value of the policy is just the amount payable by the policy issuer to the policy holder in case if the policy holder decides to discontinue the policy. It is only upto this extent the loan will be approved by the banks. This is just an alternative for quick loan approval however; it is not a great option for loans as the value of the loan amount will be very low and totally depends on the surrender value of the loan amount. The minimum period for repayment of such loans is 6 months.      

This loan facility is not available online, thus you will have to reach out to the LIC Corporation and banks directly in case if you are in need of loan against Life Insurance Corporation policy.

Loan against NSC:

Backed by government, National Savings Certificates are safe form of investment and thus banks are ready to offer loan on such certificates. This type of loan can be used for business and personal requirements. Usually for this type of loans banks will not raise any question regarding for what purpose the loan amount is being used. Interest charges on this type of loan vary between Base Rate + 4% to Base Rate + 7% depending on the bank which is offering loan.  Age limit for this type of loan is between 18 to 75 years. And loan will be sanctioned with limited documents.

Documents required for Loan against NSC approval are just valid identity proof, income proof of the applicant, photographs and the original documents of NSCs. The tenure of Loan against NSC is as same as the tenure of the National Savings Certificate.

  • NSC VIII Issue (5 years maturity): 8.50% compounded half yearly
  • NSC IX Issue (10 years maturity): 8.80% compounded half yearly

Car Loan:

Banks are offering car loans to buy new and used or second hand cars. Some of the top banks in India offering this loan are SBI, ICICI, Kotak, HDFC, Bank of Baroda, Bank of India, Indian Bank, and IndusInd Bank. The schemes, charges, offers and rate of interest on these car loans will differ from one bank to another. It is upto the bank to decide factors of car loan such as maximum loan amount, EMI, loan tenure, processing fees and pre-payment and part-payment fees.

Some banks are even offering car loans at zero interest rates, reducing balance scheme, fixed rate scheme and even floating rate of interest. While purchasing car it is important to contact the dealer to understand the ex-showroom price and on-road price of the vehicle. Loan is usually offered on on-road price of the car. This is the actual full payment expected to be made by an individual in order to purchase a car.

Home Loan:

Housing is one of the most basic needs for humans along with food and clothing. Every youngster strives to build a house and tries to make it his/her first priority once they start earning. Housing is also a major investment that allows a family to cut down on much other expenditure such as rent and taxes.  The potential homeowner must first look out for the family’s monthly income and apply for a home loan. This will help in planning to own a house at the right time without spending the entire lifetime towards repayment of the home loan.

Home loan features are unique as compared to other loans. Few basic features are listed here:

  • Purpose: For resale or construction, purchase of fully constructed house from builders, extension or renovation of existing house.
  • Loan amount: Home loans amount totally depends on the requirement; however there is limit is loan amount which is ranging from Rs.2 lac to Rs.200 lac, and this is calculated on applicant’s eligibility, repayment capacity and income.
  • Security: All home loans are secured wherein collateral is a must.
  • Loan tenor: 30 years is the maximum loan tenure offered for home loan.

Business Loans:

Business loan is one the easy methods to pool in finance towards business needs.  There are many banks that offer loan upto 30 lakhs with and without collateral with pre-approved offers. However, if you are looking to reduce the rate of interest and monthly EMI then secured loan are advisable. As banks and financial institutions have collateral to recovery back the loan amount in case if the borrower defaults, the rate of interest on such loans are very low and affordable. It is the money that is credited to your account with certain percentage of interest and fixed tenure for repayment. This amount can be used for expansion of existing business or the start a business from the scratch. According to the needs of the business, the loan amount will be approved by each bank.

