Personal loan FAQ: first-time borrower questions, answered in rupees

Should this be a loan at all? A personal loan moves a purchase earlier and charges for the months it moved. If the money sits in a deposit that is not your emergency fund, spending that almost always costs less. A loan fits a one-off need with a date on it that savings cannot meet in time.

How much should I borrow? What you need, priced, and nothing more. Take a need of ₹2,60,000. Asking for ₹3,00,000 instead adds ₹1,329 to the EMI and ₹7,829 of interest over 36 months, plus ₹944 of processing fee and GST on the extra ₹40,000: ₹8,773 for a cushion. Even untouched in savings for three years at an illustrative 3 percent, earning ₹3,600, it still costs ₹5,173.

Where should I apply first? With the bank that holds your salary account. It already sees your income arrive, which usually means fewer documents. Then compare two or three others on the same amount and tenure, using the annual percentage rate on each Key Facts Statement.

How long should the tenure be? The shortest one whose EMI still leaves room for rent, savings and a month in hand. The personal loan guide walks a whole loan from need to NOC; this page takes the questions people ask along the way.

What documents do I need? Fewer than most first-timers fear. A pre-approved offer from your own bank may need little more than your PAN and consent; a fresh application to a new lender needs the full set below.

Which income does the lender use? The salary credited to your account, not your CTC, because the credit is what an EMI will be paid from. A ₹9,00,000 CTC is ₹75,000 a month on paper. Take out the employer's PF share, which sits inside CTC but is never paid to you, your own PF contribution, professional tax and TDS, and an illustrative ₹64,500 lands in the account. At an illustrative 50 percent cap on total EMIs, that is ₹32,250 of room, not ₹37,500. At 12 percent over 36 months, the difference is ₹1,58,064 of borrowing that exists only in the CTC figure.

Why do they want bank statements if they have my salary slips? Statements show what slips cannot: whether salary arrives on time, which EMIs already leave the account, and whether anything bounced. A recent returned mandate is read more harshly than a modest salary.

What if my name is spelt differently on PAN and Aadhaar? Fix it before you apply. A mismatch between identity documents, or between them and the bank account, is one of the commonest reasons a clean application stalls at verification.

What score do I need? There is no single cut-off in law. Each lender sets its own, and the score sets the rate as well as the answer. What sits behind the number matters as much: an overdue, settled or written-off account outweighs a decent score.

I have never borrowed. Can I still be approved? Often, but a thin file makes lenders cautious: the sanction may be smaller or the rate higher. Being new to credit is not the same as having a poor record, and a first loan repaid on time builds one.

Does checking my own score lower it? No. Checking your own report is a soft enquiry and leaves no mark on the score. A hard enquiry is made when a lender pulls your report because you applied, and several in a short span are what hurt.

Can I improve the answer within a month? One lever works that fast: the balance on your cards on the statement date. Lenders see what the card issuer reports on that date, not what you mean to pay later. On a ₹1,20,000 limit, an ₹84,000 statement balance is 70 percent utilisation. Pay ₹60,000 before the statement date, rather than before the due date, and ₹24,000 is reported instead: 20 percent. How lenders also turn a card balance into a notional EMI is worked on the eligibility check page.

Why was I rejected? Usually one of four reasons: the score or something behind it, too little room under the lender's EMI cap, an employer or document it could not verify, or recent bounces in the account. Find out which before applying elsewhere; the same problem earns a second enquiry and the same answer.

What should I check in the offer? The Key Facts Statement. RBI requires banks and NBFCs to give you one before you sign, with an annual percentage rate that folds the fees into one figure. A charge that is not in it cannot be added later without your explicit consent, so read it the way you would read a bill before paying.

Why did less money arrive than I was sanctioned? Because some of it was deducted first. On the ₹3,00,000 loan, an illustrative 2 percent processing fee is ₹6,000, plus ₹1,080 of GST: ₹7,080. A loan protection premium, ₹6,000 here, is often deducted as well. And when disbursal falls some days before the EMI cycle begins, broken-period interest covers the gap: 20 days at 12 percent on ₹3,00,000 is ₹1,973, which some lenders take upfront and others add to the first EMI. Together that is ₹15,053, and ₹2,84,947 arrives.

What does that do to the rate? The EMI is still ₹9,964, worked on ₹3,00,000. Priced on the ₹2,92,920 left after the fee alone, the annual rate is 13.67 percent, not 12. With the premium also deducted, it is 15.13 percent. That second figure is the one to set against any other offer.

Is the insurance compulsory? Ask. The sanction letter should say whether it is a condition; if it is optional and you hold enough term cover, declining it takes ₹6,000 off the deductions. And the money should only ever be paid into a bank account in your own name.

