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A Personal Loan is issued for lifestyle expenses and emergencies—banks and NBFCs market personal loans as a premium product for the salaried class. Salaried customers receive a monthly salary in the bank, offering transparency regarding their income and expenses. Lenders are comfortable providing short-term funds to customers based on their monthly income, which is repaid through Equated Monthly Instalments (EMI). A Personal Loan is primarily granted based on the monthly salary received by an applicant. Consequently, the Personal Loan Criteria, such as the loan amount and interest rate, are determined and applied according to the monthly wage. The salary bracket is broadly defined as follows: Salaries processed are segmented by banks as follows:
Eligibility criteria for a Salary of 25k to 30k: The minimum income benchmark set by Banks for a Personal Loan is a salary of ₹ 25k. This is the amount a graduate employee can expect at the start for basic expenses and spare funds to invest in a new mobile phone and home appliances with a personal loan. Banks that issue Personal loans to applicants with a salary of above ₹ 25k are YES Bank and IDFC Bank. NBFCs that offer Personal loans to applicants with a salary of ₹ 25k include Fullerton India, INCRED and Hero Finance. To Apply for a Personal Loan to YES Bank, an applicant must fulfil the other YES Bank Personal Loan Eligibility Criteria and have a CIBIL score of 700+.
Personal Loan Eligibility for applicants with a salary of ₹ 30k to ₹40k per month: With the rise in inflation and living costs and the corresponding increase in earnings, the previous benchmark of a salary of ₹ 20k is now increased to ₹30k to Apply for an HDFC Bank Personal Loan and an Axis Bank Personal Loan. An applicant working in a CAT A company featured in the HDFC Bank Company Category List is eligible for a loan amount of ₹ 500000 lakhs to be repaid with an EMI of 13167/- over a tenure of 48 months. HDFC Bank permits applicants with a salary of ₹ 30k and above without a CIBIL score and no previous credit history to Apply for a Personal Loan if the company features in the Approved Company Category List.
Personal Loan options for applicants with a salary of ₹ 40k and above: A monthly salary of ₹ 40k transferred to the Bank fulfils the eligibility for income criteria of most Banks. Applicants can apply for an ICICI Bank Personal Loan and an ICICI Bank Coral Credit Card with a salary of ₹ 40k and above. The income is sufficient to cover monthly expenses and apply for credit when required for a family wedding, home renovation, or education expenses. The maximum amount an applicant can get as a Personal Loan is ₹5lakhs to 8 lakhs depending on the CIBIL score and if the employer features in the approved company category list. It is not mandatory for the applicant to have a CIBIL score to Apply for a Personal Loan from HDFC Bank.
Eligibility for High-income applicants with an income of ₹ 50k, ₹75k and above: With a higher income, the terms of Banks are revamped; the multiplier applied for the loan amount an applicant is eligible for increases as the income allows expenditure over and above the monthly budgets. Maximum loan amounts of ₹ 30 to 35 lakhs are issued to eligible customers with discounted interest rates and extended repayment terms. Customers earning over ₹ 75000/- are treated as Elite customers, and the personal loan application is processed under the Golden Edge Personal Loan category with favourable terms. A waiver of the penalty clause for foreclosure of a personal loan after paying 12 EMI is offered for loan amounts above ₹ 10 lakhs.
Further, to verify the salary received to process the loan requirements, the following terms must be qualified according to the personal loan eligibility criteria:
Personal Loan applicants can use an EMI Calculator to determine an affordable EMI based on their monthly earnings. Whether they’re an IT professional working for a company listed in the Economic Times or a government employee, their income and stability make them a preferred lending category. Personal Loans have become a convenient option, with loan amounts processed online, allowing salaried applicants to receive funds within 72 hours to address financial shortfalls!
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The recent Repo Rate cut of 0.25 basis points has given borrowers a moment of cheer, but various factors determine how the rate cut will filter down and lower interest rates and monthly instalments. Expecting your current loan to cost less or thinking of taking fresh credit, let us explore the implications of the Repo Rate cut.
What does the rate cut mean for home loans and Mortgages, depending on the terms of your loan?
The customer can repay with a fixed or Floating Interest Rate when appending a Home Loan. Fluctuations in the Repo Rate (the RBI’s repurchase rate) will directly affect customers repaying their home loans at a Floating Interest Rate. Home buyers running a loan with a floating rate can expect a change in their interest rate according to the revision cycle of two to three months.
With a fixed interest rate applicable for a home loan, the interest rate does not change if the Repo Rate increases or decreases. The EMI remains constant for the duration of the fixed term. Banks usually offer a fixed interest rate for 2 to 3 years, after which the existing Floating Interest Rate is applied.
Thus, customers with a Floating Interest Rate can take advantage of the rate cut when the date for the revision as per the cycle is due, whereas applicants with a fixed interest rate will have to wait for the fixed term to end.
Is your Home Loan operating under the RLLR (repo rate linked), EBLR (External benchmark linked rate) or MCLR (marginal cost of funds) regime?
In 2019, the RBI initiated the Repo rate-linked mortgage system and advised banks to issue loans under the RLLR or repo rate-linked regime to pass on the benefits of a rate directly to customers.
Banks’ lending under the Repo rate-linked scheme will add a spread to the base rate for example, with a Repo Rate of 6.5%, a Bank adding 2.5% as operating costs and profit will issue a home loan at 9%. With the .25% reduction in the Repo Rate, customers with a Floating Interest Rate will be offered a reduced rate. Loan holders can opt for a reduced EMI or tenure to avail of the benefit.