Purposes for which business loan is availed are:
  • To expand the business
  • To expand business location
  • To start a whole new business
  • To build credit for future requirements
  • To purchase equipment for business
  • To purchase more inventories
  • To bring in fresh talents to the business.
Features & Benefits of Business Loan
  • Accessible and Convenient
  • Multiple Loan Options
  • Non Profit Sharing
  • Lower Rates of Interest
  • Business Loans Offer Tax Benefits
Eligibility Criteria for a Business Loan:
  • Limited or Private Limited Company: Net income of the concern should be more than ₹150,000 per annum for business loan up to ₹1,500,000 and over ₹ 300,000 for business loan above ₹1,500,000.
  • Partnership or Proprietorship Firm: A minimum of 25% stake each can be clubbed to the income of the concern.
  • Chartered Accountant / Self Employed Professional: Who possess diploma or degree in any of these discipline like art / craft /profession or who possess the skill that is considered as a profession from banks perspective shall be considered for any financial assistance. For example: Dental Surgeons, Accountants, Medical Practitioners, Engineers, Craftsmen, Management consultants, Construction contractors etc.
  • Age Limit: The applicant should be min 21 years & max. 65 years.
  • Income: Business should be profit making at least for the past 2 years.
  • Turnover: ₹150,000 p.a. should be the minimum annual income.
  • Co-applicants: This is optional to the applicant, not mandatory in case of business loan.
Checklist of Documents Required for Business Loan:
  • Identity proof
  • Address Proof
  • Bank Statement
  • Latest ITR along with computation of Balance Sheet, income & Profit & Loss a/c for the last 2 yrs.
  • Proof of continuation
  • Other Mandatory Documents such as Sole Proprietorship Declaration, Certified true copy of Memorandum & Articles of Association
  • Last 3 years audited financials

Dos and Don’ts of Loan against Securities:

  • Provide all necessary documentation related to the loan requirement, if you have any securities, including its documents and sales contract.

  • Keep all original documents handy like pay-slips, bank statements and other financial documents.

  • Keep a close watch on your credit rating

  • Continue to stay employed in same company if employment income is used as proof for loan approval.

  • Ensure payments are made on all outstanding debt obligations

Pros and Cons of Loans against Securities:

Here are some of the top pros and cons of Loan against securities:


  • Low interest rates are charged on Loan against securities as lenders have collateral to recover the loan value in case of default.

  • Best option for availing loans for those who have poor credit history and Low CIBIL rating.

  • Getting longer tenure loan is easy with the help of secured loans such as Loan against securities.

  • Easy way to borrow large amounts as loan.


  • Risky, because your asset is mortgaged. Failure to repay will result in confiscation of your property by lender to recover the loan.

  • The asset mortgage cannot be sold during the tenure of the loan.

RBI Guidelines for Loans against Securities:

Some of the important guidelines of RBI with regard to Loan against securities are:

Para No



Restrictions on other loans and advances


Loans and Advances against Shares, Debentures and Bonds


Money Market Mutual Funds


Advances against Fixed Deposit Receipts (FDRs) Issued by Other Banks

In India almost everyone are making utmost use of the opportunity of loan. This will not just help in short term and long term financial needs but will also generate a lot of tax benefits. There are many types of loans available in India. It is said for almost anything and everything this is used nowadays. Getting a loan is very simple and it can be used for purposes like business, marriage, medical, education, debts, household, two wheeler, car, holiday, for purchase a house, home renovation and others.

Here is the list of popular loans in India and the top three loan provider:

Personal Loans:

When there is an unusual expense like child's marriage, renovation of your home or furnishing, children’s higher education, family holiday, or any other dream to be turned into reality, make use of the personal loan option. With this, you have the option to repay your borrowed amount gradually through upcoming years, no guarantor or security is required, hassle free documentation process- right officials will come to you to collect necessary documents and if all requirements are met, money can be expected within few days.

Top 3 Banks for Personal Loan:

  • ICICI Bank: It has attractive scheme at reasonable interest rates.

  • HDFC Bank: Loan at low-interest rates with or without security.

  • Axis Bank: Axis Bank offers the most flexible personal loans.

Home Loans:

Housing is one of the most basic needs for humans along with food and clothing. It is a major investment that allows a family to cut down on much other expenditure. All those who are looking for a home loan will be looking for the list of best banks that offer home loan. We have furnished this list to make things easier for you.

Top 3 Banks for Home Loan:

  • State Bank of India: Nearly 50% of home loan market is captured by this bank.

  • HDFC Bank: This bank is known as a home loan banker.

  • PNB Housing Finance Ltd.: PNB Housing Finance Ltd. is a wholly owned subsidiary of Punjab National Bank (PNB) and provides housing loans to individuals for construction, purchase, repair, and upgrade of houses.

