02 September, 2025 | 14:57 IST
With fast approvals, minimal paperwork and a digital application process, personal loans have become the go-to solution for managing everything from medical bills to home repairs. But while getting the funds is easy, repaying them isn't always straightforward.
Understanding the personal loan repayment rule is important to avoid unexpected costs and stay financially disciplined. Whether you're planning to apply or are already repaying a loan, knowing the finer details of repayment can make all the difference.
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A personal loan repayment rule refers to the guidelines set by lenders that determine how a loan must be repaid. These include the repayment period, the mode of repayment (usually EMIs), penalties for delays or defaults and provisions for prepayment or foreclosure.
Most personal loans are unsecured, meaning you don’t need to pledge any collateral. Because of this, lenders expect timely repayments and often include clauses to protect their interests.
One digital lending platform that can help you get started is the Moneycontrol app or website. It allows you to compare personal loan offers from eight lenders. The entire process is digital, with some lenders offering approvals and disbursals within minutes. Loan amounts go up to Rs 50 lakh, with interest rates starting at 10.5% per annum, giving you flexibility to match your repayment comfort and financial goals.
Usually, personal loan repayment tenure in India ranges from 12 to 60 months. Choosing the right tenure is crucial — longer durations mean lower EMIs but more interest outgo, while shorter tenures reduce interest costs but increase the monthly burden.
Lenders provide EMI calculators on their websites to help borrowers decide the tenure based on their repayment capacity. It’s always wise to pick a tenure that aligns with your income stability and lifestyle expenses.
Once a loan is disbursed, it is repaid through equated monthly instalments (EMIs). Each EMI comprises both the principal and the interest component. Initially, the interest component is higher, gradually reducing as the principal gets repaid.
EMIs are usually auto-debited from the borrower's bank account on a fixed date every month. Borrowers must ensure they maintain sufficient balance in their accounts to avoid missed payments, which can lead to late fees and a dent in their credit history.
Under personal loan repayment rules, borrowers have the option to repay their loan early — either partially (prepayment) or fully (foreclosure). However, this may attract prepayment penalties, especially in the first few years of the loan.
The Reserve Bank of India (RBI) also released a draft circular earlier this year, directing banks not to levy prepayment or foreclosure charges if the loan has a floating interest rate. But for fixed-rate loans, NBFCs and banks may charge a specific percentage of the outstanding principal as prepayment charges.
Before prepaying or foreclosing your personal loan, check:
Minimum lock-in period
Number of prepayments allowed
Prepayment charges
Impact on your credit score
Missing an EMI can have serious implications. Lenders usually impose a late payment fee or penal interest, which can range from 1% to 2% per month on the overdue amount. More importantly, it adversely affects your credit score, making future borrowing more difficult.
If you miss multiple EMIs, the lender may classify your loan as a Non-Performing Asset (NPA) and initiate recovery proceedings. To avoid this, always communicate with your lender if you foresee financial difficulty and explore options like rescheduling or restructuring your loan.
In India, several digital lending platforms now offer personal loans with transparent repayment schedules and flexible terms. For example, Moneycontrol’s app and website allow you to compare personal loan offers of up to Rs 50 lakh from eight top lenders. The entire process is digital, and in many cases, loans are approved and disbursed within minutes. Interest rates start at 10.5% per annum, making it easier to find a loan that suits your needs.
These platforms often provide repayment flexibility, easy tracking of EMI due dates and reminders — all of which contribute to a more disciplined repayment behaviour.
Adhering to the personal loan repayment rule is not just about maintaining a good relationship with your lender. It directly affects your credit score. Timely EMI payments improve your credit score, whereas defaults or frequent delays can bring it down.
A healthy credit score (750 or above) makes you eligible for better interest rates, higher loan amounts and faster approvals in the future. Thus, maintaining discipline in loan repayment is an investment in your long-term financial well-being.
Choose a personal loan repayment tenure that suits your monthly income and expenditure.
Set reminders or use auto-debit features to avoid missing EMIs.
Understand the prepayment and foreclosure terms clearly before committing.
Avoid borrowing more than you can repay comfortably.
Regular repayments improve your credit profile.
Understanding the personal loan repayment rule is vital for any borrower. From choosing the right repayment tenure to managing EMIs and knowing your rights regarding prepayment, staying informed can save you money and stress.
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