Never before has there been experienced an adversary which has so completely ravaged our lives, a virus so deadly for which there is no cure: Ceasing all activity may have helped to save lives and prepare for the ordeal ahead but the lockdown has initiated a severe economic downturn.
With the virus showing no sign of abating, we have to get back to a new normal: there is no choice other than getting back to work.
Banks which have been operating accounts and functioning in a restricted manner have restarted marketing. Leading Banks are now offering personal loans to customers, the many changes affected in this short period of time have urged Banks to make appropriate updates in the Personal loan policy.
Major factors influencing Post COVID Personal loan funding by Banks are as follows:
If the moratorium has been availed for repayment of the Personal loan EMI?
The 6 months moratorium announced by the RBI allows customers to defer the payment of their Personal Loan EMI. Applicants facing an emergency, salary cuts or unsecure of the future opted to avail the moratorium.
If an individual, who has availed the moratorium facility, applies for a personal loan, the reason for availing the moratorium and the financial status of the applicant will be considered.
An applicant, who is constricted for funds, runs a risk of a further default hence the financer will be apprehensive about lending further.
The current employer of the applicant is included in the revised company list of the Bank.
Banks & Financers have created a list of companies for the purpose of funding Personal loans to salaried employees, companies that have a healthy turnover, a stable history and are included in the Economic times list are treated as preferred organisations.
Many have been hit hard due to the lock down: Industries such as travel and the hospitality have come to a standstill with the closure of public places and travel restrictions.
Post the spread of COVID 19 Lenders have reviewed the list of companies. Taking into account the loss of jobs uncertain future of revival of affected Industries, such companies are no longer included in the list of approved companies for funding of personal loans.
What is the current employment and income stability of the Applicant?
During the lockdown only essential services and suppliers of daily needs were allowed to function, and where ever feasible Employees were asked to work from home.
Closure of operations meant huge losses of revenue for most companies, to protect the interest of employees the government decreed that regular salaries be paid to staff. High turnover companies supported their staff while others paid salaries with deductions.
While processing an application for a Personal loan the bank will check whether the applicant has been receiving salary during the lockdown period. Has the complete salary been paid or if there has been a deduction. What are the future prospects of the current employer, will the company be able to survive the economic downturn and retain the present staff in the future is also taken into account when lending to employees.
What are the Current Obligations and the CIBIL history of the applicant?
Prior to processing the request for the Personal loan, the applicants CIBIL will be checked by the Bank to determine the score, the applicant’s dealings with credit and the existing loans and credit cards.
How has the applicant managed credit during these difficult times? The number of credit lines for which the moratorium has been availed, the pending dues and the interest amount to be paid.
The applicant should be comfortable to fulfil obligations with the present monthly income and afford the extra EMI to be eligible for an additional loan amount.
What is the Credit Card obligation of the applicant?
A Credit card is a facility readily available for credit usage with an additional provision to withdraw cash. Extremely useful for daily expenditures and emergency uses, having a credit free period of 35 to 40 days.
Management of the expenditures of a credit card are important as the rate of interest charged for the non payment of dues is steep @ of 36% per annum with the interest on cash drawn being levied from the withdrawal date.
A Credit card debt if not repaid timely can spiral uncontrollably: therefore a percentage of the unpaid balance of credit cards will considered as a fixed monthly obligation by the Bank when approving the request for a Personal loan. Inability to clear Credit card debts will be a deterrent to sanctioning of the amount required as a Personal loan.
Personal loans are unsecured short term lending for fulfilment of personal needs, with no clear solution to the COVID 19 crisis; efforts are being made by Banks to restart lending with caution. Waiting and praying for a cure or vaccine to be found, so that are here progressive times again!