The EBLR Rate issued by Banks is linked to the Repo Rate as the external benchmark a variation in the Repo Rate is carried forward to the EBLR Rate, though the Bank operating costs are included in the spread when issuing an EBLR Rate.
The interest rate issued by Banks under the MCLR scheme can vary from Lender to Lender. The key factors for calculating the MCLR Rate are the Repo Rate, the cost funds, the deposit rates, operating costs and profit margin. Thus, the Repo Rate reduction may not immediately reflect in the interest rate.
Banks offering an MCLR-linked interest rate will review the terms provided to a customer after 6 months; if the other inputs for calculating the MCLR Rate are favourable, a better rate may be offered.
The RBI has reduced the Repo Rate to make loans cheaper and infuse cash into the economy. Loan holders look for immediate relief. How long it takes to lower your EMI depends on the individual terms of the loan and the time stipulated to reset the terms. Banks will examine their fixed deposit rates, current CRR, and profitability. Banks tend to drag their feet when they need to lower interest rates, and the customer profile and payment track are also considered when reviewing the loan terms.
This is a time for upheaval in the mortgage lending scene as customers anxiously look to negotiate better terms for their existing loans and new home buyers wait to compare rates offered by Government Banks and Private lenders. The Home Loan top-up option helps customers renegotiate their loans and apply for surplus funds at a lower rate.
Home loan and Mortgage customers with timely repayment tracks can take advantage of Balance Transfers by transferring the principal balance of their loan to an alternate lender offering lower rates. At the same time, Banks go the extra mile to retain priority customers.
Personal Loans are unsecured funds with short repayment terms, up to a maximum of 72 months. Banks and NBFCs look to fund customers with suitable profiles who make timely repayments, thus ensuring rotation and profitability. The Personal Loan Interest Rates are based on the cost of funds, which includes the RBI repo or repurchase rate, the CRR ratio, deposit rates, and the financiers’ operating expenses. As Personal Loans are issued without securities, Banks must keep the default ratio below the acceptable limits.
Over the past two years, the RBI has increased the Repo Rate twice, but interest rates for an ICICI Bank Personal Loan, HDFC Bank Personal Loan and AXIS Bank Personal Loan remained steady with banks taking the changes in their stride. So, will the .25% reduction of the repo rate encourage Banks to reallocate interest for personal loans as Banks are not obligated to link personal loan interest to the repo rate fluctuations and take time to absorb the changes and consider their portfolio? Further, the interest rate and EMI for a personal loan are fixed at the time of disbursal, and the EMI remains the same; therefore, a variation in the Repo rate will not change the existing rate of your loan.
At a monthly reducing balance, Personal Loan Interest Rates range from 10.80% to 20 %. Banks formulate an individual policy targeting customers according to their preferred segments and applicants with a mutually beneficial relationship. Other primary factors influencing the interest rate include:
Banks face liquidity issues due to the high fixed deposit rates and the downward trend in the savings ratio. If liquidity increases, banks might consider lowering the rate of New Personal Loans to performing segments. How the rate cut is transmitted to the personal loan sector depends on the bank’s policy, the cost of funds, and profit margins.
At this juncture, Personal Loan seekers can look for lower-rate options, and existing personal loan customers can take advantage of a reduced rate by Transferring their loan balance to an external Bank or Applying for a Personal Loan Top-up.
The RBI has reduced the Repo Rate to inject more cash into the economy and make loans more affordable. However, for the benefits to ultimately reach the average borrower, the expectation of relief through a reduced EMI for current obligations and the encouragement of fresh borrowing will depend on how effectively the rate cut is passed down in the coming months.
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Credit has become the rule of the day, and it is readily available in the form of unsecured lending such as Credit Cards and Personal Loans or mortgages, Home Loans, auto loans, and Loans Against Property. Unsecured lending helps fuel spending, which may be beyond one’s budget. If spending is not accounted for, it will likely become an uncomfortable debt, so check for these early warning signs.
A Credit Card is a handy product for lifestyle and emergency expenses. Lifestyle aspirations make it easy to get lured into excess spending with Credit Card usage, which allows you to repay after a 30-day credit-free period. Keeping Credit Card usage in check is essential as the interest levied on the unpaid dues is exorbitant. To be noted are the following Signs that you could be heading towards overdue payments on Credit Card.
Expenses on your Credit card: A Credit Card is used for lifestyle expenses or emergencies. If you use your Credit Card to pay for essentials such as groceries and children’s school fees, you are tight on funds and appear to be taking the easy way out, specifically if the payments are not cleared on time.
Your Credit Card Limit is getting exhausted the ideal usage should be up to 60% of the assigned limit. If you use two or more Credit Cards and have used them extensively, you must consider how to repay the dues on the designated date. Revolving credit by using cards alternately can lead to debt.
Delayed Payment of Your Credit Cards: Lenders usually allow a grace period of 10 to 15 days for payment after your monthly statement is generated. If you cannot pay the total amount, it is mandatory to pay the minimum due, which is 5%. The balance is carried forward to the next month with an interest of 36% to 42% per annum. Further, if the minimum due is not paid by the due date, additional charges, such as late payment charges and over-limit fees, are levied. It is advisable not to ignore the implications of postponing your Credit Card Dues. A delay of one to two cycles is understandable, but further delays can lead to the multiplication of the due amount as a high interest rate is levied on the balance carried forward.
