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Sometimes you can’t prepare for every possible need that arises; an emergency medical treatment, tuition fee for your children, your child’s wedding ceremony or home renovation. Your financial needs maybe immediate / short term or they may be long term, and in either case picking the correct Personal Loans product will ensure you have a cost effective way to meet your needs. Before taking the extreme measure of selling any asset you or your family may own or borrowing funds from friends and family, you should understand what options you have with the banking industry in our country.

Personal Loan is a product offered by almost all banks in Pakistan. Through this product you can secure a loan without submitting any collateral against the borrowed amount.

Personal Loans can be classified into two broad categories:
Personal Loans:

This is a term loan that is offered for a fixed duration ranging from 1 year to 5 years. The loan amount can range from Rs. 25,000 up to Rs. 2 million. No collateral is required and the loan is paid back in equal monthly installments.

Running Finance:

This is a personal loan which is offered with no fixed tenure ranging from Rs. 25,000 up to Rs. 2 million. This type of Personal Loan also does not require any collateral but is very different from Personal Loan / Term Loan. With running finance the bank approves you for an amount of money that is deposited in an account you control. As long as you do not withdraw any amount of money from your account you are not charged any interest; you are only required to payback what you withdrew and interest is charged on the amount withdrawn and the duration you use the amount.

For instance you received a running finance of Rs. 1 million, and you took out only Rs. 100,000 for a period of 25 days. You will only be charged interest on the Rs. 100,000 for 25 days only.This is a convenient way to meet immediate / short time financing needs, since you do not get locked into a fixed duration and amount.

We would generally recommend that you use Running Finance for immediate financial needs that would not last for a long time, whereas Personal Loan / Term Financing should be used for planned, scheduled long term needs.

5 Things to Consider When Opting for a Personal Loan

Mark up / Interest rate: This is the markup / interest rate applied per year on the total amount that you have borrowed.
Monthly Installment: This is the amount of money you will pay every month to pay back your loan.
Pre-Payment / Early Settlement: This occurs when you decide to pay off your Personal Loan before the tenure of your loan is over. Banks will charge you an early settlement fee for this service.
Processing Charges: Banks charge you a fee for processing your application to avail a Personal Loan, the specific amount of which varies from bank to bank. Some banks will only charge you this fee if your application gets approved.
Re payment period / Tenure: The duration of time you have selected to pay back your Personal Loan.

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