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Credit Card Networks in India

In recent years, Credit Card usage has significantly increased in India due to increased consumer spending, e-commerce expansion, and enhanced financial inclusion efforts. The heart of this ecosystem is the credit card payment networks that connect your bank, you, and merchants to make transactions seamless and secure. Let’s discuss the critical aspects of Credit Card Payment Networks in India.

What are Credit Card Payment Networks?

Credit Card Payment networks play a crucial role by acting as intermediaries between cardholders, merchants, and banks. They enable the processing of Credit Card Transactions, besides ensuring secure funds transfer from the cardholder’s bank to the merchant’s account. The four major globally recognised networks include Visa, MasterCard, American Express, and Discover. India also boasts its domestic network, RuPay.

Major Players in the Indian Market

  1. Global Networks:
    1. Visa and MasterCard: These are the two most widely accepted credit card networks globally, and their presence in India is substantial. They offer a range of benefits, including extensive merchant acceptance, rewards programs, and robust security features.
    2. American Express (Amex): This card is known for its premium services and higher transaction fees. In India, Amex targets a niche market focusing on affluent customers and business users.
    3. Discover: This card could be more prominent in India. Discover cards are accepted through network alliances.
  1. Domestic Networks:

RuPay: Launched by the National Payments Corporation of India (NPCI), RuPay aims to promote financial inclusion and decrease dependency on international networks. It is widely accepted across ATMs, online merchants in India, and POS terminals. Besides, it offers lower transaction fees.

Historical Development

The concept of a credit card was pioneered in 1950  by Frank McNamara. As the story goes, he was dining in a restaurant in New York City when he realised he had left his wallet at home. A year later, he returned to the restaurant and paid his bill with a small cardboard card known as the Diners Club card. Bank of America introduced its BankAmericacard next; the rest is history.  SBI, or State Bank Of India, introduced the first proprietary Credit Card 1988. Soon after, other banks followed suit, but their adoption was relatively slow due to the low penetration of banking services and limited infrastructure. Later, in the 1990s and early 2000s, there was a surge in credit card issuance, driven by economic liberalisation and the arrival of private sector banks. Citi Bank, HSBC Bank, and later HDFC Bank and ICICI Bank introduced their Credit Cards. Further, the introduction of chip cards and contactless payments boosted the adoption and security of credit card transactions.

The Current Landscape

The Indian credit card market is thriving. The country witnesses millions of daily transactions, and over 70 million Credit Cards are circulated. The market marks intense competition among issuers and networks, each competing for a larger share of the expanding pie.

Banks issue Credit Cards with the option of payment gateways ICICI Bank offers its users a wide range of Credit Cards, such as the

ICICI Bank Coral Credit Card

ICICI Bank Rubyx Credit Card

ICICI Bank Sapphiro Credit Card

ICICI Bank Emralde Credit Card

ICICI Bank issues these Credit Cards with the option of payment networks such as the Master Card, Visa Card, American Express Card, and Rupay Card.

Payment Infrastructure

The backbone of Credit Card Transactions in India is the robust payment infrastructure, including:

Regulatory Environment

The Reserve Bank of India (RBI) is crucial in regulating Credit Card payment networks. Key regulations include guidelines on interest rates, fees, charges, and mandates for consumer protection against fraud. Additionally, data privacy laws ensure the secure handling of cardholder information.

Challenges and Opportunities

Challenges:

Opportunities:

Future Trends

The future of Credit Card Payment Networks in India looks promising, with the expected technological advancements, such as biometric authentication, AI-driven fraud detection, and enhanced mobile payment solutions. Market analysts predict continued Credit Card issuance and usage growth, driven by economic growth and evolving consumer preferences.

Conclusion

Credit Card Payment networks are integral to India’s financial ecosystem, offering convenience and security to consumers and merchants alike. With ongoing innovations and regulatory support, these networks are poised to play a pivotal role in the country’s digital payment revolution. As the landscape evolves, staying informed about the trends and developments in this space will be crucial for all stakeholders.

KYC (Know Your Customer)

Anjali’s experience is a stark reminder of how a seemingly minor error can have a significant impact on your financial journey. Her application for an additional ICICI Bank Credit Card was rejected because her DOB did not match the bank’s previous records. This was a complete surprise, as she was confident that all her documentation was in order. On further thought, she began to check the details of her existing card, and lo and behold, there was an error in the Date of Birth as per the Bank’s current records.

Instances like Anjali’s are more common than you might think. Errors often go unnoticed until they become a hurdle in your financial journey. These errors, usually in minor details, can easily slip past when Applying for a Personal Loan, Credit Card, or any other credit facility.

By meticulously checking and comparing the significant details of your primary documents, such as the PAN Card, Aadhaar Card, Driving License, Passport, Voter ID, and Government-approved ID, you can prevent potential issues in your financial transactions. This level of scrutiny gives you the power to Avoid Common KYC Errors, putting you in control of your financial journey.

Date of Birth Mismatched: An individual’s Birth date is the primary identification detail to be noted and preserved. The time and date of an individual’s birth is the starting point of life and the first recognition of existence. This is the primary reference point to be used for times to come. A birth certificate is the evidence of the date of birth to which further details are added. Each time a KYC Document is issued, your date of birth is mentioned. Be alert that there is no mismatch in the Date of Birth entered in any certificate or KYC Document to avoid discrepancies for further documentation.

Name Mismatched: The applicants’ names and spelling should be ditto on all the primary documents. For example:

The name on the PAN Card is Rahul Kumar Dutt.

The driver’s license has the name Rahul K Dutt.

Though the above seems like the same person for practical details, it is unacceptable for Official KYC Purposes. This confusion often occurs when a customer involuntarily gives one ID document to open a bank account and uses an alternate ID for a credit card application. The name mismatch is a significant reason for the Lender to withhold or reject the request for a Personal Loan or a Credit Card, underscoring the gravity of such errors and their potential impact on your financial transactions.

