Which is the best way to avail a personal loan – public or a private sector?

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If you are facing a sudden liquidity crunch and need a substantial amount of funds for an upcoming commitment, personal loans are a great option.

The tenure of these loans is shorter (between 1 to 5 years), but the interest rates are slightly higher. For example, the lowest interest rate offered by banks for a personal loan is 11%. Additionally, these loans are collateral-free, making it easier for financial institutions to approve the loan application at the earliest.

Salient features of a personal loan

A personal loan applicant should be between 21 to 60 years old. The applicant should also have a minimum monthly income as stipulated by the lender.

 Wondering how much can you borrow through a personal loan? The exact loan amount depends on various factors, including your existing loans and the ability to service a new EMI.  A high credit score also improves your chances of availing a higher loan amount.

Typically, you will be able to borrow at least INR 30,000. In case you have too many ongoing EMIs, lower annual income, and a low credit score, you will not be able to get a very high amount of personal loan or get a higher amount at a much higher interest rate.

You can apply for a personal loan along with a co-applicant. However, the credit history and the outstanding financial obligations of your co-applicant will also have a bearing on your loan application.

Who should I approach for a personal loan – a private bank or a public sector bank?

Since both private and public banks offer personal loans, which should become your lender? There are several factors to be taken into account before deciding as there is no black and white answer.

Loan application and disbursal process can be a time-consuming affair when you approach a public bank. Whereas, a private bank may be able to process it in just a few working days as they operate through direct selling agents. However, the conveniences offered by private banks come at a premium — they often end up charging a very high processing fee, which is negligible for a public bank.

Private banks may also levy a very high foreclosure charge for prepayments. Usually, public banks do not have any such penalty for prepayments. When it comes to interest rates, a lot of private banks offer competitive rates compared with public sector banks, making them a top choice for many customers.

Lastly, public sector banks seldom grant any relaxations on the eligibility criteria decided by the board. Private banks may allow certain relaxations on a case-to-case basis.


Personal loans offer several advantages over other forms of financing. Therefore, when choosing a lender for your loan application, make sure to do your diligence before you decide to zero-down on one. Never miss reading the fine print – comparing interest rates, processing fees, EMI amount, repayment options, prepayment penalty, etc., will help you choose the ideal lender.