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June 14, 2026
The Dispatch

Definition

Personal Loan

A personal loan is an unsecured loan for any personal need, sanctioned mainly on the basis of your income and credit score.

A personal loan is a flexible, unsecured loan with no restriction on end use — medical bills, travel, weddings, debt consolidation and more. Approval depends largely on your income, employment stability and credit score, and funds are usually disbursed quickly with little documentation.

Because there is no collateral, interest rates are higher than secured loans, and a strong credit profile fetches a better rate. Tenures are typically short to medium, and EMIs are fixed.

Personal loans are convenient but can be expensive, so they are best used for genuine needs rather than discretionary spending. Borrowers should compare the APR (including processing fees) across lenders, not just the headline rate.

Related terms

  • Balance Transfer (Loan)A loan balance transfer moves your outstanding loan from one lender to another, usually to get a lower interest rate.
  • Secured vs Unsecured LoanA secured loan is backed by collateral the lender can seize on default; an unsecured loan has no collateral and relies on your creditworthiness.
  • Credit Score (CIBIL)A credit score, popularly called a CIBIL score in India, is a 300-900 number that reflects how reliably you repay loans and credit-card dues.

Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.