Spelling Error: The spell check is a must for the identification and address details of all documents. A name could be misspelt, or the address mentioned on two different documents may not match exactly as per the example discussed below:

Aadhaar Card –      Mrs Sarika Kapoor 121 Nyaya Marg. New Delhi 21

Bank Statement – Mrs Saarika Kapoor 121 Nyay Marg. New Delhi 22

The error may not be noticeable, but it can be problematic when applying for further credit. Spelling errors can happen due to clerical mistakes while doing data entry or as a wrong copy from a previous document. An incorrect name spelling can often lead to a different individual match when the individual’s CIBIL is checked. An address spelling error will make it challenging to identify the residence and can affect Personal Loan Eligibility.

Documents not updated: The address change, if not updated in the documents submitted as per the current residence location, can cause a verification decline as the old address is captured by the lender staff when entering the details of the customer is possible and can be the cause of a verification decline when the Banks executive makes enquiries at the location entered. The document submitted as an address proof must reflect the address where the applicant is currently residing. Giving a prominent landmark when filling in the address will go a long way toward conducting a successful physical verification.

Submit Clear Copies of Documents: All documents submitted when applying for a credit facility online or by giving hard copies must be updated and precise. Validity is important, as an expired document, such as a driver’s license or passport, will lead to delays.

With digital processing, applicants Apply for Personal Loans Online by giving soft copies of documents. If the original documents lack clarity, processing is withheld. Further, with the introduction of Video KYC, original documents are verified over a video call with the Bank officer. The verification is declared unsuccessful if the records are poorly maintained or damaged.

Other KYC Requirements: The Aadhaar card is now a universally accepted KYC Document with all the details required to process a loan or a credit card. For verification, the Aadhaar card must be linked to the applicant’s mobile number. It is used to verify biometrics and displays the customer’s current address.

The PAN Card must be connected to the Aadhaar card and the bank account; customers with duplicate or 2 PAN cards must submit both cards, as the bank will discover them during the verification process.

Applicants must ensure their KYC Documents are accurate to expedite the processing of loans or credit cards. Incomplete information can also lead to CIBIL errors when the lender views the CIBIL during the loan process.

The RBI (Reserve Bank of India) is coming down on lenders to maintain accurate KYC Records of customers, and banks, in turn, are now prioritising collecting customers’ KYC while processing credit transactions. Doing a check while keeping the above error possibilities in mind will help to enhance your experience with credit further credit applications.

Personal Loans

As economies and corporate culture continue to grow, incomes have increased. This has amplified demand for infrastructure facilities due to improved opportunities for salaried and self-employed individuals. Governments, private banks, and financial institutions are offering credit facilities, including secured and unsecured credit to support this development.

Dealing with unexpected expenses can be difficult, whether related to lifestyle, overspending on holidays, or expenses for weddings and family celebrations that exceed the budget. In the past, people often borrowed money from a well-off friend or relative when they needed extra funds beyond their monthly payments or in case of an emergency. A Personal Loan fills this vacuum as families become nuclear and relationships impersonal.

What is a Personal Loan?

A Personal Loan is unsecured funding provided for a short term and intended for personal use. The loan is granted based on the applicant’s profile and supporting documents.

Initially, Banks gave restricted amounts as Personal Loans, and usually, the customer had a relationship with the bank. Funds for Personal Loans were approved at the bank’s discretion, based on the available customer information.

Over the years, the landscape of a Personal Loan has significantly transformed. It is now a structured product easily accessible to salaried and self-employed individuals for their specific needs. The updated Banking systems, digital innovations, and customer credit details recorded by CIBIL now enable lenders to check the background and profile of customers and prioritise their lending segments.

Digitalisation has further enhanced the process. Now, an applicant can Apply for an Online Personal Loan with convenience. Documents are uploaded online, and the funds are disbursed electronically with efficiency and speed as an instant personal loan.

A robust demand has encouraged banks such as HDFC Bank, ICICI Bank, AXIS Bank, and YES Bank to process Personal Loans as a primary product. Registered NBFCs and online applications also actively market Personal loans with a structured product and policy, prominent.

What are the Eligibility Criteria for Obtaining a Personal Loan?”

The basis for a Personal Loan is the customer’s intention and ability to repay the loan promptly. Personal Loans are unsecured funding therefore, banks want to consider specific profiles and employment aspects when issuing a loan. Primary factors for the calculation of Personal Loan Eligibility for loan amount include the following:

Income: The applicant should draw a regular monthly income credited to the bank salary account. The minimum salary requirement to receive a Personal Loan is ₹ 25k and above.

Employment: The applicant’s employer is an essential factor in determining Eligibility for a Personal Loan. The reasoning is that working for a reputable company with sound financial stability and growth potential ensures a consistent income. A borrower who receives their salary on time is less likely to default on their loan EMIs. Banks have compiled a list of approved companies and prefer to fund applicants working in organisations featured in the approved list of companies.

Residence Details: The applicant’s living conditions reveal much about the personal profile. A customer living with a family in a family or self-owned home indicates a secure income. Suppose the applicant is residing on rented premises. In that case, the documented proof of a permanent address will help instil confidence in the lender that the customer is easily reachable in case of a delay in repayment.

Credit History: Individuals who manage their finances well and pay their dues on time will easily access credit when needed. The Credit Bureau of India Ltd (CIBIL) maintains records of all individuals’ financial transactions, including their loan history and repayment track record. Lenders typically conduct a CIBIL check to verify an applicant’s repayment history before approving a Loan or Credit Card to ensure that the applicant has a strong credit record. A CIBIL Score of 700 points or higher is considered an eligible score for obtaining further credit.

Stability and Continuity: “Financial institutions seek out customers with a stable background and the ability to comfortably repay borrowed funds. In this context, an applicant who has been consistently employed by the same company or has switched jobs without a gap will be viewed positively. Conversely, individuals with less job experience and prolonged periods of unemployment are considered high risk. Likewise, customers who have resided in the same area for an extended period are less likely to default on payments than single individuals who frequently change their addresses.”