The ideal debt-to-income ratio, as per industry experts, is that an individual can pay a maximum of 25% of the monthly income towards debt such as Credit Card Bills or monthly instalments for a Personal Loan, mortgage or loan against commodities. Banks consider allotting 40% to 60% of the income towards the payment of an EMI of a Personal Loan, taking into account the net salary of the customer and the Company Category as per the Approved Company Category List of the Bank. If the ratio exceeds the benchmark, in the situation that an individual has other unexpected expenses or takes additional credit, there is a possibility of defaults with the following indications:
Delayed Payment of EMI: The EMI for your Personal Loan or mortgage is presented to your bank account on the designated date. If there is an insufficient balance in the account, it will return unpaid and be reflected as a bounce. An EMI accidentally missed is overlooked, but a continuous string of delays is to be taken seriously.
Low Bank Balance: Most bank accounts require a minimum Balance to be maintained, even if they are salary accounts with a Nil balance. The account holder must have enough to meet mandatory obligations and clear EMIs. An account that does not meet the average Bank balance requirement will not be issued further credit when required, and a cheque bounce prohibits the issuance of additional credit for three months.
Indiscriminate Borrowing: When stressed about paying bills, you may take credit from lenders charging a higher interest rate, such as App Loans or Early salary loans. This may give a sense of relief but lead to a further escalation of debt. Borrowing to repay debt is a warning that you are not managing your finances.
Maintaining a healthy CIBIL Score is essential, as it signifies an applicant’s ability to manage credit. The following are the CIBIL notifications that your credit ratings are going down.
Lowered CIBIL Score: To avail of credit, you must have a CIBIL Score of 750 points or above. Checking your CIBIL Score regularly is essential to ensure it is above the required benchmark take remedial steps if your score is dipping.
The Number of Inquiries in CIBIL is Increasing: Each time an individual applies for Credit, the lender sends an enquiry to check the customer’s credit history; too many enquiries indicate financial stress and will downgrade the CIBIL Score.
Increased Risk Ratio: The Credit Bureau of India Ltd (CIBIL) allots a risk ratio from 1 to 5, based on individual credit history, with 1 showing the highest risk and 5 the minimal for issuance of further credit. An increase in the risk score is a telltale sign of financial stress.
In Conclusion, having enough funds to cover monthly expenses and save for emergencies is essential. Shortfalls can affect one’s well-being, leading to loss of sleep, health issues, and stress. If covering your expenses is giving you anxiety, take heed of the signs.
Adopt the following strategies to help you avoid further debt and revive your finances.
Debt Consolidation agencies that offer instant solutions are not the answer. Remember that taking small, consistent steps can help avoid a sticky situation. Making informed decisions when acquiring credit and noting the early signs can help prevent a debt crisis.
The Reserve Bank of India (RBI), or the Central Bank, is the financial controller and acts as the Banker to the Government of India. It issues and regulates the flow of currency, keeps inflation in check, and monitors the operations of Banks and NBFC. The RBI also acts as a Banker to other Banks and NBFCs and provides financial assistance when required for further lending. Banks can avail funds when needed against the deposit of Government bonds and securities and repurchase these bonds with interest, which constitutes the Repurchase or Repo rate. The RBI sets the price or interest to be paid by commercial banks according to our country’s economy, and the cost of funds for banks increases or decreases with a change in the repo or repurchase rate.
The Repo Rate is a Significant Factor in Determining the Cost of Lending. Other Factors Include:
Home Loans and Loans Against Property are mortgages issued for longer tenures with a floating or fixed interest rate with a floating rate of interest, the fluctuation in the Repo Rate will be carried over to the mortgage rate. Banks operating under the EBLR (External Benchmark Lending Rate) system as propagated by the RBI must pass on the change immediately. Banks that issue interest as per the MCLR (Marginal Cost of Funds Lending Rate) will include other factors, such as operating costs, when adjusting the interest rate. Ultimately, the change in the base rate is passed on to the customer as per the lender’s policy.
When the Repo Rate increases, banks quickly raise the Interest, and your monthly EMI is inflated. If your EMI is hurting with the increase, you have the following choices:
For Example, Home Loan applicants running a loan with a government Bank or a Bank that offers a repo rate-linked home loan can avail of the direct benefit of a rate change for example, if an applicant runs a home loan of ₹ 5000000/—at 8.75% for a tenure of 20 years with an EMI of ₹44185/—per month, with the interest rate reduced by .25%, the EMI to be paid henceforth is ₹43391.16/— and vice versa when the rate goes up.
Banks that adopt the MCLR system are slower in passing on the benefits and may take 6 months to a year. A fixed rate for a mortgage is offered for a three-year tenure and is renewed at the current applicable interest.
Primary Finance issued as Unsecured include:
Banks issue finance without collateral to Salaried persons as Personal Loans for emergency expenses, individual usage, and shortfalls such as weddings, school fees, and home renovations. Self-employed individuals are issued finance for personal usage and business expansions. Banks issue loans based on documentation, the applicant’s profile, and previous credit history. The interest rate for unsecured loans is determined at the time of disbursal and remains fixed for the entire term as Personal Loans have shorter turnaround times; therefore, a change in the Repo Rate will not directly affect the interest rate or EMI. However, if the Repo Rate Changes, the Lender will reassess costs and margins and change slabs accordingly.
