Want to apply for a personal loan? Here are things you should keep in mind

Personal loans are multi-purpose loans which help individuals meet financial requirements they may need in case they face a shortfall.

A personal loan 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 areas such as income level, credit and employment history, repayment capacity, etc.

So, if you are looking to take a personal loan, here’s a list of top-10 banks and NBFCs offering the lowest interest rates:

(Source: Paisabazaar)

Interest rates mentioned in the above table are indicative and may vary depending on the bank’s terms and conditions. Processing and other charges are included according to the bank’s charges for EMI calculation.

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.

Almost everyone decides on the personal loan deal just on the basis of Interest rates, which is not really a convenient option. Interest rates are an important factor to be considered but do not make it the only factor. One should also look for lenders that can lend more on the basis of income and repayment capacity.

However, like any other loan, defaulting on a personal loan will have a negative impact on your credit report and will pose problems when you apply for credit cards or other loans in the future.