Key Features of a Personal Loan:

Age: The minimum age required to apply for a personal loan is 23. An applicant can repay the loan until the age of 62. If proof of retirement age is provided, a further extension until age 65 is granted.

Education: To apply for a personal loan, an applicant must have a graduate degree. Further degree holders and professionals such as doctors and dentists are treated as a particular category and offered enhanced terms and conditions.

Loan Amount: Prominent Banks such as HDFC Bank and ICICI Bank grant funds from ₹ 1 lakh to 40 lakhs as a personal loan. Banks and NBFCs have individual policies regarding the loan amount issued to the applicant, and loan amounts are issued according to the applicant’s ability to pay the EMI after the monthly expenses are met.

Tenure: The tenure or term for repayment of a Personal loan is 12 to 72 months. The tenure is allotted according to the applicant’s ability to pay the monthly instalment. The tenure allotted at the time of disbursal of the loan remains fixed.

What are the Personal Loan Charges?

The interest rate for a personal loan is reasonable, considering it is unsecured. High-income customers borrowing large sums are offered discounts, while a lesser loan amount incurs a higher interest rate.

Significant Charges for a Personal Loan are as follows:

Interest Rate: The personal loan interest rate ranges from 10.75% to 18%. It is applied at a monthly reducing balance and remains fixed for the entire tenure.

Processing Fees: The processing fee is a one-time cost the lender pays. This amount is deducted from the loan amount disbursed as file charges. Lenders Levy a processing charge according to the individual policy; the main factors influencing the processing fees are the approved loan amount and the customer’s income.

Other charges include prepayment charges and the cost of repaying the loan before the expiry of the tenure. Banks will charge a nominal fee for other requested documentation.

What is an EMI?

The EMI or monthly installement is applied taking into account:

It is advisable to check if you are comfortable paying the EMI before applying our EMI Calculator, which also serves as a Personal Loan Eligibility Calculator, will help you arrive at a convenient EMI based on the above inputs.

Personal Loan Documents

To process a Personal Loan, minimal readily available documentation must be submitted. Applicants can Apply for Instant Personal Loans Online or give hard copies of documents. Banks require income details to determine monthly earnings and proof of customer identity and address as per the KYC norms mandated by the RBI (Reserve Bank of India).

The norm is a salary slip that indicates the monthly remuneration and a corresponding credit reflected in the Bank statement for three consecutive months.

Per the KYC norms, a customer must submit proof of identity for all credit transactions, such as a PAN Card confirming the customer’s details and serving as a signature proof.

The Aadhaar card is a universally approved document that confirms the customer’s identity and address. Alternate documents that serve as proof of address include a passport, driving license, voter ID, and any government-approved document.

The Bank will verify the residence and office to check customer availability. With the introduction of Video KYC, the process is now completed digitally.

Once the Personal Loan is sanctioned, the customer must ensure enough funds are in the account to clear the EMI before the due date. Not only will penalties be charged for the number of days the EMI remains unpaid, but the credit score will also be affected. Due to the unsecured nature of a Personal Loan, it is the easiest way to increase your credit score and vice versa. This results in the inability to get further credit when required in the future.

A Personal Loan can be your friend in need, providing you with the comfort and security of accessing funds instantly when required and at reasonable costs.

Video KYC Verification

The KYC (Know Your Customer) process is mandatory when opening a new bank account, Applying for a Credit Card, or taking out a Personal Loan. The RBI (Reserve Bank of India) has regulated that the service provider must verify the identities of all customers seeking to use financial products to reduce the risk of money laundering and financial fraud.

For Banks and NBFCs, the KYC Process is crucial in confirming customer details and residence. This diligence not only helps prevent terrorist funding and fake interactions but also significantly reduces the risk of financial losses to the Bank when the customer defaults, ensuring the security of the financial system. The maintained KYC records enable effective recovery of the outstanding amount.

The onset of COVID-19 brought unprecedented challenges, with movement restrictions in place to curb the spread of the virus. However, the widespread use of mobile and internet communication technologies played a crucial role in overcoming these challenges, ensuring that essential services could continue.

Overnight delivery apps and online platforms mushroomed, offices were shut down, and employees were asked to work from home. Official meetings were conducted online, and social functions took to Zoom and YouTube, allowing friends and family to participate in the proceedings.

During the pandemic, the RBI allowed banks to open savings and salary-based accounts through online verification. This helps mitigate the challenges of the physical verification process. Customers can upload their documents online, and the bank can verify them through a secure interface.

The success of online verification has led the RBI to extend the jurisdiction for Banks to conduct Video KYC for Processing Personal Loans and Credit Cards. Prominent Banks such as ICICI Bank, YES Bank, and HDFC Bank have a secure system to perform video KYC for customers applying for financial products.

KYC Methods:

When applying for banking services, the customer must fill out a request form with personal and professional details and submit corresponding documents to support the application.

The RBI has approved standard documentation to initiate a Customer KYC Verification. These include:

Clear and valid copies of KYC Documents will be submitted to enable a successful verification. The KYC Process was initially conducted manually, with the customer going to the Bank to show the original documents or a Bank officer visiting the residence or office to meet the customer to check that the documents submitted are true copies.

What are the requirements for a Video KYC?

Please keep in mind the following requirements for the Video KYC Process:

– The performing bank or organization must be registered with the RBI (Reserve Bank of India) and authorized to conduct the process.

– A secure Wi-Fi connection must be established between the user and the bank officer without any noise or disturbances and with good visibility.

– The applicant’s formal consent is necessary to proceed with the Video KYC.

– Clear copies of KYC documents should be readily available before initiating the process.

– The applicant’s mobile number must be linked to PAN and Aadhaar cards.

