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Personal Loans serve various purposes, including Debt Consolidation, home improvements and managing unforeseen expenses. A Personal Loan is unsecured, meaning it doesn’t require the provision of collateral like a house or car. Instead, eligibility is determined based on your creditworthiness and ability to repay based on specific documents.
The documents are the basis for sanctioning a Personal Loan, and the loan terms, including the amount, Interest Rate, and Tenure or Repayment period, depending on your profile, credit score, and income.
To initiate a Personal Loan process, the complete list of documents as required by the lender must be submitted. Though the documents needed for a Personal Loan are standard across most Banks such as ICICI Bank and HDFC Bank they can vary and additional documents can be requested depending on the policy of the individual financer.
As a salaried employee, you must provide specific documents to support your application when Applying for a Personal Loan. These documents serve different purposes, and here’s an elaboration on the role of each document in the application process:
This is a mandatory document for identity verification and financial transactions.
A valid passport serves as a universally accepted proof of identity.
It serves as a government-issued photo identity proof.
This is an official document that verifies your identity for voting purposes.
The Aadhar Card is a unique identification document issued by the Indian government.
Identity Proof Check.
A photo identity proof gives a representation of the applicant’s persona. Checklist for documents includes the following:
This document can serve as both identity and residence proof.
A recent utility bill in your name and address confirms your residential address.
A valid passport can also be used as residence proof.
It is an official document indicating your residential address.
It can also be used as residence proof.
Rent Agreement
Between the landlord and the applicant is an acceptable residence proof.
A copy of the landlord’s electricity bill is required to prove ownership.
Residence Proof Requirements.
The salary slips provide current income details.
This shows your regular salary credits, confirming your income stability.
Form 16 is a vital income document for salaried individuals, which proves employment continuity and Tax deductions.
This verifies your current employment status.
This serves to demonstrate your work history.
Income Proof
For Salaried applicants, the salary slip is the mandatory requirement for a Personal Loan and should reflect the following:
Bank Statement
The customer’s Bank statement confirms the financial status and dealings when Applying for a Personal Loan. The Bank statement for the last three months must include the following:
A recent passport-sized photo is required for identification and documentation.
Having these documents in order and readily available can streamline the Personal Loan Application process, making it more efficient for salaried individuals. Specific requirements may vary among lenders and Banks such as Axis Bank, so you should check with your chosen financial institution for additional or unique document requirements.
The Significance of Aadhar Card for a Personal Loan
In India, the Aadhar Card has emerged as a fundamental document with many applications in various aspects of life. Its importance is not limited to identity verification for government schemes and subsidies but extends to the financial sector. One significant role of the Aadhar Card is its relevance in the Personal Loan Application Process.
The Aadhar Card, issued by the Unique Identification Authority of India (UIDAI), is a biometric and demographic identification document containing a unique 12-digit number for every Indian resident. This card has gained immense significance in the realm of Personal Loans, and here’s why:
Streamlined Verification
Aadhar Card simplifies the KYC (Know Your Customer) process for lenders. Its unique identification number allows for quick and accurate verification of an individual’s identity, reducing the chances of identity fraud in the Personal Loan Application Process. It also eliminates the need for multiple identity and address proofs, making the process more convenient for applicants and lenders.
Digital Authentication
Aadhar Card offers the advantage of e-KYC, enabling the verification process to be completed electronically. This digital authentication eliminates the need for physical documentation and significantly expedites the loan approval process. Borrowers can provide their Aadhar number and lenders can access the necessary information online.
Paperless Application
Many financial institutions now offer paperless loan applications where the Aadhar Card is a primary document. This reduces the environmental impact and makes the loan application process more efficient. Borrowers can submit their Aadhar number and other required information electronically, saving time and effort.
Wider Accessibility
The Aadhar Card is widely accessible, as nearly every Indian resident is eligible to obtain one. This inclusivity ensures that a broader population can access personal loans, even if they do not possess traditional identity documents. This is particularly beneficial for individuals in rural areas who may not have access to other forms of identification.
Secured Lending
Lenders often consider personal loans against Aadhar-verified Individuals lower risk, given the robust authentication and reduced chances of identity fraud. This may translate into more favourable loan terms, including lower interest rates and loan amounts.
Remote Application
The Aadhar Card’s role in Personal Loans is especially relevant in the context of the ongoing digital transformation. Borrowers can apply for loans from the comfort of their homes, regardless of their geographical location, as long as they have a valid Aadhar Card and an internet connection.
The Aadhar Card is pivotal in streamlining and simplifying the Personal Loan Application. Its digital authentication, paperless applications and secure identification methods have transformed how personal loans are processed in India.
Importance of PAN Card for Personal Loan
A Personal Account Number (PAN) Card, issued by the Income Tax Department of India, is a crucial document that holds immense significance in personal loans. This 10-character alphanumeric identifier, unique to each Indian taxpayer, plays a vital role in applying for and approving personal loans. Here’s why the PAN Card is so important in this context:
Identity Verification
The PAN Card serves as a primary document for identity verification during the Personal Loan Application process. Lenders rely on it to confirm the applicant’s identity, reducing the risk of identity fraud. It offers a standardised and reliable way to establish the borrower’s identity.
Signature Verification
The PAN Card contains the authenticated signature of the applicant thus, it is an essential document required for all financial transactions. The lender will match the signature on the PAN card with the Personal Loan Application form and self-attested documents to ensure that the signatures are genuine.
Financial Stability Assessment
Lenders assess loan applicants’ financial health and stability by examining their income and tax history. The PAN Card is closely linked to an individual’s tax records, including income details, tax payments, and financial transactions. This information provides a comprehensive view of the applicant’s financial situation, helping lenders make informed decisions about loan eligibility and terms.
Adequate Tax Compliance
The PAN Card is directly tied to the payment of income tax in India. To be eligible for a Personal Loan, applicants must demonstrate tax compliance. Lenders often require a PAN Card to ensure borrowers have filed their income tax returns and adhere to their tax obligations.
Limit Adherence
Personal Loans come with various regulatory limits, such as interest rate caps and loan amount restrictions. The PAN Card helps lenders verify whether the loan amount and terms align with these regulatory guidelines. This ensures that borrowers are provided loans within legal and permissible limits.
Reduced Tax Deduction at Source (TDS)
Regarding interest income from fixed deposits or other financial investments, the PAN Card must ensure that TDS (Tax Deduction at Source) is deducted at the correct rate. This ensures that borrowers do not face unexpected tax deductions that could impact their ability to meet loan repayment obligations.
Income Verification
Lenders often rely on the PAN Card to verify the applicant’s stated income against their tax returns. This cross-verification process helps ensure that the applicant’s income is accurately represented and can be used to determine the loan amount eligibility.
Legal Requirement
From a regulatory perspective, many lenders are legally obligated to collect and verify the PAN Card details of loan applicants. This is by Anti-Money Laundering (AML) and Know-Your-Customer (KYC) guidelines imposed by the Reserve Bank of India and other regulatory bodies.
The PAN Card is a cornerstone in India’s Personal Loan Application Process. It is a reliable means of identity verification, financial assessment, and tax compliance verification. The PAN Card ensures transparency and adherence to legal and economic standards for lenders and borrowers. Therefore, when Applying for a Personal Loan, having a valid PAN Card is essential and often mandatory to facilitate a smooth and successful loan application process.
Age
Generally, applicants must be between 23 and 60 years old to be eligible for a personal loan. However, the age range can vary between lenders.
Employment
Lenders typically require applicants to be salaried or self-employed individuals with a steady source of income and a minimum work experience of 2 years.
Income
There is usually a minimum income requirement, which varies among lenders. ICICI Bank entertains applicants with a monthly income of 35k and above. In contrast, YES Bank allows applicants with a salary of 25k to apply. The income threshold ensures that applicants can repay the loan amount.
Credit Score
A good credit score, or CIBIL Score of 750 and above, is typically required for better loan terms. Some lenders may offer loans to individuals with lower credit scores but higher interest rates.
Employment Stability
Lenders may consider the applicant’s employment history. Salaried individuals might need a minimum number of years in their current job, while self-employed individuals might need to demonstrate their business’s stability.