The Interest Rate on a Personal Loan Varies from Lender to Lender, and Banks Decide on their Lending Slabs.
For example, the last repo rate change was in February 2023 by .25 basis points from 6.25% to 6.50% thus, Banks issuing Personal Loans steadily adjusted their interest rates. An applicant Applying for a Personal Loan from HDFC Bank was offered an interest rate of 10.75% at a reduced balance, which was increased to 10.99%. The minimal rate provided for a Personal loan from ICICI Bank is 11%.
With all the data published digitally, it is now easy to stay informed and updated about market trends. Keeping track of the changes in the Repo Rate will keep you ahead financially. Changes in the Repo Rate can alter your EMI, and Banks offering better deals can help reduce your financial burden.
The Repo Rate is a tool of the central bank to monitor inflation and regulate interest rates and cash flow. It influences the cost of living, the pricing of essential commodities, and the interest rates for lending. Thus, a variation in the Repo Rate gets filtered down to the average borrower.
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The Reserve Bank of India (RBI) on January 10 said it is mandatory for banks to offer fixed interest rate product in all equated installment based personal loan categories.
The frequently asked questions (FAQs) on ‘Reset of Floating Interest Rate on Equated Monthly Instalments (EMI) based Personal Loans’ (August 2023) also said the circular covers all equated installment based personal loans, irrespective of whether the interest rate is linked to an external benchmark or an internal benchmark.
What Did The FAQ Say?
– At the time of sanction of loans, annualised rate of interest/ annual percentage rate (APR), as applicable, should be disclosed in the Key Fact Statement (KFS) and the loan agreement, the FAQs said when and at what frequency should banks and other regulated entities (REs) communicate with the borrower.
– During the tenure of the loan, any increase in the EMI/tenor on account of the external benchmark rate should be communicated.
– The quarterly statements should be provided disclosing at the minimum, the principal and interest recovered till date, EMI amount, number of EMIs left and annualised rate of interest for the tenor of the loan.
– Regulated entities (REs), the FAQs said have to mandatorily offer fixed interest rate product in all equated installment based personal loan categories.
– REs have to provide the option to the borrowers to switch over to a fixed rate as per their board approved policy at the time of reset of interest rates.
The Banking Industry in India has experienced rapid transformation. Previously, Banks were mainly regarded as safe-keepers of money and were conservative about lending. They gave financial aid to government-sponsored schemes and well-known industrialists. Banks gave credit to a select few with onerous paperwork and securities.
Gradually, with socio-economic changes beginning in the last century, the opening up of the public sector, and the privatisation of Banks in the country, there was a rapid change in functioning. Funds were forwarded as loans for business purposes as private enterprise was encouraged.
Development and growth brought about better opportunities for qualified professionals such as doctors and engineers, leading to a strong middle class. Banks initiated offers of credit, both secure and unsecured, to the self-employed and salaried individuals. Personal Loans and Credit Cards are offered to customers in addition to mortgages.
Personal Loans allow individuals to fulfil emergency and lifestyle requirements with funds when needed. To meet customer requirements promptly, banks and NBFCs endeavour to disburse loan amounts quickly and efficiently. The digitalisation of the banking industry has significantly reduced the time taken for Personal Loan Processing. Loans that previously needed a week or more to process are now disbursed in hours and advertised as Online Instant Personal Loans. Due to the automation of many processes, such as credit checks and document verification, which were previously done manually,
Noteworthy areas where digitalisation has helped customers eliminate delays and enabled Lenders to reach the right audience are as follows:
All the information is available online if you want to Apply for a Personal Loan you can check for the Eligibility Criteria for Personal Loan that best suit your profile details. For example, if you have not used any credit before, Apply for a Personal Loan from HDFC Bank, which provides a Personal Loan without CIBIL Score. Check for the Lender that provides the most suitable terms and the Personal loan lowest interest rate.
Personal Loan Application and Documentation: In the past, whenever a customer needed, say, a Personal loan from HDFC Bank, a visit to the Bank branch was required, or the Bank executive came to the office or home premises with the Personal Loan Application Form. Photocopies of all personal loan documents required were to be attached as hard copies physically stamped and signed by the applicant.
Gone are those Days: An applicant can apply online from a computer or mobile phone interface within minutes in the comfort of a home or office premise. The Personal Loan Documents are available online, such as an Aadhaar card and a PAN card as proof of identity and your current address. An applicant can instantly download the banking information, and the salary slips are usually available by mail or retrieved from the company’s portal.
Thus, the online application reduces the paperwork, and Personal Loan Application Requests are completed within minutes and forwarded to the Bank.
Credit Report Check: Credit bureaus record all transactions done by individuals that Banks and NBFCs report the Credit Bureau of India, or Transunion CIBIL, as it is commonly known, is regarded as the primary agency by most lenders. The CIBIL commenced operations in India in 2007. It records all individual transactions and generates a risk score. Lenders refer to individuals’ repayment histories to reduce the chances of default.
With the digitalisation of records, credit transactions get updated instantly, and the Bank receives the credit history online. The processing of a Personal Loan Application is initiated after the Lender is satisfied that the score is above the required benchmark an applicant can also access the CIBIL Score Online to check for discrepancies in the records. If there are delays or aberrations in the payment history, it is better not to apply, as a decline further depletes the score.
Verification: On receipt of a Personal Loan Application, the Lender verifies the authenticity of the information and documents. It is now convenient to check the customer’s KYC Documents Online, such as the Aadhaar card and PAN card, from the Government portal, a far change from when the Bank team physically matched via a visit to the client.
