Personal Loan: What You Need to Know Before You Borrow

A personal loan, a fixed-sum unsecured loan given for any personal use, not tied to collateral like a house or car. Also known as unsecured loan, it’s one of the most common ways Indians cover emergencies, medical bills, or consolidate debt without selling assets. Unlike credit cards, you get the full amount upfront and pay it back in fixed monthly payments over 1 to 5 years. But here’s the catch—lenders don’t just look at your income. They check your credit history, existing debts, and even your job stability before approving you.

That’s why some people get approved for ₹5 lakh at 10% interest, while others with similar income get rejected or offered 18%. The difference isn’t luck—it’s how well your financial profile matches what lenders want. Your credit score, a three-digit number that shows how reliably you repay borrowed money is the biggest gatekeeper. If it’s below 700, you’re likely to pay more or get turned down. And if you’ve missed payments on past gold loans, loans where you pledge gold jewelry as security or EMIs, that shows up too. Even a single late payment can hurt your chances for months.

Many think personal loans are only for emergencies. But smart borrowers use them to replace high-interest credit card debt or fund planned expenses like weddings or home repairs. The key is matching the loan term to your ability to pay. A 5-year loan might feel easier each month, but you’ll end up paying way more in interest than a 2-year loan. And don’t fall for "zero interest" offers—they usually hide fees or require you to pay the full amount upfront. Always read the fine print on processing fees, prepayment penalties, and insurance add-ons.

What you’ll find below are real stories and facts from Indian borrowers who’ve been there. Some saved thousands by switching lenders. Others got trapped by hidden charges. A few used personal loans to build credit instead of wreck it. No fluff. No theory. Just what works—and what doesn’t—when you’re borrowing money in India today.