Personal loan is required for personal consumption of an individual. Eligibility for loan amount is calculated on the basis of personal incomes and the existing liabilities of the individual. In this product no collateral or security is required so it is known as unsecured loan, unlike Home loan and loan against property which are secured loans.

Personal loan interest rate plays the most significant role in deciding the financial institution from which loan is to be availed. Other factor which is to be considered while making the decision is penalty on partial payment or complete prepayment of the loan.

Loan amount sanctioned by the bank is credited in account of the applicant so the applicant can spend credited amount at his/her own will. The tenure in this loan extends from minimum of one year to maximum of six years depending upon profile of applicants. Some financial institution permits pre-closure of personal after certain period without penalty whereas as per the conditions of some financial institutions pre-closure can be done without any penalty.

Major players in this segment are SBI Personal Loan, HDFC Personal Loan and ICICI Personal Loan.