Residential Stability
Lenders may verify the applicant’s residential stability, which can involve living in the same place for a specified period or residing in a self-owned or family-owned residence.
Repayment Capacity
Lenders assess the applicant’s ability to repay the loan based on their income and existing financial obligations.
Credit History
A clean credit history is usually preferred without a record of defaults or late payments.
Loan Amount
The loan amount you’re eligible for depends on your income, credit score, and other factors. Higher income and better credit can lead to more significant loan amounts.
Existing Loans
Lenders consider the applicant’s existing loans, as having too much debt can affect your eligibility for additional loans.
KYC Documents
Applicants must provide proper identification and address proof documents as part of the KYC (Know Your Customer) process.
Employer Category
Some lenders have specific eligibility criteria based on the employer or company an applicant works for. Prominent Banks such as HDFC Bank Publishes a Company Category List of approved companies fulfilling the eligibility criteria for sourcing. Public sector employees and certain reputed private companies may have more favourable terms.
It’s worth mentioning that eligibility criteria may differ from one lender to another. Hence, verifying your chosen lender’s specific prerequisites and confirming your eligibility is recommended before initiating a Personal Loan application.
The applicant needs to complete the application form to apply for an Online Personal Loan or physically provide self-attested documents that are crucial in expediting the approval process. Any discrepancies in the documentation should be rectified to ensure a smooth application experience. Documents provided must be legible to avoid any miscommunication.
Additionally, it’s essential to remember that banks meticulously review the submitted documents. Therefore, having a complete and accurate set of documents can expedite your loan approval, while a single incorrect document could lead to the rejection of your loan application.
A Personal Loan can be valuable when you need quick funds to address expenses like paying off credit card debt, home renovations, or handling unexpected financial challenges. It grants you the financial flexibility necessary during such times. However, before you decide to Apply For a Personal Loan, it’s essential to understand how the Rate of Interest operates and the elements that can impact the interest rate you’ll be offered. This awareness will enable you to make informed decisions and secure the most advantageous loan terms possible.
The Interest Rates For Personal Loans are represented as a percentage of the loan amount (principal).
The rate provided is the Annual Percentage Rate (APR), which denotes the yearly rate applied to your loan. Most Personal Loans employ the monthly periodic rate, derived by dividing the APR by 12. When applied to the principal, this monthly rate determines the additional amount you must repay when borrowing the principal and repaying it gradually.
Several factors influence the interest rate you are offered when Applying For a Personal Loan. These factors include:
Whether your employer is a listed (publicly traded) or non-listed (privately held) company can influence your interest rate. Some lenders may offer favourable terms to individuals employed by listed companies, as they perceive them as having stable and verifiable income sources. Thus, the Company Category List For Personal Loans is considered while offering an interest rate.
Your credit score plays a pivotal role in determining the interest rate you’ll be granted. This score is a numerical portrayal of your creditworthiness, meticulously evaluated based on your credit history. A higher credit score typically results in a lower interest rate, indicating a lower risk of default to the lender.
Your history of repaying loans and credit plays a significant role, often encapsulated in your credit score. So, for a favorable interest rate, the Minimum CIBIL Score For a Personal Loan should be 720 and above.
Your monthly income is vital for loan approval and affects the interest rate. Your income is a crucial factor that lenders consider when assessing your loan repayment capability. A higher monthly income may lead to a lower interest rate since it demonstrates a more substantial capacity to meet loan payments.
Your employment status and stability are essential factors. Lenders prefer borrowers with stable employment histories, such as those with the same employer for an extended period. Consistent employment can enhance your creditworthiness and potentially result in a more favorable interest rate.
Lenders tend to generate greater profits from loans with longer terms as the debt has a longer duration to accumulate interest. Consequently, they often provide more attractive interest rates for loans with extended repayment periods. It’s worth noting that specific lenders may impose prepayment penalties on borrowers who settle their loans ahead of schedule.
The amount you intend to borrow can impact your interest rate. Larger loan amounts may be associated with lower interest rates, representing a high turnover and lower management costs to the lender.
The type of lender you choose can influence your interest rate. Banks, credit unions, online lenders, and peer-to-peer lending platforms may offer different interest rate structures. Some lenders specialize in specific borrower profiles and may offer more competitive rates to those who fit their criteria.
Your DTI ratio is the proportion of your monthly income for paying existing debts. A lower DTI ratio indicates a lower financial burden, which can result in a more favorable interest rate.
This ratio measures your Credit Card balances relative to your credit limits. A lower credit utilization ratio suggests responsible credit usage, which can positively impact your credit score and, in turn, your interest rate.
Your relationship with the lender can influence the interest rate on a personal loan. If you are a loyal customer with a strong banking history, your current bank may offer you a Personal Loan at the most competitive interest rate.
| Bank | Interest Rate | Processing fees |
| HDFC Bank Personal Loan | 10.5% p.a. – 21.00% p.a. | Up to 2.50% |
| ICICI Bank Personal Loan | 10.75% p.a. – 19.00% p.a. | Up to 2.50% |
| Yes Bank Personal Loan | 10.99% p.a. onwards – 20% p.a. | Up to 2% |
| Kotak Mahindra Bank | 10.99% and above | Up to 3% |
| Axis Bank Personal Loan | 10.49% p.a.- 22% p.a. | Upto 2% of the loan amount |
| IndusInd Bank | 10.25% p.a. – 27% p.a. | 3% onwards |
| HSBC Bank | 9.99% p.a. – 16.00% p.a. | Up to 2% |
| IDFC First Bank | 10.49% p.a. onwards | Up to 3.5% |
| State Bank of India | 11% p.a. – 14% p.a. | Up to 1.50% |
| Bank of India | 10.25% onwards | Up to 2% |
| IDBI Bank | 10.50% p.a. – 13.25% p.a. | Up to 1% |
Having a solid credit score is a sign of your creditworthiness. Banks and financial institutions tend to provide the most favorable Interest Rates on Personal Loans to applicants with high credit scores. Therefore, assessing your credit score before seeking a Personal Loan is advisable. If your credit score falls below 720, consider methods to enhance it, as a credit score above 750 increases your likelihood of obtaining a Personal Loan at a lower interest rate.
Failing to make a loan or credit card payment can hurt your credit score. Typically, loan providers consider your payment history when determining Personal Loan Interest Rates. Individuals who have consistently made timely payments on their previous EMIs and credit card bills are more likely to receive lower interest rates.
Financial institutions often introduce short-term promotions with lower interest rates, especially during festive periods. Furthermore, specialized schemes designed for female applicants or salaried individuals can make obtaining a Personal Loan at a reduced interest rate easier.
Before Applying For a Personal Loan with a specific lender, it’s essential to compare the interest rates offered by various lenders. A diligent comparison will empower you to secure a more favorable Interest-Rate Personal Loan.
If you hold an existing bank account with a financial institution or maintain a strong rapport with a loan provider, you can negotiate for a more favorable interest rate. An applicant with a previous relationship with a Bank is a preferred customer and can request a reduced interest rate once the loan is approved.
When you’re considering taking out a Personal Loan, it’s essential to understand how interest rates are calculated. The method used can significantly affect the overall cost of borrowing. Here we’ll delve into two standard methods for computing interest rates on loans the flat interest rate method and the reducing balance interest rate method.
The flat interest rate method, also known as the fixed-rate method, is one of the most straightforward ways to calculate interest on a Personal Loan. Under this method, the interest is calculated based on the entire loan amount (the principal) for the whole of the loan tenure. The interest amount is fixed and does not change throughout the loan term, regardless of how much the principal has been repaid.
The reducing balance interest rate method, also known as the reducing balance method or the declining balance method, is the most commonly used method for Personal Loans. In this approach, the interest is calculated only on the loan’s outstanding balance. As you make payments, the principal decreases, which leads to a reduction in the interest amount in subsequent payments.
The Interest Rate For The Personal Loan remains fixed for the entire tenure.
Lenders impose a one-time processing fee, which can potentially raise the overall cost of your loan. Examining and comparing the processing fees from various lenders is crucial, even if you’re offered a low interest rate.
Even if a bank or financial institution provides Personal Loans with attractive interest rates, confirming whether you meet the lender’s eligibility requirements is imperative. Ensure that your income falls within their defined limits and that you fulfill the specified age criteria.