– The KYC can be conducted from the documented residence or office address as mentioned in the form details.

What are the steps to a Video KYC?

KYC Verification is a mandatory process for approving any financial transaction. Credit can be denied if the Lender is not satisfied that the documents submitted are true copies. The Financer can conduct the KYC Process at the primary stage after checking the CIBIL Score and the company category list. Or after all the stages are completed and the request is approved.

The steps to complete a Video KYC are as follows:

The Pros and Cons of a Video KYC

Banks use online systems to improve their processes as they prepare for the digital era. People looking for credit are also eager to engage in digital transactions. The Video KYC process eliminates the need for lengthy physical verification and reporting. Customers from any part of the country can now apply for and verify their personal loans entirely online. Leading banks like HDFC Bank, ICICI Bank, and YES Bank have introduced Video KYC, a secure process to prevent fraud and illegal activities.

Though the Video KYC Process is successfully conducted, the industry may not be ready for a complete transformation. Not all customers may have the facility to make online contact and execute the Video KYC Process. Applicants may not have the time and capacity to make contact if the Video KYC Fails on the first attempt.

Although the technology has not yet been adopted by all financial organisations, applicants with vintage documents can face clarity issues while conducting a Video KYC. Therefore, physical verification will remain an alternative for some time to come.

Credit Card

Starting your first job is not just a new phase in your life but a significant step towards financial independence. It’s when you begin to earn and take charge of your finances, transitioning from a student with limited financial responsibilities to a professional needing to manage expenses and savings. This shift, the culmination of years of education and training, is the perfect opportunity to start shaping your financial future.

With financial independence, you can create your living environment, furnish your living premises, and design a comfortable home that reflects your unique style and preferences. This is not just about financial freedom; it’s about the sense of achievement and empowerment that inspires you to take control of your financial journey.

As a fresh candidate, your employer’s decision to hire you and open a bank account for your monthly remunerations with leading banks like HDFC Bank, ICICI Bank, Axis Bank, and YES Bank is a significant sign of trust and stability. This regularity of salary transfers provides a strong sense of security and lays a solid foundation for your financial future, giving you the confidence to plan and invest.

As a new job holder, you may consider getting a Credit Card. It’s a common aspiration, as credit has become the norm, and banks offer Debit Cards for ATM Transactions and cashless payments. A Credit Card can provide unparalleled convenience for spending on necessities and daily usage. However, it’s important to note that banks typically require a year of work experience to extend credit on behalf of the account.

What are the Benefits of a Credit Card?

A Credit Card offers a credit-free period of 30 days and can be used conveniently without the hassles of carrying cash. Primary usages include the following:

The ICICI Bank Coral Credit Card

The ICICI Bank Coral Credit Card provides the best benefits for first-time credit seekers, considering the usages and advantages needed. The benefits of the ICICI Coral Credit Card are best suited which include:

The ICICI Bank Coral Credit Card is particularly beneficial for new job holders. With its low annual fee, cashback offers, and easy application process, it’s designed to meet the needs of those just starting their professional journey.

Tips for usage of your first credit card:

Setting a ‘conservative limit’ is essential when you get your first Credit Card. This refers to a credit limit lower than the maximum amount the bank is willing to offer, usually based on your monthly income. Accepting a conservative limit is wise, as it helps you manage your spending and avoid accumulating too much debt.

Use your credit card responsibly:

Your Credit Card is a powerful tool for cashless transactions, but it’s crucial to keep the details of your card, such as the PIN and CVV Number mentioned in reverse, private. Sharing these details can lead to unauthorised card use and potential financial loss. Using your Credit Card responsibly can avoid unnecessary debt and maintain a healthy financial status.

Keep track of the usage:

With the freedom of cashless spending on your Credit Card, you tend to spend without knowing that the money will be paid later. Maintain a record of the expenditure and treat the card as a debit card, knowing there are enough funds in your account.

Pay your bills on time:

The credit-free period of a credit card is 30 days. After the 30-day cycle is completed, a statement of account is generated. A grace period of 10 to 15 days is further extended to pay the dues. Mark the payment date on your calendar to ensure you do not forget, as a delay can cost you penalties and will be noted in your CIBIL history. Creating an auto-debit payment system from your Bank account is an option.

Upon receipt of your credit card, the literature with the terms and conditions is provided.

Take note of these details for optimal Credit Card Usage. Using your Credit Card regularly and making timely payments will help improve your CIBIL Score, strengthen your credit standing, and prepare you for future financial endeavours.

Equated Monthly Installments (EMI)

In today’s consumer-driven society, the availability of easy credit from banks and financial institutions has fuelled the desire for a better lifestyle and progress. Whether you’re in the market for a new home or a mobile phone, the option to make a minimum payment and convert the remaining balance into installments payable over a suitable period is a common practice. This is what we refer to as an EMI (Equated Monthly Installment), a financial tool that plays a significant role in managing your financial commitments.

Why Prioritise Your EMI?

When Applying for a Loan, it’s common for customers to focus on the interest rate and other charges. However, it’s equally important to consider the monthly installment. A manageable Equated Monthly Installment (EMI) is not just a financial obligation but a tool that allows you to repay the amount without straining your monthly budget, providing a sense of financial security and peace of mind.

How Does the EMI work?

Understanding how the EMI works is critical to effective loan planning. The interest rate applied to the loan amount issued to the customer is divided over the tenure for which the loan is sanctioned. Each EMI (Equated Monthly Installment) includes a part of the principal and the interest charged. For both mortgage and unsecured loans, the interest is charged on a monthly reducing basis. This means that with the payment of each installment, the amount of principal owed reduces, and the interest is applied to the reduced balance. Despite the changing ratio of principal and interest, the EMI remains constant for the entire tenure, making it easier to plan your monthly budget.

