When it comes to borrowing money, most Indians think of personal loans first. But a new option — salary-linked loans — is quickly gaining popularity. Both serve the same purpose: quick access to funds. However, their structure, eligibility, and interest rates are quite different. Let’s break down the key differences so you can decide which works best for your financial needs.
What Are Salary-Linked Loans?
A salary-linked loan is a type of borrowing directly tied to your salary account. Banks and fintech lenders partner with your employer to provide loans where repayment is deducted directly from your monthly salary.
Features:
Lower Interest Rates (as low as 9-12% compared to 12-18% for personal loans)
Automatic EMI deduction from salary
Minimal paperwork since your employer verifies income
Eligibility linked to employment rather than just credit score
What Are Personal Loans?
A personal loan is an unsecured loan available to anyone with sufficient creditworthiness, regardless of employment type.
Features:
Higher interest rates (12-24%)
Flexible usage — medical, travel, marriage, etc.
Strict credit score check
Available to both salaried and self-employed individuals
Salary-Linked Loans vs Personal Loans: Key Comparison
| Factor | Salary-Linked Loan ✅ | Personal Loan ❌ |
|---|---|---|
| Interest Rates | Lower (9-12%) | Higher (12-24%) |
| Eligibility | Salaried employees only | Salaried + self-employed |
| Repayment Method | Auto salary deduction | Manual EMI payments |
| Paperwork | Minimal, employer-backed | Higher documentation |
| Flexibility | Limited (salary-based) | Flexible for anyone |
| Approval Speed | Very fast (same-day) | Fast, but depends on credit check |
Which One Should You Choose?
Choose Salary-Linked Loans if:
You are a salaried employee in a company partnered with the lender.
You want lower interest rates and easy repayment.
You prefer hassle-free approval.
Choose Personal Loans if:
You are self-employed or freelancer.
You want flexibility in loan usage and repayment.
You don’t mind higher interest rates.
Final Thoughts
Both salary-linked loans and personal loans have their place in India’s borrowing ecosystem. For salaried individuals, salary-linked loans are cheaper and easier. But for self-employed professionals or those seeking flexibility, personal loans remain the go-to option
FAQs
Q1. What is the main difference between a salary-linked loan and a personal loan?
A salary-linked loan is directly connected to your salary account with EMIs deducted automatically, while a personal loan is independent of salary and requires manual EMI payments.
Q2. Are salary-linked loans cheaper than personal loans?
Yes. Salary-linked loans generally have lower interest rates (9–12%) compared to personal loans (12–24%), since repayment is secured through salary deduction.
Q3. Who can apply for a salary-linked loan?
Only salaried employees working in organizations partnered with banks or fintech lenders are eligible. Freelancers and self-employed individuals cannot avail this facility.
Q4. Can self-employed individuals apply for personal loans?
Yes. Unlike salary-linked loans, personal loans are available to both salaried and self-employed individuals, though interest rates may vary.
Q5. Which loan has faster approval — salary-linked or personal?
Salary-linked loans usually get approved within hours since lenders already have your salary data. Personal loans may take longer due to detailed credit checks and documentation.
Published on : 26th August
Published by : SMITA
www.vizzve.com || www.vizzveservices.com
Follow us on social media: Facebook || Linkedin || Instagram
🛡 Powered by Vizzve Financial
RBI-Registered Loan Partner | 10 Lakh+ Customers | ₹600 Cr+ Disbursed
https://play.google.com/store/apps/details?id=com.vizzve_micro_seva&pcampaignid=web_share