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Understanding the Basics of Personal Loan

Personal loans are a popular financial tool that individuals in India often rely on to meet their diverse financial needs. Whether it’s funding a wedding, planning a vacation, or covering medical expenses, personal loans offer a flexible solution. Explored here are the basics of personal loans, with a focus on pre-approved personal loan, also known as BOB Personal Loan.

What is a personal loan? Definition

A personal loan refers to an unsecured credit option offered by financial institutions like banks or NBFCs to loan seekers depending on their repayment potential and credibility. 


Financial institutions specify eligibility parameters for personal loans. These parameters include income, age, credit history, employment status and prevailing debt. 


You can use personal loan proceeds for distinct reasons like home renovation, debt consolidation, education expenses, medical exigencies, etc. However, note that you cannot use personal loan for speculative purposes. 

Importance of Bank of Baroda pre-approved personal loan

Bank of Baroda (BOB) offers pre-approved personal loans to its customers. These loans come with a simplified application process and faster disbursal.

Interest rate

The personal loan rates can either be floating or fixed. A floating interest rate is better than opting for fixed rates owing to the former’s link with the repo rate, which provides complete transparency in rates. 

Loan amount

Personal loan proceeds differ depending on the loan borrower’s credit profile and income. It usually ranges anywhere between Rs 50,000 and Rs 40 lakh. 

Repayment tenure

Personal loans generally have a repayment tenure ranging from 1 to 5 years. However, the Bank of Baroda offers extended repayment options for its pre-approved personal loans.

Credit score

A good credit score enhances the chances of loan approval and may result in lower interest rates. BOB considers the credit score while offering pre-approved personal loans.


Banks require certain documents like identity proof, address proof, income proof, bank statements, and employment details for personal loan applications. BOB pre-approved personal loans may require fewer documents.

Processing time

The processing time for personal loan applications varies from bank to bank. BOB’s pre-approved personal loans offer faster processing due to reduced documentation requirements.

Loan disbursal

Once the loan application is approved, the loan amount is disbursed directly to the borrower’s bank account.

Flexible use

Personal loans provide borrowers with the flexibility to use the funds as per their requirements without any restrictions.

EMI calculation

Equated Monthly Installment (EMI) is the amount paid by the borrower to the lender each month. It includes both the principal amount and the interest.

Prepayment and foreclosure

Borrowers can choose to prepay or foreclose their personal loans before the completion of the repayment tenure. However, it may attract certain charges or penalties.

BOB personal loan features

Bank of Baroda Pre-Approved Personal Loan offers competitive interest rates, a simplified application process, minimal documentation, and flexible repayment options.

Comparison shopping

It is advisable to compare personal loan offerings from different banks to ensure the best interest rates, terms, and conditions.

Debt-to-income ratio

Banks evaluate a borrower’s debt-to-income ratio to determine their repayment capability. It compares the borrower’s monthly debt obligations with their monthly income.

Credit utilisation ratio

This ratio indicates the proportion of credit a borrower has utilised out of the total available credit limit. A lower credit utilisation ratio is preferred for a good credit score.

Credit history

A good credit history, which includes timely payments of existing loans and credit card bills, increases the chances of loan approval.

Guarantor requirement

Personal loans are usually unsecured, meaning they do not require collateral or a guarantor. However, certain banks may request a guarantor depending on the borrower’s profile.

Default and consequences

Failing to repay the personal loan within the agreed terms can result in default. It negatively impacts the borrower’s credit score and may lead to legal action by the bank.

Balance transfer

Borrowers can opt for a balance transfer if they find a personal loan with better terms, such as lower interest rates or longer repayment tenures. This allows them to shift the outstanding loan amount to the new lender.

BOB personal loan benefits

Bank of Baroda Pre-Approved Personal Loan offers benefits like quick approval, competitive interest rates, flexible repayment options, and dedicated customer support.

Late payment charges

Banks impose penalties for late payment or non-payment of EMIs. It is crucial to make timely repayments to avoid additional charges.

Insurance coverage

Some personal loans come with optional insurance coverage to protect the borrower and their family in case of unfortunate events like disability or death.


While applying for a personal loan, borrowers can negotiate the interest rate, processing fee, and other charges with the bank for better terms.

Loan top-up

Certain banks offer the facility to top-up existing personal loans to meet additional financial requirements. Bank of Baroda also provides top-up options for its pre-approved personal loans.

Privacy and security

Personal loan applicants must ensure the confidentiality and security of their personal and financial information throughout the application process.

Relationship with the bank

Maintaining a long-standing relationship with a bank, like Bank of Baroda, can increase the chances of getting pre-approved personal loans and other exclusive offers.

Financial discipline

Borrowers should exercise financial discipline while utilising personal loans, ensuring that they can repay the loan amount within the agreed tenure.

Utilising EMI calculators

EMI calculators available on bank websites can help borrowers estimate their monthly EMIs and plan their repayment accordingly.

Loan application rejection

Banks have the right to reject personal loan applications if the borrower does not meet their eligibility criteria. Rejections should not discourage individuals from exploring other loan options.

Credit counselling

In case of credit-related concerns or issues, individuals can seek credit counselling services to understand their financial situation better and make informed decisions.

Bank of Baroda customer support

BOB offers customer support services to assist borrowers with any queries or concerns related to pre-approved personal loans or other banking products.

Personal loans, including Bank of Baroda Pre-Approved Personal Loan and BOB personal loan, provide individuals in India with a flexible financial solution for various needs. Understanding the eligibility criteria, interest rates, documentation requirements, and repayment options are essential for making informed decisions when availing personal loans.

In conclusion, personal loans play a crucial role in the Indian financial landscape, offering individuals the flexibility and convenience to meet their immediate financial requirements. Bank of Baroda’s pre-approved personal loan product provides additional benefits, such as simplified application procedures and faster processing, to cater to the evolving needs of its customers. By understanding the basics of personal loans and considering factors such as eligibility, interest rates, repayment tenures, and loan features, individuals can make informed choices and ensure a smooth borrowing experience.


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