Business Loan:

Business loan is one of the great way to increase financing towards various business needs. There are many banks that offer loan up to INR 3 million with and without collateral with pre-approved offers. This amount can be used for expansion of existing business or the start a business from the scratch.

Top 3 Banks for Business Loan:

  • HDFC Bank: Choose for triple benefits of fast loan, competitive pricing and transparency on charges.

  • ICICI Bank: ICICI Bank offers business loans to match specific needs of every business. ICICI Bank gives the option to choose the most convenient and suitable solution for business.

  • Citibank: Choose for trade finance at LIBOR denominated rates to keep your business globally competitive.

Car Loan:

Whether new or used cars, if you have a desire to own it, India offers car loan. This can be used to purchase a car and has the option to repay the amount through EMIs and monthly interest.

Top 3 Banks for Car Loan:

  1. HDFC Bank: HDFC Bank offers Car Loans at rate of interest starting 9.45% for up to 7 years tenure.
  2. ICICI Bank: ICICI Bank offers Car Loans at rate of interest starting 9.5% for up to 7 years tenure.
  3. CAPITAL FIRST: Capital First offers Car Loans at rate of interest starting 13% for up to 7 years tenure.

Debt Consolidation Loan:

This is more like taking one bulk loan amount to clear all other outstanding debts – just like debt refinancing. There are lots of banks in India that offer such loans to individuals who are self-employed or salaried.

Top 3 Banks for Debt Consolidation Loan:

  1. Kotak Mahindra Bank: One of the best bank with low rate of interest and less fee charges
  2. HDFC Bank: this bank offers lot of flexibility and is quick at processing.
  3. Citibank: It offers much professionalized service and turnaround time is very quick

Bike Loan:

Whether you have an eye on simple two-wheeler or costly bike with a 1000cc engine, you can opt for a bike loan to make your dream a reality. By this you can own a bike today and pay the principal plus interest over the time of loan period.

Top 3 Banks for Bike Loan:

  1. HDFC Bank: Rate of Interest -12.90% - 24%, processing fee 2% of loan amount, 1% for HDFC Account Holders, up to 4 years tenure.
  2. ICICI Bank: Rate of Interest -12.5%, 0.25% one-time fee, and up to 3 years tenure.
  3. Baja Finserv: No Rate of Interest, ₹ 500 one-time fee, and 5 years tenure.

Home Renovation Loan:

It is essential to keep in mind; home loan is different from home renovation loan. Everything from the loan charges, loan amount to rate of interest is different for both. Home renovation loan should be used only for renovation purpose.

Top 3 Banks for Home Renovation Loan:

  1. HDFC Bank: Rate of Interest - 8.35% - 8.95%, Up to 0.50% of the loan amount or ₹ 3,000 whichever is higher, plus applicable taxes, up to 15 years tenure.
  2. ICICI Bank: Rate of Interest - 8.35% - 10.99%, 0.25% one-time fee, and up to 15 years tenure.
  3. Baja Finserv: Rate of Interest - 8.35t, Low processing fee, and 15 years tenure.


Apart from the ones listed above there are many other types of loans that can be availed in India. Every individual has equal right in India to avail for these loans at their time of need.

Interest Rates on a Loan

Interest rates on loan depend on the type of loan one is availing. There are lots of factors that determine the interest loan for a loan and it is calculated on an individual basis. Thus different people will have different interest rates based on factors mentioned below. There are mainly two types of interest rates calculation. It is Base Lending Rates and MCLR- Marginal Cost of Funds based Lending Rate. It is calculated on marginal cost of the borrowing and return on the net worth for banks.

Base rate Calculated on

MCLR Calculated on

Cost of the funds (interest rate given for deposits)

Marginal cost of funds

Functional expenses/running cost

Negative carry on account of CRR

Cost of CRR

Functional cost/running cost



Types of Interest Rates

Rate of interest is always a worrying factor for every investor. It is up to the borrower to decide whether to choose a fixed or floating rate of interest.

