Category: Blog

Everything You Need to Know Before Applying for a Loan in India

Applying for a loan is one of the biggest financial decisions you’ll make. Whether it’s a personal loan, home loan, car loan, or business loan, understanding the process helps you avoid rejection, save on interest, and make informed choices. Here’s a complete guide to help you prepare before applying for a loan in India.

1. Know Your Loan Type

Different loans serve different needs:

  • Personal Loan: For medical expenses, travel, or debt consolidation.
  • Home Loan: For buying or constructing a house.
  • Car/Vehicle Loan: For purchasing a new or used vehicle.
  • Education Loan: For funding higher studies in India or abroad.
  • Business Loan: For expanding or managing a business.

Choose the loan that fits your purpose to get better terms and faster approval.

2. Check Your Credit (CIBIL) Score

Your CIBIL score reflects your creditworthiness.

  • A score above 750 is considered excellent.
  • A low score can result in higher interest rates or rejection.
    Check your score for free online before applying and clear pending dues to improve it.

3. Compare Interest Rates

Interest rates vary between banks and NBFCs.

  • Fixed Rate: Remains constant throughout the loan tenure.
  • Floating Rate: Changes as per market conditions.

Use online loan comparison tools to find the lowest EMI and best lender.

4. Understand Loan Eligibility

Lenders evaluate:

  • Your income and employment type
  • Age and repayment capacity
  • Existing debts and credit utilization

Use an eligibility calculator to estimate how much loan you can get before applying.

5. Prepare Required Documents

Keep these ready to speed up approval:

  • ID Proof: PAN Card, Aadhaar Card
  • Address Proof: Utility bills, passport, or voter ID
  • Income Proof: Salary slips, ITR, or bank statements
  • Property Documents: For secured loans

6. Calculate EMI and Tenure

Use an online EMI calculator to plan your monthly repayments.
A longer tenure reduces EMI but increases total interest paid.
Choose a balance that suits your income and budget.

7. Check for Hidden Charges

Apart from interest, watch out for:

  • Processing fees
  • Prepayment penalties
  • Late payment charges

Read the fine print carefully before signing the loan agreement.

8. Apply with the Right Lender

Select a lender known for:

  • Transparent terms
  • Quick processing
  • Good customer support

You can apply through bank DSAs like ZestLoans.in, which help you compare and apply to multiple banks at once.

9. Maintain Stable Income and Job

Lenders prefer applicants with a stable job or business income for consistent repayments. Avoid job changes during the loan process.

10. Keep a Co-Applicant or Guarantor (if needed)

If your income or CIBIL score is low, adding a co-applicant can improve your approval chances and help you secure better rates.

Final Thoughts

Before applying for any loan in India, take time to assess your needs, credit score, and repayment capacity. An informed borrower always saves more in the long run.

Personal Loan vs Gold Loan: Which One Should You Choose?

When you need quick funds, choosing between a Personal Loan and a Gold Loan can be confusing. Both options offer instant liquidity, minimal documentation, and flexibility in usage — but they differ in eligibility, security, and interest rates. Let’s explore the key differences to help you make the right financial decision.

1. What Is a Personal Loan?

A Personal Loan is an unsecured loan, meaning you don’t need to pledge any asset as security. Banks and NBFCs provide these loans based on your credit score, income, and repayment history.
You can use the funds for any purpose — such as medical emergencies, home renovation, weddings, or travel.

Key Features:

  • No collateral required
  • Loan amount: ₹50,000 to ₹40 lakhs (varies by lender)
  • Tenure: 12 to 60 months
  • Approval depends on CIBIL score and income stability

2. What Is a Gold Loan?

A Gold Loan is a secured loan where you pledge your gold ornaments or coins as collateral. The lender provides a loan amount based on the market value and purity of the gold.

Key Features:

  • Requires gold as security
  • Loan amount: 60–75% of gold value
  • Quick disbursal — often within an hour
  • Tenure: 3 months to 3 years

3. Interest Rates Comparison

  • Personal Loan: Usually ranges from 10% to 24% per annum, depending on your credit profile.
  • Gold Loan: Typically starts at 7% to 15% per annum, since it’s secured by gold collateral.

✅ Verdict: Gold loans generally come with lower interest rates compared to personal loans.

4. Documentation and Eligibility

  • Personal Loan: Requires income proof, bank statements, ID, and address proof. Approval depends on your credit score.
  • Gold Loan: Only requires KYC documents and gold evaluation — credit score is not mandatory.

✅ Verdict: Gold loans are easier and faster to get approved for, especially if your CIBIL score is low.

5. Loan Tenure and Repayment Flexibility

  • Personal Loan: Offers longer tenure (up to 5 years) and fixed EMIs.
  • Gold Loan: Shorter tenure (up to 3 years), but many lenders offer flexible repayment options, including bullet repayment.

✅ Verdict: Choose a personal loan for long-term financial needs, and a gold loan for short-term cash requirements.

6. Risk Factor

  • Personal Loan: No risk to your assets since it’s unsecured.
  • Gold Loan: If you fail to repay, the lender may auction your pledged gold.

✅ Verdict: Personal loans carry no asset risk, while gold loans require careful repayment planning.

7. Which Loan Should You Choose?

Criteria Personal Loan Gold Loan
Security Required No Yes (Gold)
Interest Rate Higher Lower
Approval Speed 1–2 Days Within Hours
Credit Score Needed Yes No
Risk None Gold may be auctioned
Tenure Up to 5 years Up to 3 years

Final Thoughts

If you have a strong credit score and need a long-term loan, a Personal Loan is ideal.
If you own gold and need quick funds with lower interest, a Gold Loan is the better option.

At ZestLoans.in, we help you compare and apply for both personal and gold loans from leading banks and NBFCs — ensuring the best interest rates and fast approval.