Digitalisation has streamlined verification processes. Lenders can now conveniently verify the authenticity of documents via the video KYC process on a call with the customer. In case of unavailability, there is the option of biometrics KYC. This efficient process instils confidence that the customer’s details are accurate and that the applicant can be located easily in case of a default.
Embracing digitalisation has ushered in a new era, empowering you to manage your finances from the comfort of your home, computer, or phone. You no longer need to visit the Bank and stand in queues; account holders can draw cash from an ATM, and payments are made via NEFT or IMPS, all at your fingertips.
Personal Loans have also undergone a radical change with digitalisation customer Banking can be verified online with authorisation to check customers’ income and outgoings.
Before the Reserve Bank of India introduced the CTS (Cheque Truncation System), a specific number of cheques as per the tenure for repayment were required for the payment of the Personal Loan EMI suppose a customer receives an HDFC Bank Personal Loan for a tenure of 36 months, a similar number of cheques were to be given to the Bank. The Bank then physically sent each cheque for clearing on the due date, which was onerous and time-consuming. Now, a CTS cheque facilitates the online clearing of funds, the amount approved as a personal loan is transferred by the Bank to the applicant account and the EMI is presented for clearing through ECS (electronic clearing system). This system has significantly reduced the time and effort required for loan repayments, making it more convenient for borrowers.
Customer data and information are updated online, expediting the decision, and the applicant is informed of the status via email or telephone.
With digital systems in place, Banks can now securely store customer Data and enable automated Preapproved Personal loan offers to applicants with healthy banking histories. Online systems have made it easy and practical to store data, eliminating the need for scores of physical files and documents. Now, analysing years of data is possible and efficient, allowing banks to track customer data over the years and reconsider personal loan requests if an applicant re-applies.
Now, banks can track customer data over the years, checking for Personal Loan Rejection Reasons for customers denied credit previously and can reconsider the request if an applicant re-applies.
With the infinite possibilities and progress digitalisation has made possible, Lenders must address usage concerns.
In conclusion, the digital sector is constantly progressing and developing, with AI taking over various functions. The financial industry is trying to keep pace, and there is no telling what the future holds.
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There has been a subtle change in spending patterns over the millennia. Post-COVID, facing uncertainty and challenges, there have been changes in the spending ratio to savings. Instead of saving, people prefer using their income to enjoy life fully. Simultaneously, there is an increase in credit usage, both secure and unsecured. Credit Cards and Personal Loans are widely used for lifestyle expenses and individual usage without considering repayment schedules. Thus, Banks are facing a higher average of payment defaults and are apprehensive about further funding.
Primary reasons why the percentage of rejection has increased include the following.
Overleveraged means that the applicant’s credit obligations are exhausting the income, and the Lender feels that the customer is financially stressed and unable to make timely repayments. When issuing further credit as an HDFC Bank Personal Loan, the HDFC Bank process will assess the applicant’s eligibility criteria and forward the customer details so they can check the CIBIL for the credit score and transactions. For example, Suresh has applied for an HDFC Bank Personal Loan of ₹ 5 Lakhs, and his profile details are as follows:
The bank team noted that Suresh’s pending credit card payments were more in ratio to the income earned.
The interest payable on credit card dues is 36% per annum, which was becoming a financial drain on Suresh. He applied for a Personal Loan from HDFC Bank to help manage his finances, but his request was declined, given that the Applicant is overleveraged. With the existing credit Bank debt, Suresh could not fulfil the HDFC Bank Personal Loan Eligibility Criteria as the Bank allows an applicant to allot 30% to 40% of the income earned towards credit repayment for loans and credit cards. The credit card dues must also not exceed 5 times the monthly income.
The above case is not unique; being declared overleveraged or not having the financial bandwidth to afford further credit is one of the common reasons for the decline of an HDFC Personal Loan or an HDFC Personal Loan TOP Up.
Find yourself in a situation where credit dues have become unmanageable, as in Suresh’s case. You can work out relief from the debt as follows With a Balance transfer of the Credit Debts to an HDFC Bank Personal Loan, the Bank will repay the credit card dues to the parent Bank. Suresh can conveniently repay the HDFC Bank Personal Loan with instalments at much lower interest. With the reduced financial obligation, he will no longer be judged as being overleveraged.
The CIBIL Score is not just a number but an evaluation of your credit management. Banks and NBFCs increasingly rely on credit history and ensuing CIBIL scores for issuing further credit. Banks like AXIS Bank and YES Bank will consider a Personal Loan request if the applicant has a CIBIL Score of 700 or higher. However, applicants with a CIBIL Score of 0 or -1 and those with no credit usage history are not eligible for a personal loan from either YES Bank or AXIS Bank. Applicants with no record of credit usage can Apply for an HDFC Bank Personal Loan if they meet the criteria for Personal Loan Eligibility HDFC Bank but will be issued conservative amounts at a higher interest rate.
With the change in spending patterns and increased reliability of credit tools such as Credit Cards and Personal Loans, people are likely to fall behind on payments. The delays and payment discrepancies affect the CIBIL Score and reflect in the history, so applicants seeking further credit will face rejection.