  1. Fixed Rate: In Fixed rates, the rate of interest is locked throughout the life of the loan, this cannot be changed at any time even if the market rate increases or decreases over the coming years. It is a kind of hedging of interest rate to the market volatility.
  2. Floating Rate: This is right opposite to fixed rate, where the rate is subject to market volatility. If the interest rate in the market falls, you will have to just pay the reduced rates and vice versa. The risk is high here that is if the interest rate in the market shoots up then it will directly impact the borrower. However, usually short term borrowers will choose this type of rate of interest as they speculative the rate of interest to not change within few months.


Floating Interest

Fixed Interest


Flexible according to market volatility.

No flexibility.

Risk of uncertainty



Protection against Cash Rate Fluctuations




Comparatively cheaper

Not as cheaper as floating interest rate

Pre-Payment Penalty

Not applicable


Option to lower interest rate in future


Not available 

Transparency on interest calculation



During inflation

Not beneficial


Hedging against market volatility

Not possible


Suitable for risk averse customers




Fluctuating EMI amount and Loan Tenure

Stable EMI amount and Loan Tenure

Factors That Affect Interest Rates:

  • Location of the Borrower: The state or city you live in will decide the rate of interest. According to the rural and urban standard of living the rate of interest varies.
  • Loan Amount Requirement: Opt for loan according to the necessity. Take loan only to meet the needs not up to the limit available. If the loan amount is huge, then the interest percentage will be equally proportional. The more amount your take, the higher will be the overall interest payment.
  • Credit Score: Without any doubt, this is a crucial factor. The credit worthiness will directly impact on the rate of interest charged. Thus is important to keep a good track record of financial obligations.
  • Loan Term: This plays a key role. To simplify things on this factor - shorter term loans will have low interest rates; similarly reduces overall cost, but this calls for higher EMI payments. Choose a loan term that best sinks with your requirements.
  • Loan Type: There are a lot of loan types such as conventional, VA and FHA loans. Rates will be significantly unique depending on the loan type the applicant chooses.
  • Interest Rate Type: The two main types of interest explained previously is another core factor to determine the interest rate. Fixed and floating rate of interest has its own share of rate percentages.
  • Age: The younger the applicant is more money will be sanctioned. Also this increases the probability of getting the loan approved quickly. Interest rate of any loan is dependent on this factor.

Factors That Decide Your Eligibility for a Loan

Banks offer loan only if the individual is meeting all eligibility criteria. Among the long list of factors that makes an applicant eligible for loan, few important ones are mentioned below:

  • Age Criteria: The younger the applicant is there is more probability of getting loan. Most banks offer loan for salaried employees only if they are between the age group of 23 to 60 years. However for self-employed this will change to 24 to 65 years.
  • Employment Stability: It’s a crucial aspect for loan consideration. Unless the applicant is salaried and employed for at least 2 years in the same profession or if the applicant is self-employed with minimum 5 years of total earnings loan will not be processed.
  • Credit Rating: Apart from the applicant’s company’s performance, individual credit rating has a lot of importance. Good credit rating will increase the chance of getting the loan with more flexibility on loan. Default payment records, fraudulent tracks, and outstanding loan, will reflect negatively on the applicant, this could lead to bank’s cancelling the loan request or will charge high rate of interest.
  • Financial Situation: For this factor, not just present status is considered, the past records of financial stability holds lot of value in deciding the eligibility for a loan.
  • Employer: If the applicant is working with an employer who has high reputation and impressive turnover, the credibility of the applicant will respectively increase. Being a part of reputed and high turnover companies is an asset for the applicant.

Top 5 Common Reasons for Rejection of a Loan Application

There are several reasons because of which a personal application gets rejected. Some may be known to you whereas some remain unknown to you. Personal loans are also rejected due to some solely on the bank discretion despite the applicant meeting major eligibility criteria.

1.     Poor Documentation can cause Rejection of a Loan Application

Lenders always verify each and every document you provide in your personal loan online application. So, before you submit it, double check the information you provide before submitting your instant personal loan application. In case the lender finds any inconsistency in your information provided, they will reject your personal loan application.

Some common documentation error which leads to personal loan rejection are:

  1. PAN Card: wrong name and/or DOB in PAN Card
  2. Voter ID card: Wrong Name and/or DOB and/or Permanent Address and/or Gender.
  3. Bank Statement: Name Mismatch and/or Address Mismatch

2.     Minimum Required Income Criteria not met

Every lender has their own defined eligibility criteria to be fulfilled in terms to get qualified for a personal loan. This eligibility criterion contains income factor too. The minimum required income criteria varies from lender to lender and if an applicant is not able to meet this criterion the loan application gets rejected.

