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Personal Loan Terms and Conditions for Applying in India

Thanks to technological advancements and digital banking solutions, applying for a personal loan in India has become streamlined and convenient. However, understanding the terms and conditions associated with personal loans is crucial for making informed decisions.

Knowing eligibility criteria, documentation requirements, and repayment conditions can make the application smoother, whether you’re eyeing an instant personal loan or planning to take a 5 lakh personal loan. This blog will delve into the key terms and conditions you must consider when applying for a personal loan in India.

Understanding Personal Loans

Personal loans are unsecured loans provided by banks and financial institutions to meet various financial needs, such as medical emergencies, home renovations, or travel expenses. Unlike secured loans, personal loans do not require collateral, making them an attractive option for borrowers.

RBI Guidelines for Lenders On Fair Practice Code

The RBI has issued guidelines to ensure the lending process is fair and beneficial for lenders and borrowers. Here are some key points:

  • Comprehensive Loan Application Forms: All loan applications must include detailed information on fees and payments, allowing borrowers to compare rates with other banks and make informed decisions.
  • Timely Verification: Loan applications should be verified within a reasonable period. Borrowers must be promptly contacted without undue delay if additional information is needed.
  • Rejection of Small Loans: If loan applications for amounts less than Rs. 2 lakhs are rejected, the reasons must be provided in writing.
  • Timely Disbursement and Communication: Loans should be disbursed promptly. Any changes in terms or conditions must be communicated to the borrower.
  • Notice for Repayment Changes: If lenders wish to recall, cancel, or request faster repayment, they must give adequate notice to the borrowers.
  • Non-Interference: Lenders cannot interfere in the borrower’s personal life unless specified in the loan agreement.
  • Non-Discrimination: Borrowers must not be discriminated against based on caste, religion, sex, etc.
  • No Harassment in Recovery: Lenders are prohibited from harassing borrowers during the loan recovery process.

The RBI has provided numerous guidelines to protect the interests of both borrowers and lenders.

The Terms and Conditions

Use and Security

One of the primary advantages of personal loans is their versatility; they can be used for various purposes, unlike auto loans or education loans, which are restricted to specific uses. Moreover, personal loans typically do not require collateral, so applicants should be cautious and avoid falling for fraudulent claims.

Eligibility Criteria

Eligibility criteria for personal loans are designed to ensure that borrowers can repay the loan. Each lender has different requirements, but common factors include:

  • Age of the Borrower: Most lenders offer loans to individuals aged 21 to 57, as this age group generally has a stable income, making them more likely to repay the loan.
  • Income of the Borrower: Income is a crucial criterion for eligibility. Borrowers usually need a minimum income ranging from Rs. 13,500 to Rs. 15,000 or higher. Many lenders prefer salaried applicants over self-employed individuals due to perceived lower risk. Additionally, lenders often require that income be directly deposited into the borrower’s bank account, making it difficult for those who receive income in cash to obtain loans.
  • Credit Scores: A borrower’s credit score is a key indicator of creditworthiness. Higher credit scores improve the chances of securing a personal loan at lower interest rates. Most lenders require a credit score of over 700 for personal loans, as no collateral is involved. Borrowers with low credit scores or inconsistent repayment histories may find it challenging to obtain loans.
  • Additional Factors: Providing accurate documentation and not having multiple concurrent loans also affect eligibility.

Lenders set these conditions to ensure the borrower can repay the loan, making the process smoother and minimizing errors. Borrowers should know and meet these criteria to successfully obtain a personal loan.


Applying for a personal loan in India involves understanding various terms and conditions, from eligibility criteria to documentation and repayment options. Tools like a personal loan eligibility calculator can simplify the process and help you make informed decisions.

Whether you’re considering an instant personal loan or a 5 lakh personal loan, being well-informed about the terms and conditions ensures a smoother borrowing experience and helps you manage your finances effectively.

Ready to apply for a personal loan? Use a personal loan eligibility calculator today to check your eligibility and explore the best loan options for your needs!

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