Benefits of an EMI Calculator

Before taking out a loan, using an EMI Calculator can be a game-changer. It allows you to determine the monthly installment in a flexible and adaptable way. You can adjust various parameters, such as the loan amount, interest rate, and repayment tenure, to find the most suitable installment. If the Calculated EMI seems too high, you have the power to consider extending the repayment term, applying for a lower loan amount, finding a lender with a lower interest rate, or opting for a shorter repayment term with higher EMIs. This tool provides a sense of reassurance and confidence in your loan planning, putting you in the driver’s seat of your financial decisions.

Using an EMI Calculator can help prospective borrowers determine a suitable EMI that fits their monthly budget, thus saving valuable time and effort during the loan application process. This efficiency in financial planning allows the borrower to focus on other essential aspects of their life, making them feel more productive and in control of their time.

What are the Advantages of an EMI?

The EMI has become part of daily existence, a tool that has helped millennia better manage life and emergencies. Salaried persons can dream of owning their home and going on a vacation by appending a home or Personal Loan and making the repayment via EMI. Financial shortfalls during emergencies can be met with a Personal loan. Banks such as HDFC Bank, ICICI Bank, and Axis Bank now disburse Personal Loans Online, and repayment is done with easy EMI over 12 to 72 months.

Self-employed individuals can Apply for a Business Loan to extend their existing work and upgrade their machinery. Financial shortfalls during weddings and family functions are conveniently met, and funds are repaid over monthly instalments or EMI.

Loans from Banks and NBFC fuel the Auto industry, and most individuals find it convenient to have their transport. With a minimal down payment, the cost of the vehicle is paid in monthly instalments for personal or commercial usage. Vehicles are movable commodities, so banks can recover them if the EMI is not paid.

Banks and financial institutions are prepared to provide funds and generate income from repayable loans, benefiting both the borrower and the lender.

The Advantages of an EMI are Immense, But Let us Consider a Few Cons.

“When borrowing, it’s essential to clarify and understand the terms of the repayment schedule. Make sure that the payment of the EMI or the monthly installment comfortably fits your budget, as any delay or non-payment will negatively impact your credit ratings.

Keeping track of the EMI Payment dates and maintaining a sufficient balance is obligatory, as a bounce will negatively impact your record.

Accumulating many EMIs without proper budgeting can lead to a debt trap. Borrowing excessively for extravagant spending without considering your budget may also lead to financial difficulties. It’s essential to be mindful of this because banks and financial institutions are unlikely to lend to individuals who are overleveraged and paying too much towards their EMIs.

Repaying credit via instalments makes fulfilling obligations and comfortable living affordable, but this should not be taken for granted. The commodity is not yours until you have paid the amount due as an EMI or through a downpayment.

Know Your EMI

After the loan request is approved, an agreement is initiated between the borrower and the lending organisation, which mentions the terms and conditions of the loan. These include:

A loan repayment schedule is issued, giving details of each instalment and the component of the interest and principal deducted over the tenure of the loan.

The EMI amount for a Personal Loan is fixed at the time of disbursal and is deducted from the applicant’s account monthly. A floating interest rate is applicable for a mortgage loan, adjusted according to the PLR (Prime lending rate) declared by the RBI (Reserve Bank of India).

The customer’s prerogative is to maintain sufficient funds in the account to clear the EMI for all credit taken. A bounce or return will negate the Credit Score and the track record, whereas an on-time payment record for your EMI will go a long way in getting you additional credit when required with the best terms!

Credit Card vs a Personal Loan

Whether you face daily shortfalls or unexpected emergencies, funds are constantly needed. The good news is that banks and NBFCs offer various credit options, allowing you to choose what suits you best.

There’s a solution for every need, from secured credit options like mortgages, auto loans, or gold loans to unsecured possibilities like Credit Cards or Personal Loans for smaller amounts. This flexibility empowers salaried individuals with a regular income, allowing them to tailor their borrowing to their specific circumstances.

How Does a Credit Card Loan Work?

A Credit Card is a handy credit tool that allows for easy spending. Most lenders sanction a credit-free period of 30 to 50 days to pay the monthly bill amount. If you cannot pay the total amount due, a minimum of 5% must be paid.

To facilitate the payment, the customer has a choice of converting the balance into a consolidated amount or as a Loan, which is payable in monthly instalments. Alternatively, a loan on behalf of a Credit Card is also offered to cardholders seeking funds for other personal usage and emergency needs.

When you take out a Credit Card Loan, the issuer provides the funds to be repaid with interest in equated instalments that form part of the monthly statement to be cleared on the due date for the tenure applied.

What are the Features of a Credit Card Loan?

A loan against a Credit Card is available to a holder because there are no defaults in the payment history and enough balance on the card to support the loan. For example, an ICICI Bank coral credit card holder with a limit of ₹ 200000/—can borrow ₹160000/—if ₹ 20k has already been spent on the card, then the amount is ₹140000/—The card can only be used for the limit balance until the monthly EMI gets paid.

The monthly instalment for the loan appended forms part of the monthly statement presented to the customer and must be paid on time.

Benefits: Credit card payments are made immediately upon purchase of the item, and the holder can simultaneously request that the amount be converted into a loan. Funds can also be received in the account on request as a Personal Loan for shortfalls or emergency needs.

Thus, the customer has immediate access to funds with no paperwork, and since the credentials have been verified previously, the Lender can request funds on the go.

The interest rate applicable to a Credit Card Loan is reasonable, and the loan amount can be repaid anytime.

Precautions: Although the Loan Against a Credit Card seems like a perfect deal, there are underlying precautions and restrictions to be noted.

How Does a Personal Loan Work?

A Personal Loan has become the most popular credit tool today when funds are required for individual needs. Banks are keen to lend funds for a short term, which can be used as needed and repaid with fixed monthly Installments.

HDFC Bank, ICICI Bank, AXIS Bank and YES Bank Service Personal Loans to account and non-account holders for loan amounts of up to ₹ 30 lakhs for 12 to 72 months. The personal loan policy for most Banks is similar, with each lender having specialised norms and target segments.