3.     Unstable Employment History of the Applicant

Most of the lenders offer personal loans to applicants who have a stable history of employment. Unstable employment history of the applicant increases the risk factor to the lenders for the repayment. So, if you do not have a stable job or have a history of switching jobs multiple times, your personal loan application can be rejected. Lenders want customers with stable employment or business so that they can be regular with income and hence with the EMIs and repayments.

4.     Low CIBIL

CIBIL is the basic representation of your financial history. It shows all your borrowings and repayments made against your borrowings. A low CIBIL indicates that you were not timely with your EMIs or you have missed some of your EMIs. This increases the risk to the lender and hence to be on a safer side they reject applications with low CIBIL score.

5.     Higher Income to Debt Ratio

Income to debt ratio is also an important thing which lenders consider while processing a personal loan application. A higher income to debt ratio means the applicant is already into debt which is more than 40% of his/her income. Generally, lenders reject such applications have they are not much sure about their repayment.

Documentation Required for Loans

  • Passport size photographs (including those affixed in loan application)
  • Proof of Identification: electoral id card / passport / driving license / pan card.
  • Proof of Residence: electoral id card / passport / electricity bill / telephone bill.
  • Proof of Business Address: In case of non- salaried borrowers.
  • Statement of bank account for the last six months.
  • Signature identification from present bankers.
  • Personal assets and liabilities statements in bank’s standard format.

For Salaried Employees:

  • Original salary certificate for last month.
  • DS certificate- Form 16 or copy of I.T. Returns for the last two financial years, duly acknowledged by I.T. Dept

For Self-Employed Individuals:

  • Three years I.T. Returns duly acknowledged by I.T Dept./ I.T. Assessment Orders for Computation of income
  • Copies of challans in respect of advance payment of income tax

Loans & Taxes

Here is the list of loans that are taxable and tax free. This list will help you in manage financial requirements by tax benefits. Think wisely and choose the one reap maximum tax benefits and serves your purpose.

17(2) (viii) with Rule 3(7) (i) states:

  1. Interest free loan or loan at concessional rate of interest given by an employer to the employee (or any member of his household) is a perquisite chargeable to tax in the hands of all employees on following basis:
    1. Interest free loan or Loan at concessional rate of interest
    2. Find out the ‘maximum outstanding monthly balance’ (i.e. the aggregate outstanding balance for each loan as on the last day of each month);
    3. Calculate interest for each month of the previous year on the outstanding amount (mentioned in point 1) at the rate of interest (given in point 2)
    4. Find out rate of interest charged by the SBI as on the first day of relevant previous year in respect of loan for the same purpose advanced by it;
    5. Interest actually recovered, if any, from employee
    6. The balance amount (point 3-point 4) is taxable value of perquisite
  2. Nothing is taxable if:
    1. Loan in aggregate does not exceed ₹20,000
    2. Loan is provided for treatment of specified diseases (Rule 3A) like neurological diseases, Cancer, AIDS, Chronic renal failure, Hemophilia (specified diseases). However, exemption is not applicable to so much of the loan as has been reimbursed to the employee under any medical insurance scheme.

What is prepayment and part-payment of a Loan?

All of us would have heard about these two terms when it comes to taking a loan and not many still know the actual difference between the same. It is pretty and easy to understanding. Pre-payment is in layman sense being able to repay the complete outstanding loan amount even before the actual tenure of the loan. This is also called as pre-closure. Primarily the principal amount will be repaid along with the pre-payment charges. The pre-payment charges varies from bank to bank according to their policies, these charges will be intimated at the time of loan approval.
Another important doubt with regard to pre-payment is when can this be done during the tenure of the loan? While some banks will have just 6 months as the locking period, other have upto 12 months. After continuous EMI payment for the set time frame of 6- 12 months the total outstanding loan amount can be pre-paid. Along with this there will be some amount of pre-closure charges and this varies from zero to 5% on the outstanding loan amount from bank to bank. If you know to play the cards well, you can either choose a bank that has zero pre-payment charges or look out for the offers from reputed banks that give this offer to the customers at certain specific period.
On the flip side part-payment is just closing the outstanding loan amount partly. Say your actual loan amount INR 500,000 and 2 years down the line the balance outstanding is INR 300,000. If you are expecting to receive around INR 150,000 of surplus fund, this can be used to partly repay the loan amount. Thus your outstanding loan amount will drop to INR 150,000 and there will be a proportional change in your EMI and rate of interest on the loan. This is the easiest way to repay the loan amount even before the actual tenure and your exposure to risk also drops. There is option to pay any amount between 2 to 5 times of the actual EMI amount at least once a year as the part payment.