It’s essential to be aware that some banks may impose a pre-closure fee if you decide to repay the outstanding loan balance before the scheduled loan repayment tenure concludes. Therefore, verifying whether the bank or financial institution you’re applying to enforces pre-closure charges is crucial.
When you’re seeking a Personal Loan for an emergency, it’s essential to consider the loan disbursal time. Many well-established banks and financial institutions are capable of disbursing the loan amount almost instantly.
For a smooth borrowing experience, choosing a lender with a reputation for outstanding customer service is essential. Before you proceed with your loan application, take the time to review the available customer support channels and assess the lender’s responsiveness to your inquiries.
Although the lender may impose a slightly higher interest rate, you could potentially reduce the overall loan cost if the processing fee, default charges, pre-payment fee, Loan Cancellation Charges, Check/EMI bounce charges, Instrument return charges, Stamp Duty Charges, Duplicate statement issuance charges, swap charges, Duplicate Amortization schedule issuance charges, and more are lower. Therefore, it’s essential to compare the various fees levied by the lender before proceeding with your Personal Loan Application.
Even if the bank or financial institution has set a high-interest rate, it’s worth negotiating for a lower one. Lenders often offer discounts to their existing customers and those who have cultivated a strong, positive relationship with them.
You can use the Personal Loan EMI Calculator to determine your loan’s Equated Monthly Installment (EMI). Input the loan amount, Repayment tenure, interest rate and processing fee to compute the monthly EMI amount.
Calculation Method for Personal Loan EMI
The EMI formula is expressed as EMI = [PxRX(1+R)^N]/[(1+R)^N-1], where P stands for the loan amount, R denotes the monthly interest rate, and N signifies the total count of monthly instalments.
Meet Mr. Mehta, a 33-year-old IT engineer seeking a Personal Loan to cover his wedding expenses. He plans to request a loan of Rs. 10 lakh and repay it over 36 months, and he envisions a reducing interest rate of 14%.
To compute the EMI For The Personal Loan, Mr Mehta must visit either a bank or NBFC’s website or opt for a third-party website equipped with an EMI Calculator Tool. Subsequently, he’ll be required to enter specific details: the loan amount (Rs. 10 lakh), the loan tenure (36 months), and the interest rate (14% p.a.).
Once these details are entered, the system will reveal the monthly EMI, which amounts to Rs.34,178. In Mr. Mehta’s situation, the total interest to be paid is Rs.2,30,395, and the total payable sum is Rs.12,30,395.
Also, the Interest Rate For a Personal Loan remains fixed for the entire tenure.
When quick cash is necessary, Personal Loans emerge as a viable choice. However, it’s imperative to gain insight into the dynamics of interest rates and the variables influencing the rate you’re eligible for. Elevating your credit score by exploring diverse lenders’ tactics to enhance your prospects of securing the most advantageous interest rate possible.
Personal Loans have become integral to modern financial planning, offering individuals a flexible means to meet various financial needs. When seeking a Personal Loan, borrowers often have to choose between obtaining it from government or private banks. Each option has advantages and disadvantages, making it crucial for borrowers to understand the differences. In this in-depth comparison, we will delve into Personal Loans from Government and Private Banks, helping you make an informed decision.
Private and Government (Public-Sector) banks often have different motivations and strategies for marketing loans. Here are some key reasons why private banks tend to be more aggressive in marketing loans compared to government banks.
Profit Orientation
Private Banks are profit-driven institutions whose primary goal is to maximise shareholder value. This profit motive leads them to seek lending opportunities and promote loan products to generate interest income, fees, and other revenue streams. On the other hand, government banks may have a broader mandate, which can include social and developmental goals and profitability.
Competition
Private banks face stiff competition from other private financial institutions and non-banking financial companies (NBFCs). They often invest heavily in marketing campaigns to attract borrowers to stay competitive and gain market share. Government banks, being government-owned, may not face the same level of competition and may have a more captive customer base.
Funding Sources
Private banks often rely on a mix of customer deposits and borrowings to fund their lending activities. They must actively attract deposits and seek borrowers to maintain a healthy balance between their assets (loans) and liabilities (deposits). Government Banks may have more stable and reliable funding sources, such as government deposits or access to government funding, which can reduce their urgency to market loans aggressively.
Risk Appetite
Private Banks often have a higher risk appetite compared to government banks. They may be more willing to take on riskier loans or explore niche markets to boost their portfolio. Government Banks, in contrast, may have a more conservative approach, focusing on lower-risk lending to ensure the safety of public funds.
Market Niche
Private Banks may target specific market niches or customer segments to differentiate themselves. They can tailor loan products and marketing strategies to cater to these niches’ unique needs and preferences. While serving a broader customer base, government banks may have a more standardised approach to lending.
Innovation and Technology
Private Banks are often more agile and innovative in adopting new technologies and data analytics. This allows them to develop and market loan products faster, target potential borrowers more effectively, and provide a better customer experience through digital channels. Government Banks may have more bureaucratic processes and slower technology adoption.
Ownership and Governance
Private Banks are owned by private shareholders and governed by profit-oriented boards of directors. These owners and governance structures can push for aggressive marketing strategies to maximise investment returns. In contrast, government banks are owned by the government and may have different priorities, such as financial inclusion and social development.
Regulatory Environment
The regulatory environment for private banks may differ from that of government banks. Private banks may face fewer regulatory constraints or have more flexibility in their marketing strategies, allowing them to be more aggressive in pursuing loans.
The profit-driven nature of private banks, competition in the private banking sector, funding considerations, risk appetite, and governance structures all contribute to private banks’ tendency to aggressively market loans compared to government banks. Government banks often operate with broader mandates and different priorities, which can result in more conservative lending and marketing approaches.
Also, Private Banks give Personal Loans to all salaried people, whereas PSU Banks only to account holders. The rates for government banks are also varied. Govt Banks are apprehensive about giving large amounts as they have a poor fraud control & recovery system. Private Banks have better services compared to government banks.
Government or public sector banks are financial institutions owned or controlled by the government. These banks are often considered the backbone of a country’s banking system and play a pivotal role in promoting financial inclusion and serving the public. Let’s explore the features of personal loans from government banks:
Government banks are known for offering Personal Loans at relatively lower interest rates than private banks. This is because government banks prioritise social objectives over profit maximisation.
Government banks typically have more relaxed Eligibility Criteria. They may be more willing to lend to individuals with lower credit scores or those with limited credit history.
While government banks may be perceived as bureaucratic, the documents required for personal loan applications are extensive. The application process is often lengthy and time-consuming.
Government banks offer more flexible repayment options, including longer loan tenures. This flexibility can help borrowers manage their monthly payments more comfortably.
Government banks are often viewed as more secure and trustworthy because of their government backing. Borrowers are more confident that their funds and personal information are well-protected.
Private banks, in contrast, are financial institutions owned by private entities or shareholders. Their primary objective is profit generation, and they typically cater to a more affluent clientele. Here’s what you need to know about personal loans from private banks:
Private banks often offer Personal Loans at higher interest rates than government banks. This is because profit is their primary motivation.
Private banks like HDFC Bank are renowned for their superior customer service. They frequently provide dedicated relationship managers who guide borrowers through loan application and repayment.
Private banks like ICICI Bank usually have stricter eligibility criteria. They may require a higher credit score and a more stable financial history.
Private banks may offer a more streamlined application process, and the documentation requirements are convenient and readily available with a comprehensive credit assessment.
Private banks like AXIS Bank Offer flexible repayment tenures from 12 to 72 months, which give the applicant the convenience of working out a suitable EMI.
Private Banks offer customers the option of processing a Personal loan as per the situation and requirement of a Fresh Personal Loan, Parallel Loan, Balance Transfer or Personal Loan Top-Up.