To initiate the process, the applicant must submit the requisite income and KYC Documents with online processing, applications are expedited, and funds are disbursed within 48 to 72 hours.

What are the Benefits of a Personal Loan

Restrictions:

In Conclusion

A loan on behalf of a credit card is credited to the account directly without any questions, which works well in emergencies. However, the amount cannot exceed the card’s prescribed limit.

Timely repayment of the instalment is paramount, as delays can lead to further costs. With the excessive interest charged, there is the danger of getting into a debt cycle. Factually, with a credit card, the lender is giving you funds to return the original amount and will charge you interest on the same!

The terms and conditions of a Personal Loan are structured, and the interest charged is reasonable. To be Eligible for a Personal Loan, the applicant must have a good repayment track record of credit taken. If excess dues are to be paid as a balance on your card, taking a Personal Loan to repay the same is a good idea!

Apply for Instant Personal Loan Online

Apply Online to Top Up their existing Personal Loan or reduce costs by transferring their balance to an alternate lender.

Options are restricted in the case of an App Loan. Axis Finance Ltd, a wholly owned subsidiary of Axis Bank, is the only financer that accepts the Balance Transfer of an App Loan.

In Conclusion

App loans give instant cash and work when small A Personal Loan from a mobile App or to apply online? The better option.

In today’s fast-paced life, individuals prioritise instant gratification for fulfilling their needs. Gone are the days of extensive paperwork banks and NBFCs offer quick credit in the form of personal loans to eligible customers for individual and emergency needs.

What is a Personal Loan Mobile App?

Mobile phones are now our constant companions, with multipurpose reach for various utilities and daily needs. A mobile App can be easily accessed on the go and allows users to receive timely financial assistance through a smartphone or tablet’s mobile browser.

Mobile banking apps offer unsecured loans such as cash, early pay advance salary, and personal loans. The app can be downloaded from the Google Play Store or App Store and must be registered with the RBI (The Reserve Bank of India Ltd).

App loans are short-term credit and are most popular with Salaried persons and offer conservative loan amounts from ₹ 15k to ₹ 5lakhs for emergency costs or shortfalls in personal expenses.

How Does a Personal Loan Through an App Work?

A Personal Loan App interface emphasises the speed and convenience of appending funds. Instant Personal Loan offers are displayed directly on the screen.

The applicant must provide basic information, personal and professional details, and the required loan amount to initiate the process.

The Aadhaar and PAN cards are the primary documents to process the request. The applicant’s mobile number must be linked to the Aadhaar card and bank account: the customer’s details are verified online, and the loan is decided upon.

As the customer permissions have been solicited previously, the amount is transferred to the account directly.

Benefits of a Personal Loan through an App

With an app downloaded on a mobile phone, funds are available with a click when needed most. The USP is the ease and convenience of getting instant funding when required you only need a browser and Wi-fi connectivity.

Applicants no longer need to access a computer facility or make extensive copies of documents minimum documents and details are required to process the loan, which is transferred almost simultaneously after the formalities are completed.

Previous credit history and a CIBIL Score are not mandatory to receive funds from an app loan, though each financer has their policy and can require a credit score to give increased loan amounts.

The Precautions are to be Taken When Applying Through an App

Considering the easy customer reach and promise of ready credit, Personal Loan Apps have quickly gained popularity. As a result, a surfeit of Loan Apps has been created. The RBI has notified over 700 fake apps that have been banned because they are not registered and do not have the requisite permissions for operations.

Before downloading the App, it is vital to check its authenticity, as persistent offers of prompt funding can easily mislead. If the App asks for undue permissions, such as access to your camera or other data, it can put your personal information at risk and should be avoided at all costs.

Be sure to verify the app’s original sponsor. There should be a customer care number that is reachable when required. An alternate financer may fund the Personal Loan, and the app’s advertiser could be a third party. In such a situation, the advertiser is just the face and may not be responsible for solving any queries or problems that may occur.

Check the terms of the funding beforehand to avoid any surprises or misunderstandings at a later date. The interest rate and EMI payable must be easily affordable to avoid pressures for payment.

What is an Online Personal Loan?

We no longer stand in queues to update our passbooks, check our account balances, or rush to the Bank to withdraw funds all of the above is possible from the comfort of our residence or office. Operating procedures have been transformed to keep up with the digitalisation of the banking industry.

The online platforms are uploaded on leading Banks HDFC Bank, ICICI Bank, and YES Bank websites. Applying for secured and unsecured products is now possible by filling in the required information and uploading the documents.

How Does an Online Personal Loan Work?

On receiving the request for a Personal Loan, a loan account number is created, and the applicant is informed that the request has been registered. If there is a pendency in the documents, the applicant is notified.

If the lender requires a CIBIL, the applicant’s CIBIL Score is generated to check whether it is above the necessary benchmark and if there are no aberrations in the CIBIL history.

The lender will then conduct a verification for the KYC and Income documents,

The ICICI Bank provides a link for Video KYC, which can be obtained from the applicant’s residence or office to expedite the personal loan process.

The bank’s underwriter will then assimilate the inputs and calculate the customer’s eligibility. A Personal Loan EMI Calculator can confirm the EMI before applying.

The customer signs an agreement acknowledging the loan terms before transferring the loan amount to the Bank account.

Benefits of an Online Personal Loan

Unsecured funds issued once as an Online Personal Loan can be used as the applicant requires. Customers needing excess loan amounts can apply online for loans of ₹ 1 Lakh to ₹ 40 Lahks.

The interest rate offered for a Personal Loan is 10.75% onwards and is calculated at a reduced balance, giving the applicant funds without any security at the lowest interest rate. The repayment tenure of a Personal Loan can be extended up to 72 months, depending on the EMI the applicant can afford.

The process for an Online Personal Loan is transparent, and the customer is clearly informed of all the terms before disbursing the loan.