When you have some surplus funds, which loans should you pre-close first?

In case of surplus fund the loan with higher rate of interest has to be pre-closed first. The higher the interest rate is; most part of the EMI amount will be flowing towards the interest of the loan instead of the principal. Thus the thumb rule is to pre-close the loan with higher rate of interest. The sooner you pre-close a loan with higher interest rate, higher will be the benefits. Of course, there will be some charges for the same which the borrower will have to incur but this amount is comparatively lesser than the actual interest you would end up paying until the complete tenure of the loan. Also it is said that home loans are generally cheaper, but before taking a decision compare all the outstanding loan interest rates and then make a wise decision.

Do’s & Don’ts of a Loan:

Just as everything has dos and don’ts, the same is the case of loans. The below list will help you understand the same.


  • Never borrow more than what is required: This can lead you to pay interest for unnecessary debts. It is essential to consider all requirement for a loan, sum up the amount requirement and then start looking for loan option, interest rates, monthly EMI, tenure etc.
  • Borrow what you can afford to repay: Taking loan that you will struggle is pay is not a good idea. Before taking a loan, make a thorough calculation of how much you will be able to pay.
  • Use the Money for Necessities: Taking a loan ‘just because it is easy to get one’ is the worst idea. Avoid putting yourself into debt. Be clear why a loan is required and stick to the plan.


  • Jump into Payment Protection Insurance: Check if there is a need for PPI and even if there is a requirement; take it from an independent company instead of the loan provider.
  • Ignore the Policy and Procedures: It is worth you spending an hour extra now to read the guidelines provided bank instead of later regretting. Ignorance of terms is not an excuse.
  • Miss Payments: Though it sounds obvious, don’ts list will be incomplete without this point. Missing or delaying one single payment will reflect on all aspects of your financial life. Apart from the extra interest that is required to be paid, you will end up having weak credit rating score. 

How Does Finance Buddha Works?

Finance Buddha is not just a loan comparison site, but you can directly apply for a loan at the best bank. This website is available for free to provide all necessary information for those looking out for loan. Applicants can check the loan eligibility according to the type of loan required, post which choose the bank to apply for a loan. Considering the request banks will contact the applicants for further processing.

How to Choose the Best Loan at Finance Buddha?

Choosing best loan is always a tough task for each and every one who is looking to avail loan. It is essential to consider the below factors while choosing best loan.

  • Application Fee
  • Credit Evaluation
  • Loan Processing Fee
  • Appraisal Fee
  • Eligibility
  • Documentation 
  • Underwriting Collateral Requirement
  • Partial Payment Fee
  • Prepayment Fee
  • Default Charges

How to Apply For a Loan at Finance Buddha?

Here you just have to update your details such as Current Company, take home salary, existing EMI amount, Salary account bank, loan requirement and tenure, and it will auto-calculate the amount that should be paid per bank interest rates, its processing fees, etc. Once this information helps you to decide the bank you wish to avail loan, click on “Apply Now” and share your contact. Bank officials will contact you directly to make your interest executed. Here all types of loans can be applied and bank will get the feed of the same immediately.

Top Rated FAQs

What is EMI calculator used for in Finance Buddha?

This helps individuals to check how much loan they can avail with their eligibility and how much would be the monthly repayment amount along with tenure and interest rate details.

What credentials should be shared to check EMI details?

The applicant should just give loan amount, tenure, interest rate percentage and processing fee. There are separate EMI calculators for home loan, personal loan, business loan, car loan and so on

What are the features and benefits an EMI calculator can offer?

