Different components of a personal loan



If you are planning to apply for a personal loan, you must concentrate on various related factors, and a personal loan is always effective with these terms and conditions. The amount, interest rate, repayment tenure, processing charges, etc. These terms are directly related to a personal loan.

We discuss these components, their relation, and their influence on a personal loan.

Loan amount.

First, a loan amount is a primary component on which all other factors depend. The approval of the amount depends on a person’s credit score and salary. The personal loan approval depends on the income and the transactional history of a customer. A lender checks the credit history, and the loan amount is considered according to the salary. If you have a good salary and credit score, you can apply for an amount per your requirements.  Always try to choose an amount according to your need even after the eligibility for the higher amount. Your repayment will be based on your actual amount only.

Rate of interest.

All personal loan is based on the interest rate only. There is a variable rate of interest depending on the lenders, and it is also different on the credit score. A person with a good credit score may get a loan at a lower interest rate than someone with a low CIBIL score. If you are getting a loan at a reasonable interest rate, it will be easy to repay the loan. Your EMI will be less as per the interest rate. So, always try to consider a reasonable rate of interest. You can negotiate the interest rate with the lender if your credit score is good.

Repayment tenure.

The repayment tenure is also an essential component of a personal loan. Suppose you borrow a high loan amount, then you can repay your loan in different EMI. It will make your repayment easy and comfortable. Generally, the loan amount for a personal loan is fifteen times your salary, or it may be more according to your credit score. Paying these amounts in multiple EMI will be easy because you can save the amount of EMI from your monthly salary. The repayment tenure in the case of a short-term personal loan is different because the term is for thirty to thirty-five days. In this case, you should pay with your salary only.

Processing charge.

A personal loan consists of a processing charge depending on the different lenders. The processing charge is applied to the loan amount, and the borrower must pay it. It may be different from lender to lender.  So before applying for a personal loan, you should concentrate on it to minimize your overall cost.

Collateral or security.

A personal loan is said to be unsecured because of the absence of collateral; a personal loan does not require any assets for a salaried person. Lenders approve the loan based on a person’s salary and credit score. But in some cases, some customer does not have any compensation or have self-business; they can apply for a loan against their property like assets and fixed deposit. The personal loan against the property becomes accessible for approval because there are no chances of any defaults or losses for the lenders.

A personal loan consists of these components, which are invariably related to the loan. One should always look at these factors before getting a loan.

There are other types of personal loans, such as short-term personal loans. It is approved for a salaried person. The lenders approve thirty to forty percent of the salary. The repayment tenure is of thirty days. The loan amount is supported in a ratio that a person can quickly pay with his upcoming paycheck.

It may be used for different purposes because when there is a shortage of funds at the end of the month, one can apply for it. Its approval and disbursal take less time. So, one can use its amount as per the requirements.


There are four main components of a personal loan, which are related to a personal loan as a part and whole relationship. There is a direct relationship between these and a personal loan. Any changes in these components can influence the loan and its repayment. So, it is better to concentrate on this component properly to make your deal fair and comfortable.