With an Instant Online Personal Loan, the processing is expedited so that the customer can receive the loan amount required within 72 hours.

Comparison of a Personal Loan via an App and an Online Personal Loan

Funds received as a Personal Loan from an App or by applying online both serve the purpose of funds for individual or emergency usage. Though an App disburses funds immediately, the sequence moves quickly, and the customer may not understand the implications of the loan.

Transparency of Process and Terms

Financial payment apps advertising pre-approved Personal loans have access to customer KYC information linked to the Bank account and offer loan amounts on behalf of banking transactions. The Loan financer is usually a third party who will ultimately be responsible for any further dealings. Without transparency, reaching out to the financer can be tedious.

On the other hand, Applying For a Personal Loan Online follows a streamlined procedure. The customer is informed of the progress of the request, and finally, the loan amount is disbursed only after the applicant has accepted the terms and conditions.

Costs of the Loan

Having taken a Personal Loan through an App in an emergency, the applicant later realises the high-interest rate when the EMI is deducted from the Bank account. A delay in the payment of the EMI will result in a high penalty and aggressive follow-up from the financer.

Apps provide limited loan amounts with higher costs, whereas an Online Personal Loan has funding available per the customer’s requirements. The interest rate for an Online Personal Loan is among the lowest in the unsecured loan category.

A customer can choose a suitable EMI with a choice of repayment term. In contrast, an App loan EMI is inflated and strains the budget with a restricted repayment tenure and high interest.

Data Privacy

Checking an app’s authenticity may be challenging, as there is a surfeit of offers available on mobile. If you need funds urgently, you can choose the wrong lender involuntarily.

Apps are vulnerable to the leakage of personal information that can be misused if permissions are granted without reading the fine print.

When an applicant applies for a Personal Loan Online, it is in the protected domain of the lender. Information relevant to the process is asked with the borrower’s acknowledgement.

Options for Restructuring

If surplus funds are required, customers can appums are needed that can be repaid quickly within a targeted time frame. Customers already in debt and borrow money from Apps to relieve their current debt are in danger of getting into a debt cycle.

Online Personal Loans are structured loans issued to applicants fulfilling the bank’s eligibility criteria. They have clearly defined terms and reasonable costs.

Moving Credit Card Debt to Personal Loan

Owning a Credit Card has become a lifestyle necessity. When an individual earns a regular income, Applying for a Credit Card becomes the next objective. Even if there is no urge to use it, offers stream in from various Banks and are hard to resist.

A Credit Card is handy because it allows spending to be repaid later. While enjoying the benefits, one usually acquires additional cards from other issuers.

How Does The Payment For a Credit Card Work?

The statement or bill for the payment of Credit Card spending is generated after a month. A user is granted a grace period of up to 15 days to pay for the due date. If an individual cannot pay a minimum amount due, 5% of the total bill must be deposited. The balance is carried over to the following statement.

Why is it Easy To Get Stuck in a Credit Card Payment Trap?

The relief of not having to pay immediately comes at a cost, as 36% interest is charged on the pending amount. Any further card usage, if not paid on time, also attracts interest.

Therefore, without adding expenses, the amount due will double in two months, and if an applicant has numerous cards, the dues can mount considerably. Before realising it, an individual can fall into a debt trap.

When is The Right Time To Apply For a Transfer of your Credit Card Dues?

An individual can use a Credit Card to pay for expenses and credit transactions up to the assigned limit. The card issuer will prescribe a limit according to the applicant’s income. If the limit has been used, further transactions are declined until the dues are cleared.60% to 70% of the card limit is assigned for credit transactions and 30% to 40% for cash withdrawal.

The cash withdrawal facility is meant for emergency use. The cash must be repaid shortly, as interest is charged daily on the money drawn.

Suppose the usage of a Credit Card or multiple Credit Cards has exceeded 70% of the limit, and the holder has withdrawn cash on behalf of the card and does not have the resources to pay after the billing cycle is complete. In that case, the dues must be cleared as per the statement’s due date, or other options, including a Balance transfer, must be considered immediately.

What are The Options Available To Deal With Pending Credit Card Dues?

The expenses made using a Credit Card should be accounted for in the monthly budget. Ideally, when swiping a credit card, the payment amount should be available in the account or expected before the billing cycle is complete. Indiscriminate spending on a card can cause budgetary problems when the payment due date is near.

If you have made excessive expenditures due to an emergency, occasional leisure expenditures, or the temptation to buy an item that is currently unaffordable, swiping your card will help.

Suppose funds are unavailable for the total amount due. In that case, the following options will help tide over the situation: Contact the card issuer and request that the due amount be converted to equated monthly instalments, which will be charged a fixed interest, or transfer the balance to an alternate card.

If multiple cards have been used and repayment is unaffordable, Apply for a Balance Transfer of the Credit Card dues to a Personal Loan.

What are The Eligibility Criteria for Transferring Credit Card Dues to a Personal Loan?

Leading Banks such as HDFC Bank, Axis Bank and Kotak Bank offer to take over pending Credit Cards dues for eligible applicants. Taking timely action to Apply For a Balance Transfer of Credit Card dues will serve well, as the transfer can be denied if the transfer criteria are unmet. Although each lender has exclusive criteria, the basics are similar.

The minimum, 5% of the total due, must be paid on time by the payment date. The card statement must not reflect negative remarks such as over-limit usage fees, delayed payment charges, or overdue charges. The total unpaid dues of all the credit cards must not exceed five times the monthly salary drawn.

Axis Finance is a wholly owned subsidiary of Axis Bank that takes over the balance payment of Credit Cards if the EMI is up to 6o% % of the applicant’s salary.

The applicant’s CIBIL Score must be above the required benchmark, and the profile must meet the bank’s policy requirements.

How Does The Process for the Transfer of Credit Card Dues Work?