It offers convenience, accuracy, speedy calculation, specific details of each type of loan and Amortization tables and so on.

What is the formula for EMI calculation?

Loan amount x Interest/12) x [(1+ interest rate/12)^loan tenure in number of months] / ([(1+ interest rate/12) ^ loan tenure in number of months]-1

What are the simple ways to reduce loan EMI?

Consider taking loans with banks where there is existing relationship; negotiate with banks for lower rate of interest, compare and tae decision, look for part and full payment options to reduce burden and also prioritize loan payments per due date and highest interest rates.

What is the method of EMI calculation on Excel?

Simple EMI calculation is (P X R/12) X [(1+R/12) ^N] / [(1+R/12) ^N-1] and for excel it is PMT(RATE,NPER,PV,FV,TYPE)

Why did RBI ban 0% EMI scheme?

he main reasons are due to hidden rate of interest, artificial demand creation and disparity in pricing.

What are the advantages of converting purchases to EMIs?

There are attractive rates of interest, flexibility in repayment tenure, minimal to zero paperwork involvement

What is the difference between EMI in Advance vs. EMI in Arrears?

It can be illustrated through an example: EMI schemes for a car loan. On road price of the car: Rs. 4,50,000, Interest rate for the loan: 12%, Loan amount applied for: Rs. 3,00,000, Processing fee for the loan: Rs. 3,000 and Loan tenure: 36 months.

Will there be tax benefits if available on loan?

Yes, there are tax benefits available on loans from reputed banks. The same can be availed while filing tax returns.

Is there an option to customize the loan amount with partly floating and partly fixed rate of interest?

Yes, it is possible. However, this should be made clear at the time of applying for the loan.

Is it possible to give standing instructions to the bank for EMI payment?

Yes, it is possible and this way you will not miss paying the EMI on a timely manner. However, when you are giving standing instructions, it is important to make sure there is sufficient balance in your account for the EMI payment.

Is it compulsory to pledge security for all type of loans?

No, it depends on the type of loan you are requesting and the bank from which the loan is taken.

What is pre-EMI interest?

This is the interest amount paid to the bank on a monthly basis from the month of loan disbursement upto the month of loan EMI payment.

Will my house property documents be safe with the bank while availing home loan?

Yes, it will be as safe as it is in the locker. The documents and ownership will be transferred as soon as the loan amount is fully repaid.

How soon can a loan be pre-closed?

Though it is according to different banks’ rules, most of the banks agree for pre-closure after 6-12 months of EMI payment.

Which are the various types of interest rates charged on a loan?

The two main types of interests charged are either fixed rate and floating rate of interest.

Will I get tax benefit from a loan?

Yes, all the residents of India as per the India Income Tax Act, 1961 will not have tax charged on the loan amount as per 80C.

Is there a need to have agreement of sale for availing a home loan?

Yes, loan will not be approved until there is an agreement of sale. The original of this will be with the bank until the loan amount is repaid.

What are the different types of income proof?

For Salaried Individuals - For Govt. employees, the most recent salary slip.For Self-Employed: Copy of the most recent Income Tax return form.

Will I need a guarantor to get a loan approved?

It totally depends on the type of loan you are taking. For a home loan, guarantor is necessary while for a personal loan this is not required for most of the banks.

What will be the processing charges of the loan amount?

It will vary between INR 600 to 3% of the loan approval amount. Some banks offer loan at zero processing fee. Thus doing a thorough comparison will help you to pick the best from the alternatives available.

Is it possible to apply for a loan through online?

Yes, it is absolutely possible. And Finance Buddha is the best platform for comparing and applying online.

How long will it take to process a loan?

Approximately about 48 hours is required to process a personal loan, bike loan and top-up loan if all the documents are accurate and if the applicant meets all the eligibility criteria.

Loan Reviews

Johnson V

5 / 5

I was tired of looking for a home loan for low interest rate and low tenure as am 46 years old, but got a best deal from ICICI bank. Loved their service and it’s a very flexible bank.
Sindhu Prabhu

5 / 5

This is my second experience with Axis bank and I like the attention and attitude they have towards each customers
Sheryl Sam

5 / 5

I would suggest everyone to take loan from Bajaj Finserv, this is the best bank I have come across till date for loans.
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