Personal Loan

Personal loan is a loan granted for personal use, family or household use, as opposed to business or commercial use. Such loans are either unsecured, or secured by the asset purchased or by a guarantor. Unsecured loans arecalled signature loans are advances made on the basis of the borrower’s previous loan history and ability to pay out the loan from personal income. Repayment is done usually through fixed installments over a fixed period of time. Personal loan is also called consumer loan.

Advantages of taking personal loans :

 

• Easily available – Personal loans are easily available at reasonable rates from banks and other financial institution.

 

• No  Agent required – To avail personal loan there is no middle man required which results in cut down of unecessary expenses and delays.

 

• Unsecured loan – Personal loan is an unsecured loan, as there is no collateral security required in order to get this loan. However previous credit-history and ability to pay back the loan out of personal income is highly required. Since the loan does not demand the borrower to mortgage any of their assets or provide for any kind of guarantee. The lending institution verify and does a throughout back ground check to become sure of your re-payment ability, before they process the loan.

 

• Processing time is low – Since the personal loan is an unsecured loan the processing time to release the loan is very low.

 

• All purpose Loan – Since it is not important to mention the reason for the loan, a borrower may use that for any purpose he feels like.

 

• Minimum Paper work – Since the personal loans are passed without any mortgage or collateral security the processing requires a minimum of paper work.

 

• Amount and Tenure – Personal loan amount may vary  from 15,000 to 20,00,000 which however depends from institution to institution, with a tenurity of 12months to 60months and could be paid through EMI scheme of fixed interest rate. Hence it is always advisable to opt for personal loan instead of borrowing cash.

 

• Schemes and offers – Many banks and other financial institution offers different kind of scheme for personal to get them available to professionals like doctors, architect etc.

 

 

Eligibility Criteria :

Individuals who can take a Personal Loan

 

• Salaried Employees age 23 – 58 and for self employers age must 28 – 65

 

• Salaried doctors 25 – 65

 

• Employees of Public and private limited companies with minimum monthly income Rs.17,500

 

• Government sector employees including Public Sector Undertakings and central and local bodies a minimum net monthly income – Rs. 15,000

 

• Maximum age of 60 years at loan maturity for government sector.

 

• For self employed person a 5 years of minimum business tenure is required  for doctors 3 years minimum and 2 years for salaried person.

 

• Years in current residence must be minimum be 1 year.

However, the eligibility criteria may vary from institution to institution.

Documentation requirement for Personal Loan.

 

• Documentation for salaried person are as follow:
• Identity Proof like Passport, Driving License,Voters ID, PAN Card .
• Residential Proof  like Leave and License Agreement  Utility Bill not more than 3 months old Passport any one.
• Latest 3 months Bank Statement where salary, income is credited salary slips for last 3 months.
• 2 Passport Size photographs.

List of documents for Self-Employed person are as follows:

 

• KYC Documents : Identity proof , address proof and date of birth proof
• Residential Proof like Leave and License Agreement Utility Bill not more than 3 months old Passport any one.
• Audited financials for the last two years as income proof.
• Last 6 months statement of bank account.
• Proof of office address.
• Proof of office and residebtial ownership.
• Details of continuity of business as proof.

However the documentation demanded may vary from institution to institution.

FEATURES OF PERSONAL LOANS

 Secured or Unsecured ?

Personal loan is an unsecured loan, as there is no collateral security required in order to get this loan. However previous credit-history and ability to pay back the loan out of personal income is highly required. Since the loan does not demand the borrower to mortgage any of their assets or provide for any kind of guarantee. The lending institution verify and does a throughout back ground check to become sure of your re-payment ability, before they process the loan.

Interest rates for personal loan?

Interest rates for personal loan may vary from 11.50% to 24%.

Well to understand whether the rates charged are compounded monthly or annually we need to understand the what is EMI. EMI is a combination of both the interest and principal portion of the loan, to be paid every month. Hence we can say interest rates are compounded on a monthly basis, since the fixed rate of interest creates a fixed EMI.

Is pre-payment of loan allowed?

Yes pre-payment or foreclosure is possible in case of personal loans.

What are the prepayment charges?

 

• 5% of the Principal Outstanding for unexpired period of loan whichever is lower plus service tax.
• Rs 100 for pre-payment statement charges plus service tax.

 

However this charges also vary from institution to institution, some institution dont charge any amount for pre-payment of personal loan.

Modes of payment for Personal Loans?

The Personal Loan can be paid through:

• Direct Debit , ECS mandatory for all ECS and RECS locations.
• Post Dated CTS Compliant Cheques for all Non ECS and RECS locations.
• Plus online payment through net banking is also possible in case of personal loan.

However to switch from one mode of payment to the other ECS to cheque or vice versa the swap charges will be Rs 500 plus service tax as applicable.

Charges of late EMI ?

The charges of late EMI on personal loan is 2.0% per month on the remaining unpaid installments.

What are the loan processing charges?

The loan processing charges for personal loan is up to of 2.25% on the loan amount charges are inclusive of service tax.

However these charges may vary from institution to institution.

Is there any proposition for women employee on Personal Loan?

Woman employees get rebated interest rates when applying for Personal loans.  Women are also eligible for tax deduction on interest rate paid on personal loans. With some institutions also bringing in tailor made personal loans schemes for woman employees to promote women empowerment in the society.