Now that you know the loan process and the factors you shouldn’t overlook, let’s consider the options. Which one is the suitable choice: a private or a public bank?
| Private Bank | Public Bank | |
| Convenience and Effort | If you value the convenience of a personalised agent coming to your location, then a private bank like YES Bank is ideal. They provide door-to-door services, ensuring you won’t need to run around to get your loan approved. | If you’re comfortable waiting in long queues for your turn, then a public bank is your option. Just be ready to handle all the necessary legwork yourself. |
| Processing Fee | As you enjoy a higher level of convenience the bank provides, you can expect to be charged a higher processing fee. | The processing fee at the public bank is significantly more affordable. |
| Approval Time | The approval time at private banks is swift, making them a more efficient choice when you require a loan urgently. | Their process is rigorous, and this is a significant factor contributing to the delay in loan approval. |
| Prepayment Restriction | Depending on the specific bank where you applied, you may need to wait for a minimum of 6 to 12 months before you can start repaying the loan. | You can repay a loan from a public sector bank at any time after borrowing it. |
| Digitization | Private banks are embracing digitalization to enhance their customer engagement. Through their mobile apps and websites, borrowers find tracking the status of their loan applications and repayments convenient. | Public banks lag behind their private counterparts in this aspect and still have progress to make in digital media. |
The choice between government and private banks for a Personal Loan hinges on your unique financial situation and preferences. Consider the following:
Depending on your financial situation and preferences, select the right lender for a Personal Loan, whether a Government Bank or a Private Bank. Make an informed choice by carefully assessing your needs, comparing loan terms and ensuring the selected option aligns with your long-term financial goals. Whether you opt for the reliability of government banks or the convenience of private banks, a well-informed decision will help you achieve your financial objectives while responsibly managing your debt.
Loans provide valuable assistance by enabling purchases, addressing short-term cash flow shortages or supporting the acquisition of a long-term asset like a home.
Banks, non-banking finance companies (NBFCs), and housing finance companies (HFC) are among the many financial institutions that provide an extensive array of loans tailored to cater to the diverse requirements of consumers. Customers can choose between Home and Personal Loans based on their needs.
A Home Loan, also called a mortgage, is a sum of money an individual borrows from a bank or another financial institution to purchase or build a house.
A Home Loan or a mortgage is issued at a floating interest rate per the directives of the RBI, and the borrower is required to make monthly instalment payments covering both the principal amount and the accrued interest over the loan’s term.
The duration of the repayment period can vary, influenced by several loan-related factors. Furthermore, a home loan is categorised as secured, meaning the borrower must provide collateral. In the case of Home Loans, lenders use the borrower’s home as collateral. Hence, when the borrower fails to repay the loan, the Lender can claim a lien on the property.
Among the most common types of home loans is financing for purchasing new or pre-owned properties, with leading Banks like HDFC Bank offering various options in this category.
Various institutions offer land purchase loans, like ICICI Bank, which provides flexibility for land acquisition. Buyers can choose to save and build a home when their resources permit or retain the land as a long-term asset or investment.
In this case, loan disbursement is designed for individuals interested in constructing a home from scratch instead of buying an existing one. This type of loan follows a distinct approval process considering the land cost and construction expenses.
Banks Like Axis Bank also offer loans for home expansion, allowing homeowners to alter their existing structures and add extra rooms, balconies, and other features.
A Personal Loan is a sum of money individuals can borrow from a bank or a lender to cover various expenses, such as travel, medical emergencies, home renovations, purchase of household items, and more.
Importantly, it’s an unsecured loan, meaning borrowers don’t need to provide any collateral or security to obtain it. Borrowers can repay the loan amount through monthly instalments, which comprise both the principal and the interest charged by the lender or bank. Also, one can avail of Online Personal Loans without much effort.
Personal Loans can help cover the substantial costs of weddings, from venue rentals and catering to attire, enabling couples to have their dream wedding without draining their savings.
Personal Loans can fund family celebrations like birthdays, anniversaries, or reunions, making it possible to host gatherings and create cherished memories for loved ones.
Medical emergencies can be unexpected and costly. A Personal Loan can provide the necessary funds to cover medical bills, surgeries, or treatments when health insurance falls short.
By combining multiple high-interest debts into a single, lower-interest personal loan payment.
For addressing unforeseen medical expenses, vehicle repairs, or other immediate financial requirements.
You are funding renovation projects or repairs to enhance your living space.
Paying for tuition, textbooks, or other educational costs
Financing dream vacations or travel experiences.
Home Loan: Home Loan applications involve extensive documentation. Borrowers must provide property-related documents (like title deeds and property valuation reports) and personal financial documents.
Personal Loan: Personal Loan applications generally require fewer documents than Home Loans. Borrowers need to provide proof of income, identification and residence proof.
Home Loan: Home loans are secured loans where the property being purchased or refinanced serves as collateral. The lender has a claim on the property until the loan is fully repaid.
Personal Loan: Personal Loans are typically unsecured, meaning no specific collateral is involved. Lenders grant these loans based on the borrower’s creditworthiness, income and ability to repay.
Home Loan: The amount issued as a Home Loan depends upon the property’s value and the applicant’s income. The amount you qualify for can vary among various lenders. The loan amount is sanctioned after the requirements of the Bank or lender are fulfilled.
Personal Loan: Banks and financial institutions offer an amount from ₹ 1 Lakh to ₹ 30 Lakhs. It is important to note that this amount differs according to the policy of the specific lender or Bank and the applicant’s ability to pay the EMI.
Home Loan: Home Loans usually involve longer repayment terms, ranging from 5 to 30 years.
Personal Loan: Personal Loans typically have shorter repayment terms, ranging from 1 to 5 years.
Home Loan: Because of the longer repayment duration associated with a Home Loan, the monthly EMI is less than that of a Personal Loan.
Personal Loan: In contrast, Personal Loans have a shorter repayment duration, resulting in higher EMIs.
Home Loan: Home Loan processing usually takes two to three weeks, but any missing documents or the builder’s qualifications can cause additional delays.
Personal Loan: The advent of e-banking has further accelerated the approval and disbursement of Personal Loans. In some cases, new clients can receive immediate loan approval and have the funds transferred within 24 hours.
Home Loan: Home Loans generally offer lower interest rates than unsecured loans due to the collateral involved. Home Loan interest rates in India range from 6.9% to 8.5%. The interest rate is calculated as a floating rate and can change as per the directive of the RBI.
Personal Loan: Due to their unsecured nature, Personal Loans typically feature significantly higher interest rates, from 9.6% to 22%, depending on the borrower’s unique profile. Lower credit scores correspond to higher Personal Loan interest rates, whereas higher credit scores translate to lower interest rates for borrowers.
Home Loan: Home Loans offer tax benefits that enable borrowers to reduce their income tax liability.
Personal Loan: Personal Loans generally do not offer tax benefits.
| Distinguishing Factors” | Home Loan | Personal Loan |
| Type of Loan | Secured | Unsecured |
| Interest rates | 6.65%-9.90 % | 8.95%-21.30% |
| Amount disbursed | Rs 15 lakhs – Rs 10 crores | 1 Lakh to Rs 60 Lakhs |
| Tenure | 5-35 years | 12 to 60 months |
| Processing time | 3-4 weeks | Instant |
| Benefits | Taxable | Not taxable* |
Personal Loans generally lack tax benefits since they are typically used for personal expenses or consumption. On the other hand, home loans may offer tax advantages as they are utilised to acquire property, considered a long-term asset.
The Income Tax Act of 1961 allows for tax deductions on the interest paid for a home loan under Section 24(b). Individuals can claim deductions of up to INR 2 Lakhs on the interest paid for a self-occupied property. In the case of a let-out property, there is no maximum limit for tax deductions on the interest paid.
Furthermore, suppose an individual has obtained a home loan to purchase or construct a house. In that case, they are eligible to claim a tax deduction of up to INR 1.5 Lakhs under Section 80C of the Income Tax Act, 1961, for the repayment of the principal amount of the loan.
Property Details
The property itself can affect eligibility. Lenders may have criteria regarding the property’s type, location, and condition. Hence, the property should be approved by the bank.
Age
Lenders like YES Bank often have age criteria, with borrowers typically needing to be at least 23 years old and not exceeding a certain age (usually around 65 to 70) at the time of loan maturity.
Income
Your income is a critical factor in determining eligibility. Lenders assess your ability to repay the loan a stable and sufficient income is usually required. Both your gross and net income may be considered.