A CIBIL check before applying for credit will stand you in good stead to avoid a rejection. A self-check by an applicant will not affect the CIBIL ratings, whereas when a lender sends an enquiry to check the CIBIL, the score is reduced by 10 to 15 points. You can check if the score exceeds the required benchmark and if any updates do not match your usage. A good length of payment relationship with a Bank is likely to get you further credit quickly from the lender; for example, if you are presently running a Personal Loan from HDFC Bank and the EMI is being cleared on time, your request for surplus funds as an HDFC Bank Personal Loan Top Up is processed instantly.
On the other hand, if you have a settled account with any Bank in the past, it will catch up with you, and the Lender will not issue further credit. The lender notes your credit obligations in the CIBIL report and will calculate your eligibility for funds based on the eligibility criteria. Check your eligibility to pay a further EMI by using our EMI Calculator.
When you Apply for a Personal Loan, your CIBIL history will reflect your existing credit lines, types of credit, and total obligations.
As per recent developments and the Reserve Bank of India decree, applicants’ CIBIL records are to be updated every 15 days, which is twice a month. Customers must be informed each time their CIBIL is checked, and applicants must be updated on why a credit card application is declined. With the Reserve Bank of India encouraging transparency, applicants must know that their credit transactions are all recorded and available for Banks to check.
Most lenders offering Personal Loans and Credit Cards face the challenge of keeping unsecured lending defaults below the acceptable average, as recovery is an uphill task. Therefore, individual lenders have their norms for tendering the right segment. They use the CIBIL Score and the HDFC Bank Company Category List as a launch pad to provide a Personal Loan with speed and efficiency, such as an Online Personal Loan or with hard copies of documents. So, check your credit score and ensure you have the financial bandwidth to support further credit before Applying for a Personal Loan.
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A Personal Loan offers individuals relief from unexpected financial issues and shortcomings. It is a tool that provides applicants instant funds in an emergency or for personal use, such as for home renovation, weddings, or travel expenses. A Personal Loan is unsecured, and the Lender must ensure that the Loan is repaid on time.
To maintain quick processing and target the right customers, banks and NBFCs verify the customer’s profile using the years of data available to the lenders. To study customer behaviour, identify the segment best deserving of an Unsecured Personal Loan, and rule out which applicants will most likely fall behind on their repayments.
To this end, Prominent Banks such as AXIS Bank and IDFC Bank have devised a Scorecard method that is designed statistically. When you Apply for an AXIS Bank Online Personal Loan or by giving hard copies of your documents, your application first goes through the scorecard check. The online program enters all the personal, professional, and financial details and assesses them, finally deciding the score.
If the score exceeds the required benchmark, the request for a Personal Loan from AXIS Bank will be processed further otherwise, it will be treated as a denial. To educate our customers, listed below are the primary profile points of a Personal Loan Applicant that the AXIS Bank scorecard considers vital to judge and score.
CIBIL Score: Credit is issued as a Personal Loan based on an individual’s credit score and history compiled by CIBIL (Credit Bureau of India Ltd). Applicants must have a credit record and a CIBIL Score to Apply for a Personal Loan AXIS Bank. A robust credit score and history contribute much towards a scorecard evaluation, whereas a delayed payment track or settled loan will negate the score. Though there is no fixed AXIS Bank Personal Loan Eligibility CIBIL Score Requirement, an overall assessment of the credit history is done, which contributes towards the Axis Bank Personal Loan Score.
Income: An applicant’s monthly salary is a vital consideration for a scorecard. Applicants with a salary of 30k and above are eligible to Apply for an Axis Bank Personal Loan and activate the scorecard. An increased monthly income signifies the applicant’s capability to borrow higher loan amounts for lifestyle needs and repay them promptly. Axis Bank encourages applicants from the high-income segment, and the scorecard evaluates them favourably.
Approved List of Companies: The applicant’s employer must be featured in the AXIS Bank Company Category List. The scorecard assigns higher value to an applicant working in a Category A or Economic Times-listed company than to an applicant employed with a company listed as Cat C or Cat D in the AXIS Bank Company Category List. An applicant employed with a limited or government organisation that features high in the company category list ensures job stability and income.
Education: A higher education is the basis for a promising future the applicant must be a graduate to Apply for a Personal Loan with Axis Bank. Further, being professionally qualified or holding a degree from a recognised institution ensures good remunerations and job prospects. The Personal Loan scorecard endorses the value of being technically competent and having a degree from a premier institute. It issues a favourable score to well-qualified personal loan applicants.
Self-owned Residence: Living in a self-owned or family-owned residence adds much more value to the scorecard than an applicant residing in a rented house. An unsecured personal loan in AXIS Bank is issued for a tenure of 1 to 7 years, and lenders take comfort from the fact that the applicant is constantly contactable and has the freedom of not paying monthly rent, which also adds to the financial eligibility for the loan amount required.
Stability: A length of employment with an organisation featured in the Approved Company Category List and continuity of residence, living with your family, spouse, children, or parents in the same premises for several years, are signs of steadiness. The AXIS Bank scorecard favours applicants with a stable residence and employment profile compared to applicants who frequently change jobs and residence addresses.
AXIS Bank Relationship: If you are an account holder, hold a Credit Card, or successfully run a loan with AXIS Bank, the relationship adds bonus points to your scorecard. Further credit is offered to applicants as an AXIS Bank Personal Loan Top Up, Personal Loan Balance Transfer to AXIS Bank when required based on an existing relationship or a previous account held with a smooth track of timely repayments effectively.
