What is a Personal Loan?
Simply put, it is an unsecured loan taken by individuals from a bank or a non-banking
financial company (NBFC) to meet their personal needs. It is provided on the basis of key
criteria such as income level, credit and employment history, repayment capacity, etc.
Unlike a home or a car loan, a personal loan is not secured against any asset. As it is
unsecured and the borrower does not put up collateral like gold or property to avail it, the
lender, in case of a default, cannot auction anything you own. The interest rates on personal
loans are higher than those on home, car or gold loans because of the greater perceived risk
when sanctioning them.