What happens if an EMI bounces? Up to three charges follow: the lender's bounce charge, your own bank's charge for the returned mandate, and a penal charge while the EMI stays unpaid. RBI's rules require that penalty to be a charge rather than extra interest added to your rate, and no further interest can be charged on it. The amounts are in your KFS.

On the ₹9,964 EMI, take an illustrative bounce charge of ₹500 plus GST, a bank return charge of ₹300 plus GST, and a penal charge of 2 percent a month on the overdue amount. One EMI paid a month late costs ₹1,143, which is 11.5 percent of the EMI. Miss the next one too, and the charges come again on the second EMI while the first keeps attracting its penal charge: ₹2,486 across the two months.

When does it reach my credit report? Lenders report repayment status to the credit bureaus on a regular cycle, and an EMI unpaid past its due date shows as days past due. An account that crosses 30 days past due is recorded that way, and later lenders see it for years after the charges are forgotten. Paying within days, before the next report goes out, costs least.

What if I cannot pay for a few months? Call the lender before the first miss, not after the third, and get any revised arrangement in writing. A settlement may end the calls, but it is reported as settled, which later lenders read as a loss the last lender took.

Can I prepay a personal loan? Usually, on the lender's terms. RBI's rules bar prepayment charges on floating-rate loans taken by individuals for non-business purposes, but most personal loans carry a fixed rate, so the charge and any lock-in are whatever your KFS says.

Should a part-payment cut the EMI or the tenure? After 12 EMIs on the ₹3,00,000 loan, ₹2,11,675 is outstanding and ₹27,468 of interest is still to come. A ₹50,000 part-payment then offers two routes. Keep the EMI at ₹9,964 and the loan ends in 18 more months instead of 24, saving ₹11,845 of interest. Keep the tenure and the EMI falls by ₹2,354 to ₹7,611, saving ₹6,488. Shortening saves ₹5,357 more; lowering the EMI buys monthly breathing room.

Is foreclosing always worth it? Not late in the loan. Take an illustrative foreclosure charge of 4 percent of the outstanding plus GST. Closing at month 12 costs ₹9,991 and saves ₹27,468 of interest, a net gain of ₹17,477. Closing at month 30 costs ₹2,726 on the ₹57,748 left, to save ₹2,038 of interest: ₹688 worse than letting the last six EMIs run. Interest is front-loaded, so what prepaying saves shrinks faster than the charge.

When is the loan actually closed? When you hold a no-dues letter and the lender has reported the account closed to the bureaus. Cancel the EMI mandate too, and check your credit report a couple of months later: an account still showing open counts against you.

What is the difference between a guarantor and a co-applicant? A co-applicant is a borrower: their income counts towards eligibility, and both of you owe the full EMI from the first day. A guarantor is not a borrower unless the borrower defaults. Then the lender can ask the guarantor for the entire outstanding, not just the missed EMIs; under Indian contract law a guarantor's liability generally matches the borrower's.

Does guaranteeing a friend's loan affect my own borrowing? It can, and your lender decides how much. Say your take-home is ₹70,000, with an ₹8,000 car EMI. At an illustrative 50 percent cap, your room for a new EMI is ₹27,000. You guarantee a friend's ₹5,00,000 loan over 48 months at 12 percent, an EMI of ₹13,167. If your lender ignores the guarantee, you can still borrow ₹8,12,903 over 36 months at 12 percent. If it counts all of it, ₹4,16,480: ₹3,96,423 of your own borrowing gone for a loan you do not use.

What if the borrower stops paying? Two years in, ₹2,79,710 is still outstanding on the friend's loan, and that is what you can be asked for, with charges on top. The guarantee can also appear on your credit report, and a default on the guaranteed loan can be recorded against you.

Can I withdraw a guarantee later? Only with the lender's agreement, usually when it accepts a substitute or the loan closes.

Two things decide a first application before any lender sees it: what your credit report holds, and how much EMI room your accounts really leave. Unyfy's loan eligibility check pulls your Equifax credit report as a soft enquiry, which does not affect your score, and shows the score with the accounts behind it, including any overdue, settled or written-off account, before you apply anywhere. Alongside it, the app computes a live FOIR from the EMIs and card payments it sees leaving your accounts, read from bank and card transaction emails and, on Android, transactional SMS, so the room you plan on is the room a lender will find.

What you see is the score, each account on the report with its status, your current FOIR, and, if you want them, loan offers compared from 15+ banks and NBFCs. Only the one lender you choose to apply with runs a hard enquiry.

Unyfy is not a lender, so the sanction, the rate and the fees are the lender's decision. It never asks for your bank password or UPI PIN, and every payment is one you authorise. Install Unyfy on Android, or use the web app at app.unyfy.co.in on an iPhone.