Employment History
Lenders typically favour applicants who possess a consistent work record. Having a constant job for a certain period may be a requirement. However, the customer company is not essential for home loans.
Credit Score
A good credit score is essential for Home Loan approval. Lenders use your credit history to assess your creditworthiness, and a higher credit score often leads to better loan terms. So, you should have a credit score of at least 700 points.
Down Payment
You’ll need to make a down payment, a percentage of the property’s purchase price. The amount required can vary but is typically around 10-20% of the property’s value.
Debt-to-Income Ratio
Lenders calculate your debt-to-income ratio (DTI) to ensure you can manage your existing debts along with the new home loan. A lower DTI is usually more favourable.
Age
For a Personal Loan, a minimum age requirement of 21 years applies to most Banks and lending institutions. The loan repayment must be completed before the applicant is 58 or until retirement.
Income
The monthly income criteria are essential for Personal Loan Eligibility customers must have a minimum monthly income of 30k. Lenders assess your repayability, so a stable income is still necessary.
Credit Score
A good credit score is vital for Personal Loans as well. However, some lenders may offer personal loans to individuals with lower credit scores, although the interest rates may be higher.
Employment
Borrowers with a steady employment history are commonly the preferred choice for lenders. Having a consistent job or a regular source of income is typically required. The company must feature in the approved sourcing list of the lender.
Documentation
You’ll need to provide various documents, including identity proof, address proof, income statements, and bank statements, per the lender’s requirements.
It’s important to note that eligibility criteria can vary between lenders for both Home Loans and Personal Loans. Therefore, it’s advisable to check with specific lenders or financial institutions to understand their precise Home Loan and Personal Loan Eligibility Criteria when applying for either type of loan.
Though the underlying concepts are the same, Home and Personal Loans serve distinct purposes. Therefore, it is crucial to comprehend their unique features before opting for either.
This understanding can significantly aid in financial planning and credit needs to be taken with care, helping to build a lifestyle and a future.
During financial crises or emergencies, Personal Loans prove to be a valuable resource. They require minimal documentation and usually no collateral. Given these advantages, many individuals prioritize Personal Loans over other borrowing options. Moreover, numerous banks and NBFCs are aggressively promoting Instant Personal Loans, making the approval process smoother than ever. Nevertheless, while obtaining a personal loan might seem promising, hidden Personal Loan Eligibility Criteria and undisclosed terms and conditions can lead to application delays or even rejections.
Facing a Personal Loan Rejection can be disheartening, but it’s important to remember that it’s not the end of the road. Many factors can contribute to a loan application being denied, including credit history, income, and debt-to-income ratio. Instead of dwelling on the disappointment, taking constructive steps to understand the reasons behind the rejection and improve your financial standing is crucial. This blog will guide you through essential steps after a Personal Loan Rejection.
The first step is to understand why your loan application was rejected. Lenders are typically required to provide a reason for the rejection, often in writing or through electronic communication, due to various reasons Instant Personal Loans can get rejected. Let’s understand what can be the reason for the rejection of your personal loan application.
Once you identify the reason, you can start working on addressing the underlying issue.
Besides these factors that you can manage, other reasons for rejection might depend solely on the lending company’s rules. This could involve no branch near you, your employer not being on the lender’s list, or not meeting the lender’s minimum salary criteria. In such a scenario, it is advisable to check the eligibility criteria of other lenders and apply where your eligibility and loan requirements match the best. ”
Your credit report plays a significant role in loan approval decisions. Obtain a free copy of your credit report from major credit bureaus to review it for errors or inaccuracies. If you find any discrepancies, such as incorrect payment information or accounts that don’t belong to you, dispute them immediately. A clean and accurate credit report is essential for future Personal Loan Apply.
Your creditworthiness is reflected through a credit score. Banks retrieve an applicant’s credit score and history from CIBIL or (Credit Bureau of India Ltd) credit score higher than 700 is generally deemed favorable. Furthermore, exceeding 750 can offer the added benefit of swifter Approval For a Personal Loan. This assessment is crucial for lenders evaluating your profile, particularly in the case of unsecured loans like personal loans, which lack collateral requirements.
Thus, your income and credit repayment history take centre stage during the loan approval. So, having a low credit score suggests that you’re more likely to have difficulty paying back loans in the future, which can be risky for lenders.
If a low credit score was the reason for your loan rejection, focus on improving it. Start by paying your bills on time, reducing credit card balances, and refraining from opening new lines of credit. Over time, these responsible financial habits can help boost your credit score (CIBIL Score). Keep in mind that developing a solid credit history requires patience and consistency.
Lenders evaluate your ability to pay off the instalments on time. Changing jobs or being without employment frequently gives an impression of unstable financial conditions and financial constraints, due to which you may not be able to pay loan instalments (EMI)on time.
This can lead to rejection of your personal loan application. Thus, if your loan application is rejected due to your employment status, consider waiting and continuing to work with your current employer for at least six months before reapplying.
The Employer must also be included in the approved Company Category List of the Bank. Your application will not be processed if you are employed with a company non-listed with the Lender.
If your debt-to-income ratio is too high, reduce your debts. Create a realistic budget and prioritize paying off high-interest debts first. Lowering your debt-to-income ratio shows lenders that you can better manage new loan payments.
Maintain a sufficient balance in your account to pay the required EMI for the Loan amount. If the statement shows a negative balance, your request can be denied due to a low average Bank balance.
Apply for the loan amount as per your Personal Loan Eligibility. Insufficient income might have been the reason for rejection. Consider increasing your income by pursuing additional part-time work, freelancing, or taking on side gigs. A higher income improves your loan eligibility and enhances your overall financial stability.
Don’t lose hope if traditional banks or lenders reject your loan application. Explore alternative lending options such as online lenders or credit unions. These institutions might have different approval criteria and flexible lending standards.
Having a co-signer with a strong credit history or offering collateral such as Personal Loan Against Property can improve your chances of loan approval. A co-signer essentially shares the responsibility for the loan, while collateral provides the lender with an asset to recover in case of default. Keep in mind that these options come with their own risks and responsibilities.
After taking the necessary steps to improve your creditworthiness, give yourself time before reapplying for a Personal Loan. Rushing into another application can lead to another rejection, further damaging your credit profile. Use this waiting period to focus on building a more robust financial foundation by adequately managing your Current Obligations.
Submitting multiple loan applications quickly can negatively impact your credit score and make you appear desperate for credit. Each application generates a hard inquiry on your credit report, which can lower your CIBIL Score. Instead, work on enhancing your financial profile before applying again so that your loan application and reasonable Personal Loan Interest Rates are accepted.
If you’re uncertain about the steps to take or need personalized guidance, consider consulting a financial advisor. Yourloanadvisors.com can provide insights into your situation and help you create a tailored plan to improve your financial health.
A Personal Loan Rejection is not a permanent roadblock it’s an opportunity to reassess your financial situation and take positive steps toward improvement. By understanding the reasons behind the refusal and addressing them systematically, you can increase your chances of securing a loan. Remember, financial well-being is a journey that requires patience, determination, and a commitment to responsible financial habits.
In finance, Personal Loans have become an invaluable tool for individuals to bridge financial gaps, manage unexpected medical expenses, and finance a dream vacation or home renovation. The criteria for obtaining an Unsecured Personal Loan varies based on the eligibility criteria. One of these factors is whether the applicant’s employer is a listed or Non-Listed Company. In this blog post, we delve into the Personal Loan Criteria for non-listed companies, shedding light on the essentials that individuals need to know.
Listing involves trading a company’s shares on the Stock Exchange, enabling the public to purchase and sell the company’s stocks. Conversely, non-listed enterprises remain privately owned by their proprietors and are not featured on the stock exchange. Non-listed businesses follow directives established by the Central Government, while listed corporations operate under the guidelines outlined by the Securities and Exchange Board of India (SEBI).
When applying for a personal loan, a vital determinant of an individual’s eligibility and loan terms is their employment type. Individuals employed in non-listed companies encounter distinct considerations owing to the unique characteristics of such enterprises. Lenders often assess personal loan applications from employees of non-listed companies differently from those of listed companies. This distinction arises from the perceived differences in financial stability, transparency, and risk associated with these two types of employers.