The evaluation of a request via a scorecard allows the Bank to consider all the aspects of an applicant’s profile, leveraging features that enable the Bank to eliminate risk and make a complete assessment. Therefore, an applicant with a CIBIL of 700 points may be approved if the scorecard gives the go-ahead.
The scoring method adopted by AXIS Bank for processing Personal loans enables quick application processing. The system approves or declines a request in the first instance when the applicant’s details are entered into the scorecard. If the score issued is above the required benchmark, the application is then forwarded for verification and decision.
On the downside, if an application is a scorecard rejected, there is no provision for a reassessment or relook the applicant will have to accept the decision as final.
The details and workings of the AXIS Bank Personal Loan scorecard are system-generated, and the workings are best known to management authorities. They can be tweaked according to policy and the changing market scenario.
The information above is based on years of experience in the financial industry. It is an effort to inform our customers to take the utmost care when filling out the application form and impart complete personal information with the AXIS Bank Personal Loan documents that help them get scorecard approval and fulfil their loan requirements.
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Seafarers Employed by the Merchant Navy or cargo vessels transport goods by sea from one port to another globally. It can be enormous tanker ships carrying oil, bulk carriers with grain, or smaller vessels with livestock or local cargo. The officers and crew are employed internationally, man the ships, and brave the high seas to facilitate commerce.
Indian nationals are qualified and well-placed to be employed by companies operating under Indian and International flags. A seafarer is expected to continuously serve a 6 to 8-month contract before signing off the ship to take a break and go home for a rest. The diverse nature of the job makes it challenging to adhere to banks’ and NBFCs’ regular policy features for securing credit in the form of a mortgage or unsecured credit as a Personal Loan.
Therefore, leading Banks such as ICICI Bank, HDFC Bank, and Kotak Bank have made provisions for a unique policy that allows Merchant Navy Officers to secure a Personal Loan to fulfil their personal finance needs. To facilitate your credit journey and avoid roadblocks, the profile points listed below are significant and must be noted for the success of your request.
Employer Details: Entities owning cargo ships can register the vessel under the convenience flag in any country based on the economic advantages of lower operating costs and regulatory authority. Countries with the most maritime registries include Liberia, Panama, Singapore, and Hong Kong.
Therefore, a company based in the United Kingdom can own a merchant navy vessel with a Panama registry and employ a crew from India and Greece.
A Personal Loan is unsecured funding therefore, the lender needs assurance that the applicant’s employer is a reputable company and that the applicant’s employment can be verified. If the employer’s office is in India, physical verification is done if the employer does not have an office in India, a confirmation via phone or email is done. To this end, the Lender will require a valid employment letter with a renewed contract for the next voyage, and an HR confirmation from the employer’s office is needed.
Banking: The applicant’s salary must be transferred to the Bank account on a designated date. If the applicant is working with an Indian company, a last twelve-month bank statement with a salary credit is needed from the salary account.
Suppose a foreign company employs the applicant and gets paid in US dollars or other foreign currency. In that case, an Indian national must operate an NRI account for the salary credits and payment of the EMI and an NRO account to receive the loan amount in Indian rupees. A salary slip or certificate giving the details and breakdown of the salary transferred will be furnished with the bank statement as proof of transfer.
Documentation: With a diverse profile, banks require additional documentation to process a Personal Loan for Seafarers in India. Along with the mandatory KYC and Income documents, additional documents required include:
CDC or the Continuous Discharge Certificate: This document issued to seafarers is stamped and signed each time an officer signs on or signs off a Ship. Thus, it records employment, including the years and voyages the applicant has sailed. The CDC must be updated up to the last contract done.
Passport: A merchant navy officer must carry a valid passport when joining a vessel. This enables the applicant to apply for a visa for the country to travel to the destination port overseas and enter the ship. Additionally, a visa is required for travel to other countries thus, the applicant must submit a valid passport copy as proof for Merchant Navy Personal Loan Eligibility.
Residence Ownership Proof: A merchant navy applicant Applying for a Personal Loan should have a self-owned residence. Documentary evidence, such as a utility bill or registration documents, must be submitted with the application. The Kotak Bank only processes personal loan requests from the residence location, whereas the ICICI Personal Loan for Merchant Navy can be processed anywhere in India.
Co-applicant: The job of a merchant navy officer requires extensive travel and absence from home for long periods at a stretch therefore, Banks require a co-applicant who can be reached easily to process a loan request. The co-applicant can be a spouse or a parent, and the applicant’s KYC documents must be submitted with the Personal Loan for Seafarers request.
CIBIL: The applicant must prove that the credit taken will be repaid promptly. Therefore, Merchant Navy personnel must have a healthy credit history and a CIBIL Score of 750 points and above to Apply for a Personal Loan. The co-applicants CIBIL Score and credit history are also considered and must meet the required eligibility criteria.
Income: The job of a merchant Navy officer is strenuous, involving braving the high seas and being away from family for long periods at a stretch, which entitles them to take a break. Banks, therefore, consider a 12-month or yearly period for the income criteria. A minimum 6 months’ salary credit is required over a calendar year the average salary must be more than ₹ 1.60 lakhs monthly as required by ICICI Bank. HDFC Bank and Kotak Bank allow a salary of ₹ 80k on average monthly if the company features in the Approved Company Category List of the Bank.
Merchant Navy officers earn handsome salaries and are offered increased Personal Loan amounts starting from ₹ 1 lakh up to ₹ 40 lakhs the funds approved are transferred onetime to the account and can be used as desired. This gives an applicant the flexibility to use the amount to fulfil personal obligations conveniently.