Transferring credit card dues to a Personal Loan with an external financer is quick and convenient. The process takes 5 to 7 working days.

The applicant applies for a new loan with the required documents and requests a balance transfer of credit card dues. Copies of the Credit Cards with the statements for the last three months are to be submitted.

The initial stages of processing are similar to those of a fresh loan. Most banks permit the transfer of dues for a maximum of three credit cards. After checking for CIBIL and verification, eligibility calculations for the loan amount are done.

Banker instruments favouring Credit Card accounts are made and despatched to the applicant. The applicant must deposit the same in the relevant Banks and obtain deposit receipts.

The EMI for the amount issued is presented to the customer’s Bank account on a designated date for the assigned tenure.

What are the Advantages of Transferring Credit Card Debts to a Personal Loan?

Thus, the cardholder is relieved of debts and excessive interest that Credit Card companies charge. In comparison, the interest charged for a Personal Loan is 15% to 18%, half the rate for unpaid credit card dues.

The applicant can choose a suitable tenure with an affordable EMI to repay the Personal Loan, and they can also use credit cards as the dues have now been cleared.

The CIBIL Score will also increase immediately as the unsecured debt merges and the payment is made.

The key is to make a timely decision, as Credit Card debt multiplies and quickly becomes out of hand. If delays or returns of payment are noted, the Balance Transfer will have to wait until the applicant maintains a clean record for a minimum of three months.

A Credit Card has many advantages, but prudent usage and timely payment are paramount.

Personal Loan Fees & Charges

What do you do when you urgently need funds during a financial crisis and don’t need restrictions on using the money, like in a home or car loan? The answer is you go for a Personal Loan. Personal Loans are unsecured loans that are much more convenient than conventional ones because you can pay them back over time in affordable instalments and receive swift disbursement with minimal documentation.

Although Personal Loans are an excellent way to get money quickly, banks impose specific fees on this loan because it’s unsecured- meaning you aren’t obliged to put up any assets as security for the loan. Besides, Personal Loan Charges are also different based on the bank and the interest rate. So, without further ado, let’s find out the common Personal Loan Fees associated with the amount you borrow so you can have a precise estimate.

The primary cost of funds is the Personal Loan Interest Rates starting from 10.65% p.a. For ICICI bank, you can avail of an unsecured loan at EMI as low as Rs 1878/ Lakh. For HDFC Bank, the bank offers personal loans with interest rates ranging from 10.65% to 20% per annum, with fixed rates. The Interest Rate for a Personal Loan is applied at a monthly reduced balance and is fixed for the entire term.

Loan Processing Charge

This is the amount the bank charges when your loan is processed, and the bank charges a small amount of the overall loan as an administrative expense. The processing fee or the personal loan origination fee amount is minimal, and the charge is around 0.5% to 2.5% of the overall loan amount. Note that the processing charges for personal loans vary from bank to bank, and an individual Applying For a Personal Loan can have the cost deducted from the actual loan amount during the disbursement.

For the two leading banks, the loan processing charges or the non-refundable origination charges for ICICI Bank are up to 2.5% of the loan amount plus the applicable taxes. Meanwhile, for HDFC Bank, the processing fee is about 0.5 to 2.5% of the total loan amount, which is nearly the same amount.

Verification Charge

When you Apply for a Personal Loan from a bank, the bank has to ensure that you can repay the loan in a timely and according to the conditions of the loan after the Personal Loan Eligibility Check. To ensure this and verify your identity and overall information, banks appoint a third party that verifies your credit history and checks your repayment history. Banks incur expenses for ascertaining the overall lead there is no separate verification charge, and it is part of the processing fees paid by the applicant.

Penalties for Loan Default

When you secure a loan, the bank structures your repayment into monthly instalments based on the loan amount, duration, and interest rates. However, the key determinant for these instalments is your ability to repay. If you opt to pay off the loan faster but fail to meet these monthly payments, the bank will impose penalties for defaulting on your instalment payments. Selecting instalment amounts that align with your financial capacity is crucial to avoid such penalties.

For ICICI Bank. The penalties for late payment is 24% per annum, the repayment mode swap charges include ₹ 500/- per transaction plus applicable taxes, the loan cancellation charges are ₹ 3000+ taxes, and the EMI bounce charges are ₹ 500 and the applicable taxes. In addition, there is a non-maintenance of Mode of Payment or NNMP charges that sum up to ₹ 800/- and the applicable taxes or statutory levies.

Prepayment Charges

Most of the time, people think about what would happen if they had the funds to pay the loan early and could do it. If you have the funds to settle a Personal Loan early, you can repay or close the loan beforehand. However, banks typically discourage this practice since they lose out on anticipated interest income. Consequently, they impose a prepayment fee, typically ranging from 2% to 4% of the loan amount, which may vary depending on when you decide to clear the loan.

Goods and Services Tax (GST)

Banks extend various services to borrowers throughout the loan term, including loan processing and ongoing support. These services attract taxation, leading banks to levy goods and services tax (GST) on the customer based on the services used. HDFC Bank charges 18% GST on Personal Loans, and so does ICICI Bank.

Duplicate Statement Charges

If you require details regarding your payment schedule or lose track of repayment progress, the bank offers assistance by providing duplicate statements and other pertinent information. However, availing these services incurs a fee known as the duplicate statement fee. These statements not only aid in tracking outstanding loan amounts but also complement the paperwork associated with the loan. In addition, the Amortization Schedule charges for HDFC Bank Personal Loans are Rs.50/- per schedule of physical copy. However, customers can also download this from the website free of cost.

Conclusion

Believe it or not, Personal Loans are one of the best financial tools individuals can use to meet their expenses. However, getting a Personal Loan isn’t just about the interest charged on the loan amount there are a few other charges and personal loan fees that should be considered. Need financial advice concerning Personal Loan Charges, or have any queries about which financial institution is the best option for personal loans? You can always depend on Your Loan Advisors for financial assistance.