The HDFC Bank Company category list is the reference point to check if an employer is included in the eligible list for providing a Personal Loan. Most Banks require employment with a company listed in the Company Category List to issue a Personal Loan; some leading Banks make an exception. The ICICI Bank, IDFC Bank and Leading NBFC are willing to fund employees of open market companies. The Bank will impose stricter Personal loan eligibility check guidelines to approve funding.
Income is a fundamental criterion for any Personal Loan Application, regardless of the employer’s listing status. For non-listed company employees, demonstrating a stable and sufficient income becomes crucial. Lenders want to ensure that borrowers have a reliable source of funds to meet their loan obligations. Typically, lenders require applicants to provide recent pay stubs, income tax returns, or other relevant financial documentation to verify their income.
Given the relatively limited access to financial information about non-listed companies, lenders may assess the viability and stability of the borrower’s employer. They might consider factors such as the company’s industry, financial history (if available), and reputation. This assessment helps lenders gauge the risk associated with providing a loan to an individual employed by a non-listed company.
The length of time a non-listed company has employed an individual can influence their loan application’s success. Longer employment tenure often indicates a certain level of job security and commitment to the employer, which can positively impact the borrower’s eligibility.
In some cases, lenders may request collateral or a guarantor as a form of security, especially when dealing with borrowers from non-listed companies. Collateral could be in the form of valuable assets, such as property or investments, that the borrower pledges to the lender in case of loan default. On the other hand, Guarantors agree to repay the loan if the borrower cannot do so.
While credit history is a standard factor in Personal Loan evaluations, it can carry more weight for employees of non-listed companies. Lenders might consider a strong credit history as a sign of the borrower’s responsible financial behaviour and ability to manage debt effectively.
Loan amounts and Personal Loan Interest Rates for employees of non-listed companies could be influenced by the perceived risk associated with the employer. Those working for non-listed companies might face slightly higher interest rates or lower loan amounts than their counterparts in listed companies. This is because lenders often factor in the potential challenges in assessing the financial stability of non-listed companies.
While the Personal Loan Criteria for non-listed company employees might appear more stringent, there are several steps individuals can take to enhance their eligibility:
A solid credit history can be a significant advantage. Pay bills on time, manage existing debts responsibly and avoid excessive credit utilisation to keep your credit score in good shape.
To compensate for the lack of publicly available financial information about non-listed companies, be prepared to provide comprehensive documentation showcasing your income, financial stability and employment history.
Offering collateral or having a guarantor with a solid financial standing can alleviate lender concerns and improve your chances of loan approval.
Opt for a reputable lender with a history of catering to individuals from non-listed companies. Research their lending criteria and terms to find a good fit for your needs.
A long-standing relationship with a bank or financial institution can sometimes work in your favour. Banks familiar with your economic behaviour might be more willing to extend a personal loan.
Obtaining a Personal Loan while working for a non-listed company might present additional challenges due to the inherent differences in transparency and perceived risk. However, individuals can navigate the process by understanding lenders’ criteria and taking proactive steps to enhance their eligibility. Remember, each lender might have its unique evaluation process, so thorough research and preparation are vital to securing the Personal Loan you need.
During financial emergencies, Personal Loans prove extremely useful. Nowadays, lenders ensure swift Loan Application and approval procedures. Typically, loans are disbursed within a matter of days. While the concept of a Personal Loan is appealing, meeting essential eligibility criteria is imperative for swift approval. Among these, age is a crucial parameter evaluated by all lenders. Let’s read further to understand the impact of your age on loan eligibility.
The relationship between an applicant’s age and a Personal Loan is a complex interplay of various factors that lenders consider when evaluating loan applications. While age itself is not the sole determinant, it does influence how lenders assess an individual’s creditworthiness and ability to repay the loan. Let’s explore the critical aspects of this relationship:
Young Applicants: Younger individuals may have a limited credit history or no credit history at all. This can impact their credit score, challenging qualifying for a personal loan. Lenders use credit history and scores as indicators of an applicant’s financial responsibility. Younger applicants might need to build their credit profile before obtaining favourable loan terms.
Middle-Aged Applicants: Individuals in their middle years generally have a good credit history, which lenders can analyse to assess their creditworthiness. A solid credit history and a good credit score will likely result in better loan offers and more favourable terms.
Senior-Aged Applicants: A senior-age applicant can qualify for a Personal Loan based on their credit history and credit score. While age is a factor that lenders consider, it’s not the sole determinant of loan eligibility. Lenders primarily focus on an applicant’s ability to repay the loan, and credit history and credit score play a crucial role in demonstrating this ability. Credit history reflects an individual’s borrowing and repayment behaviour over time. A senior with a solid credit history showcases their financial responsibility and indicates that they have managed credit obligations well.
Young Applicants: Younger borrowers starting their careers might have a lower income or a less stable employment history. Lenders may perceive this as a higher risk, as it could affect the ability to make consistent loan payments.
Middle-Aged Applicants: Applicants in their middle years often have established careers and more stable income sources. This stability makes them more attractive to lenders, who are more likely to approve their loan applications and offer competitive interest rates.
Senior-Aged Applicants: The income of a senior applicant is a crucial factor that lenders examine. Income provides evidence of the borrower’s ability to make regular loan payments, a key indicator of repayment capacity.
Young Applicants: Obtaining loan approval as a young applicant might be more challenging due to the factors mentioned earlier. If approved, they might face higher interest rates and shorter repayment terms, which can lead to higher monthly payments.
Middle-Aged Applicants: Middle-aged individuals are generally better positioned to secure loan approval and more favourable terms. They might have access to more extended repayment periods and lower interest rates, making the loan more manageable.
Senior-Aged Applicants: Personal Loan Approval and terms for senior-aged applicants are influenced by income, financial stability, credit history, and other factors. By presenting a robust financial profile, carefully assessing loan terms, and choosing a lender specialising in serving seniors, you can secure a Personal Loan that aligns with your financial goals and needs.
Young Applicants: According to the lender’s criteria, a younger applicant may require a stable or substantial income. Moreover, they may need a more extended credit history or work experience. Consequently, younger applicants may be presented with a higher offer for the interest rate. In such cases, first go for a Personal Loan Eligibility Check and then apply.
Middle-Aged Applicants: Lenders view extended credit history and significant years of job tenure as signs of solid repayment ability. Thus, lenders commonly provide middle-aged applicants with Low-Interest Personal Loans. Their steady income stream and extensive professional background are the main reasons.
Senior-Aged Applicants: The interest rate for a Personal Loan for senior-aged applicants can vary widely depending on several factors. These factors include the lender’s policies, the applicant’s credit history and score, income, financial stability, loan amount, and loan duration. Interest rates are a crucial component of loan terms. Seniors with a strong credit history and financial stability can negotiate for more favourable interest rates. Lower interest rates result in lower overall loan costs.
Young Applicants: Lenders may view younger applicants as riskier due to their limited financial experience and potential life changes that could impact their ability to repay the loan.
Middle-Aged Applicants: Lenders typically see Middle-aged borrowers as less risky, given their established financial positions and a lower likelihood of significant life changes.
Senior-Aged Applicants: Risk assessment for senior-aged applicants involves a holistic evaluation of factors specific to their financial situation. Lenders aim to ensure that loans are granted responsibly and that borrowers can repay. Senior applicants can enhance their chances of securing a personal loan with favourable terms and conditions by showcasing financial stability, responsible credit management, and a clear repayment plan.
Senior-Aged Applicants: Lenders approach Personal Loan offerings to senior-aged applicants with a holistic understanding of retirement considerations. They aim to ensure the loan aligns with the borrower’s financial capacity and retirement goals. Responsible lenders consider the borrower’s income, expenses, financial stability, and stipulated retirement age according to the employer. A senior applicant can repay a Personal Loan until retirement age.
For example, suppose the retirement age per the company policy is 58 years, and the applicant’s age at the time of processing is 56. In that case, the applicant is allotted a two-year repayment tenure.
Banks can ask for proof of retirement age and an extension if allowed by the Company. HDFC Bank also considers the pension plan if the applicant works for a government entity and is entitled to the same.
