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Personal loan is a loan where the amount can be used for any purpose, making it more risky. Due to this reason the interest rate is also higher on this loan as compared to several other types of loans.The difference in terms of the interest rates will be anything between 2%-8% above other kinds of secured loans. However compared to other unsecured borrowings like credit cards, the rate will be lower.

A personal loan is a high-yielding loan for a bank because the rate of interest here is higher than what is charged on other types of loans that are given for specific purposes.Banks have raised funds from various sources for the purpose of giving these loans to various people. These funds are raised in such a manner that they match with the nature of the loans given to various entities.

Processing fee is a charge that a bank normally recovers from you when it gives you a personal loan. It is an expense incurred in completing the procedure for granting of the loan.Processing fee is meant to compensate the bank for the conduct of the various activities resulting in the disbursement of loan. This includes the various documentation and other processes involved with the loan.Usually, the processing fee is charged as a specific percentage of the loan amount. This is generally 1%-2% of the loan amount and has to be paid when the loan is taken. In other cases, this can be a flat sum subject to a maximum figure.

A personal loan is a type of borrowing wherein there is no specific purpose for which a particular loan is given. This means that you can use the loan for whatever purpose you desire.Since there is no specific purpose for the borrowing the entire process of giving a loan is not linked to any specific activity on your part, and this leads to an ease of operation for you.Since the loan is available for no specific purpose, a bank charges a higher interest rate on it as compared to several other types of loans. This is done in order to compensate for the risk of default from your side.

The amount of a personal loan required by you has to match with the various offerings made by different banks in the market. This will ensure that the right amount of loan is available and is consequently put to the best use.A lower interest rate that is offered by a bank should be selected by you in order to make the best use of the personal loan. This will reduce the cost burden of the entire loan.The repayment period has to be in tune with the income that you can generate over a period of time. This is necessary to ensure that the right amount is made available for repaying the loan.