With straightforward communication via satellites, email, and mobile phones, merchant navy personnel can stay in touch from the high seas, enabling them to monitor their finances. Need to renovate your home or take your family on a much-needed vacation with your family? The plans can start taking shape when They are still sailing, so please get in touch with us at customersupport@yourloanadvisors.com with any inquiries. Updating your documents is also easier while you are still employed, and we can help ensure your personal loan experience is smooth. Over the years, we have successfully assisted many clients.
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Customer Credit Behaviour has become a mandatory check before further lending for all kinds of Loans and Credit Cards. Every time an individual applies for credit, the financer sends an enquiry to a credit bureau—the primary ones include Equifax, Experian, Transunion CIBIL, or CRIF Highmark—to retrieve an individual’s score and history.
The Transunion CIBIL is considered the prime credit agency and maintains an exhaustive account of all credits. Understanding the CIBIL remarks is crucial as it empowers you to take control of your financial health. Keep regular updates and try to remedy the following observations in your CIBIL history that can lead to a score decline.
Every time an individual applies for credit, the financer sends an enquiry to a credit bureau to check the Credit history and CIBIL Score.
The lender views the credit history to verify the customer’s behaviour with credit. Your previous loans and outstanding Credit Card Dues play a significant role in the lender’s decision to issue further credit. Being aware of this can help you manage your credit wisely and avoid any negative impact on your Transunion CIBIL score.
Based on credit management, the type of credit usage, and repayment tracks, CIBIL issues a numeric score with a maximum of 900 points. The CIBIL Score is a benchmark adopted by most lenders today. A score of 750 points and above is the required CIBIL Score for Personal Loan Approval and the minimum CIBIL score for Credit Card Approval. Maintaining a good CIBIL Score is not just a requirement, but a responsibility that can open doors to better financial opportunities.
A hard enquiry by Banks can lower your Credit Score by 10 to 15 points, but if there are multiple enquiries within a limited period, this may increase to 20 points. Thus, if you apply to 4 Banks simultaneously for loans and Credit Cards, your score can be downgraded by 50 points or more. Besides your score downgrade, numerous requests make lenders cautious that you intend to get multiple forms of funding, which can be challenging to repay.
The Credit Card and loan application details remain on the Credit record for 2 years. However, if relegated by numerous enquiries, the effect on the score recovers within a year as long as the customer restricts the number of further applications.
It is a good idea for an applicant to make a soft enquiry before applying for further credit to ensure that the score is above the required benchmark and there are no surprises in-store, errors, or aberrations. A soft CIBIL enquiry made by oneself is not reflected in the credit history or affects the CIBIL Score. A soft enquiry is a credit check that does not affect your Credit Score, and it can be a useful tool to gauge your creditworthiness before making a formal application.
The EMI for your loan will be presented to the salary account on a pre-designated date if there are insufficient funds, the EMI will be returned unpaid. The lender reports the return of the EMI to CIBIL and other Credit Bureaus, and the time for which the EMI remains unpaid is reported as DPD or Days Past Due.
Similarly, if you miss the payment due date of your Credit Card Bill, the number of days past due will be reflected in your Credit history until the minimum owed or complete bill is paid.
For example, if your Credit Card Bill Payment is due on March 5th, and you cannot pay even the minimum amount owing until March 7th, a 2-day DPD is reported.
If an applicant misses paying a credit bill or has insufficient funds in the account to clear the EMI on the due date, a bounce is recorded. It is the applicant’s responsibility to make good the return as soon as possible.
A delayed payment or a once-in-a-while DPD remark is insignificant; still, a string of delayed payments in the credit accounts portrays that the applicants are not repaying the dues owed timely, which can be due to financial constraints or a careless attitude. This can adversely affect the credit ratings, as no lender will want to give excess credit to an applicant unable to fulfil commitments timely.
If pending payments are not made within a month, the delays are classified as 30, 60, and 90-day buckets.
If repayments are made after 60 or 90 days, an account is downgraded from Standard to Sub-Standard. Consistently delayed payments after due dates suggest that the applicant is under financial stress and unable to honour commitments.
The approaching EMI will further delay paying the pending EMI, making it difficult to get things in hand. The applicant’s intentions could be genuine, and the dues are paid within 12 months, but the applicant cannot maintain the payment schedule.
A healthy account moving towards a Substandard portrays that the applicant is under strain, with a medical emergency or shortage of funds, or has overindulged and cannot manage commitments.
The Credit Bureaus follow all credit tracks, continuously grading them according to the transactions. A substandard account signals financial stress and mismanagement, negatively impacting the credit score.
At this juncture, it is advisable not to apply for further credit, as Banks are apprehensive about giving funds to an applicant in a tight spot financially or who is not keeping up with the repayment schedule.
If your account is leaning towards a substandard category, now is the time to take action and prevent it from moving towards a Doubtful or Loss account, which can hinder your credit score and eligibility.
Credit is essential for acquiring assets and living comfortably today you can take the following steps to ensure your score remains intact. You can avoid the red flags in your credit record by paying attention to credit management. These red flags can include missed payments, high credit card balances, and multiple credit applications within a short period.
Current records suggest that consumerism is rising, with excessive credit usage compared to income and savings. This leads to restricted unsecured funding by Banks and an increase in rejection ratios, making it necessary to maintain on-time payment for all credit and a healthy CIBIL Score.
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