One of the fundamental eligibility factors for a Personal Loan is your age. Lenders typically set a minimum and maximum age range within which applicants must fall. This range ensures that borrowers are in a financially stable phase of their lives and have the means to repay the loan. In many cases, the age requirement falls between 24 and 57 years. This is because individuals within this age range are more likely to have a stable source of income and sufficient work experience.
Lenders value stability and reliability when evaluating loan applicants. As a result, work experience plays a crucial role in determining eligibility. Most lenders require applicants to have at least one year of work experience, demonstrating their ability to hold a job and maintain a steady income. Additionally, having at least three months of stable employment at your current company is often a prerequisite.
Full-time employment is generally mandatory, as it assures a consistent income stream to repay the loan.
Your income is a direct indicator of your repayment capability. Lenders assess your monthly net income to ensure that you’ll be able to meet your loan obligations without straining your finances. A minimum income threshold is typically set to qualify for a personal loan. For instance, a common requirement is a monthly net income of at least Rs. 30,000.
These are some of the Personal Loan Eligibility criteria for a Personal Loan.
Consider why you want a Personal Loan and then calculate your needed amount. For instance, you might require a loan to support your wedding expenses or to renovate your home. Your loan amount could be as low as Rs. 1 Lakh or as high as Rs. 10 Lakh. So, deciding on a specific sum will keep you from borrowing more than you require.
Before applying for a loan, look at your finances to see what you can afford. Check your earnings and expenditures to grasp your budget – that’s the money you earn and spend each month.
After determining your required amount, the next step is to confirm your eligibility. You can explore banks like ICICI Bank Personal Loans, credit unions, and online lenders to assess your eligibility and the potential Personal Loan amount. Also, with the help of a Personal Loan EMI Calculator, you can calculate the monthly EMI you would have to pay.
Some lenders offer prequalification, which gives you an estimate of the loan amount and interest rate you might qualify for without affecting your credit score. This step helps you understand your potential options and initiate a Personal Loan Application.
When approaching a Personal Loan, banks and financial institutions offer several methods. You can apply through Net Banking, complete an online application on their website, use an ATM, or visit a branch directly.
Numerous lenders, such as Personal Loan HDFC Bank, provide online application options, making the process fast and easy. Specific lenders, mainly traditional banks, might ask you to apply personally. In either case, the application will ask for personal and financial details such as your name, home address, and employment information. You might also need to provide extra documents like your:
Once you’ve submitted your application, be patient with the result, which could come in a few minutes or take a few days. The decision will likely arrive faster if your application is flawless and without errors.
While an applicant’s age is just one of many factors that lenders consider, it notably influences the Personal Loan Process. Younger applicants may face challenges related to credit history and income, while middle-aged applicants often benefit from more stable financial profiles. Regardless of age, responsible borrowing, thorough financial planning, and a clear understanding of the loan’s impact on one’s overall financial picture are essential for a successful loan experience.
The Equated Monthly Installement or EMI, as it is popularly known, is the fixed amount repaid monthly for credit issued by a Bank or NBFC. With an EMI, you can achieve your dreams by applying for a loan and paying back the amount in affordable instalments every month.
When you Apply for a Personal Loan, you won’t need to provide any security or collateral to the Bank. Thus, the Bank sanctions the Loan amount accordingly to ensure the applicant can repay the EMI comfortably. The customer can apply for the amount needed, but the Bank decides the eligibility for the Loan and the EMI to pay.
To calculate the Personal Loan EMI, the Lender calculates the FOIR by considering the Fixed Obligations of the applicant, which include the monthly household expenses, including rent paid.
The FOIR applied varies from 30% to 70%, a ratio of the monthly salary, excluding the statutory deductions, is included in the monthly fixed obligations, and the balance is the disposable income. A customer can use this surplus for lifestyle expenses and repay instalments for credit taken.
The FOIR applied varies with the customer’s profile: several factors influence the issuance of the Loan amount and the applicable EMI. If the credit usage is in excess and exceeds the FOIR, the Bank may not issue the required Loan amount.
Though individual Banks have their parameters and policies, the primary ones that affect Personal Loan Eligibility and the EMI include the following:
Income: A salaried individual can plan and budget expenses with a fixed monthly payment. After setting aside the necessary funds for rent, food, school fees, fuel, and other essential costs, allocate the remaining amount towards travel, entertainment, or the EMI for credit.
Individuals who earn a higher salary have more money left over after covering their household expenses. As a result, they can allocate a more significant portion of their income towards paying off an EMI.
Therefore, higher-income applicants with a salary above ₹75k are given higher loan amounts as a Personal Loan and are eligible for a higher ratio of the wage and a lower FOIR to pay as an EMI. Applicants with an of ₹ 50k and below are applied a FOIR of 50% or less.
Company Category: All job seekers aim to work with a well-reputed and profitable company that assures employees a steady income and a promising future.
Banks, too, update a list comprising of the Economic Times’ Top listed companies, emerging corporates, Government entities and prominent PSU organisations. The Bank grades the company according to the turnover, profit and prospects.
Banks will allow an employee of a company listed as a Category A concern to pay a higher share of the salary as an EMI than a Category C company employee.
For example, Mr Kumar, working with a Category A-listed firm, can pay 40% of his salary as instalments for credit. In contrast, Mr Sharma, employed with Category C, will get a loan with an EMI payable up to 20% of the income.
Tenure: A Personal Loan is a short-term loan repaid in equated monthly instalments, with a minimum of 12 months and a maximum term allowed by the Bank for 72 months. The Bank sanctions the tenure according to the applicant’s requirements, income, and payable EMI.
If a customer can afford a higher EMI for the needed Loan, ask for a shorter repayment period, while a customer who needs an excess amount is issued a longer tenure by the Bank.
In both scenarios, the essential factor is that the customer must be comfortable paying the EMI.
Credit Usage: A fresh loan amount is forwarded to the applicant as per the eligibility to pay the additional EMI. The Bank considers all existing EMI the customer pays when applying for the FOIR and approving the Loan, including 5% of the credit card bill outstanding.
The credit usage ratio should be at most 30% of the income. The Lender can deny the Loan if the EMI paid exceeds the permitted credit utilisation.
Customer Profile: Lenders are keen to extend credit to customers with stable incomes and backgrounds. An ideal applicant has a good vintage of employment, a self-owned or family residence and a successful credit record.
A CIBIL Score of 720 points and above and a history of timely repayment of EMI are what most Banks look for. Such applicants are eligible to pay a higher ratio of their income as an EMI, while for first-time loan seekers with no credit history, the Bank gives conservative loan amounts.
Using our EMI Calculator, a customer can easily calculate the EMI to pay for a Personal Loan. The EMI will change depending on the above inputs; take your pick and arrive at a suitable EMI.
However, it would be best to prioritise making timely repayments of the Loan EMI. The Lender will want to ensure that you have the financial capability to pay back the Loan amount.
Can I include the income of my family members to increase my eligibility and pay a higher EMI?
Members of a family living together share expenses and support each other. Regarding Personal Loans HDFC Bank allows family members living in the same premises to become financial co-applicants.
The co-applicant can be a blood relative or a spouse earning a regular income. The employment terms must be as per the bank’s criteria. With a boost in revenue, the eligibility will increase, and the applicant can receive the loan amount desired. The EMI for the Loan is deducted from the salary account of the primary applicant.
When looking for a Personal Loan, you will try to determine the repayment schedule and how much you can pay back monthly as an EMI. However, paying the EMI as repayment is not the client’s prerogative. Banks adhere to an individual policy and decide how much Personal Loan to issue and the EMI the applicant can repay.
In today’s fast-paced world, Personal Loans have become an essential financial tool to bridge the gap between aspirations and reality. Whether you’re planning a dream vacation or funding a wedding, personal loans offer a flexible solution. As the gateway to these funds, a unique loan application form is pivotal in the borrowing process. In this blog, we will delve into the significant features of a Personal Loan Application Form, shedding light on why each element matters.
It’s important to note that while Personal Loans offer flexibility and convenience, they come with obligations. Borrowers must repay the loan according to the agreed-upon terms, and failure to do so can result in late fees, penalties, and potential damage to their credit score.
The application form serves as a formal request from the individual (the applicant) to the bank for a Personal Loan. It is a crucial step in initiating the lending process and signals the borrower’s intent to seek financial assistance. By filling out the application form, the borrower formally communicates their need for funds and provides the bank with the necessary information to evaluate their eligibility and creditworthiness.
The application form marks the beginning of the Personal Loan Application Process. It is the initial point of interaction between the borrower and the bank. Completing the condition triggers a series of actions within the bank’s lending department, including verification, assessment, and decision-making processes. The accuracy and completeness of the information provided in the form influence the efficiency and effectiveness of the subsequent steps.
Have their formats, though the basic details remain the same. Applicants can complete the form to Apply For An Instant Personal Loan Online. Or else Apply for a Personal Loan by filling in the hard copy.
The application form acts as an introduction of the borrower to the bank. It provides essential personal details, such as the borrower’s name, contact information, and identification details. This introduction is necessary for establishing a formal relationship between the borrower and the bank. Additionally, it helps the bank record-keeping and ensures that all communication and documentation are appropriately attributed to the correct individual.
The application form collects crucial information about the borrower’s employment history, income sources and financial obligations. This information provides insights into the borrower’s financial profile, enabling the bank to understand its financial stability, income-generating sources, and existing financial commitments. This understanding is vital for assessing the borrower’s ability to repay the loan and make informed lending decisions.
A Personal Loan is unsecured as it does not require collateral, making the borrower’s financial and creditworthiness particularly significant. Since the bank does not have a physical asset to hold as security, they rely heavily on the borrower’s credit history, income stability, and financial obligations to gauge their risk level. The details in the application form become critical in determining the borrower’s repayment capacity and the terms under which the loan can be offered.
The foundation of any Personal Loan Application lies in the private information section. Here, applicants provide crucial details such as their full name, contact information, date of birth, and social security number. This section serves as the first point of contact between the borrower and the lender. Accuracy in this section is essential, as any discrepancies could lead to processing delays or even application rejection. This information is necessary for identity verification and ensures the lender can communicate with the borrower throughout the application process.
Lenders must assess repayment capacity, making the employment and income details section crucial. Applicants are typically required to provide information about their current employer, job title, duration of employment, and monthly income. This information allows lenders to gauge the stability of the borrower’s income source and assess their ability to meet monthly loan repayments. A steady employment history and reliable income stream can positively influence the loan approval decision. The customer will be given exclusive benefits if the employer is included in the Approved Company Category List.
Lenders are keen on understanding a borrower’s existing financial commitments before extending a loan. The financial obligations section requires applicants to disclose ongoing loans, credit card balances, and monthly expenses. This information calculates the borrower’s debt-to-income ratio (DTI), a crucial metric that compares their monthly debt payments to their income. A lower DTI indicates a healthier financial position and a higher likelihood of loan approval. Being transparent about existing financial obligations demonstrates responsible financial management to the lender.
Here, applicants specify the desired loan amount and the purpose for which the funds will be used. While lenders may not necessarily base their decision on the loan’s purpose, understanding the reason behind borrowing can provide insights into your financial management habits and plans.
A borrower’s credit history and credit score are instrumental in determining their creditworthiness. Lenders use this information to assess the borrower’s record of repaying debts and managing credit. The credit history and score section outlines past credit accounts, payment history, and any negative remarks. A higher Credit Score can lead to better loan terms, including lower interest rates and borrowing limits. It’s crucial to be transparent about past credit issues and maintain a good credit score to secure favourable loan terms.
Banks provide varied Personal Loans as per the customer’s requirement. The applicant can choose according to their need when filling in the application form.
Personal Loan Balance Transfer
Exclusive application forms are provided for premier loans such as the HDFC Golden Edge Personal Loan and the DIVA Personal Loan for female candidates.
Sometimes, Personal Loans may require collateral to secure the borrowed funds. Collateral serves as a form of security for the lender if the borrower defaults. If the collateral is involved, applicants must provide detailed information about the asset used as security, including its value and ownership details. Collateral can influence both the loan approval decision and the interest rates offered. This section is particularly significant for borrowers seeking larger loans or those with less established credit histories.
Understanding the terms and conditions of the loan is essential before signing on the dotted line. This section outlines interest rates, repayment schedules, fees, and penalties. Thoroughly reviewing and comprehending these terms empowers borrowers to make informed decisions and avoid surprises later on.
By signing the application form, you acknowledge that the information provided is accurate to the best of your knowledge. Lenders rely on these declarations to assess your credibility and ensure legal compliance. Falsifying information can lead to severe consequences, including loan rejection or even legal action.
A Personal Loan Application Form is more than just a piece of paper; it’s your gateway to realising your financial aspirations. Each section serves a distinct purpose, contributing to the lender’s assessment of your creditworthiness and repayment capacity. Providing accurate and complete information in your application form is crucial to expedite the loan approval process and secure favourable terms. Remember, an informed borrower is an empowered borrower – take the time to understand the significance of each feature in the Personal Loan Application Form.
Personal and Credit Card Loans fall under unsecured loans, yet they differ. Credit Card Loans involve short-term obligations, whereas Personal Loans cater better to those seeking extended repayment periods. Thus, if you need that extra funding, you can use a Credit Card Loan or a Personal Loan. This blog provides valuable insights to help make a decision.
More and more people are acquiring Personal Loans to meet their immediate financial needs. One of the most relevant reasons for the popularity of Personal Loans is their status as unsecured loans, eliminating the need for collateral and quick processing time.
Banks and financial institutions extend these loans with eligibility determined by work tenure, repayment capability, income level, professional status, and credit record.
A Credit Card Loan is a pre-sanctioned loan granted to you based on your Credit Card utilisation, repayment record, and history. Due to the loan’s pre-approval, disbursement is a matter of minutes. Customers with pre-approved status can secure the loan in just 1 second.
The applicant repays the loan through manageable monthly instalments (EMI) throughout the duration you’ve opted for. You can opt for a tenure spanning up to 36 months. Your Credit Card Statement will include the EMIs, to pay on the due date, along with any other purchases you’ve made. Also, the EMI Amount will lead to a reduction in your credit limit.
| Parameters | Credit Card Loan | Personal Loan |
| Eligibility | Eligibility is limited to only credit card holders. | Customers, and even those who are not customers of the bank, have the option to apply. |
| Procedure for Borrowing | You can either accept a pre-approved offer extended by the bank or proceed by applying for the same. | The customer has to submit the necessary documentation while applying to a bank or financial institution. |
| Disbursement | The funds can be directly credited to your savings/current account (if held with the same bank) or disbursed as a cheque. | The Bank transfers the loan amount to the customer’s savings/current account as a lump sum through ECS or via the banker’s cheque. |
| Approval Time | In 24 hours | Within 3-5 working days |
| Repayment | Monthly credit card statements will include EMIs for the specified duration. | In the form of EMIs paid to the bank over a designated period. |
| Tenure | Tenure ranges between 6 to 36 months. | For a tenure between 1 and 5 years. |
| Borrowing Limit | Within the limit pre-approved by the provider. | The bank will assess this based on income proof. |
| Interest Rates | Comparable to personal loan bank to bank and customer to customer. | Applicable from 10.50%, determined by the customer’s income and credit history. |
| Documents | No extra paperwork is required. | You need to provide proof of identity, address, and revenue. |
In specific scenarios, time constraints limit your ability to plan your vacation finances adequately. A Personal Loan can be advantageous due to its lower interest rates and adaptable repayment terms.
If you want to make a significant purchase like a new appliance, furniture, or electronics, a Personal Loan can help you cover the cost without depleting your savings
While renovating your home, you may need more funds to cover the expenses. An individual can obtain a Personal Loan to fulfil these needs while potentially enhancing her property’s resale value.
Life’s milestone events, such as weddings or other celebrations, often have a price tag. When you want to create unforgettable memories without compromising your financial stability, a Personal Loan can provide the necessary funds.
A single day of hospitalisation could result in substantial medical expenses running into thousands. A Credit Card loan can help you settle these bills if you face a cash shortage.
If you have to pay big utility bills or address immediate expenses, a credit card loan can assist in managing your short-term financial needs during emergencies.
Imagine you require Rs.15,000 urgently. A Credit Card loan could be helpful in this scenario. The advantage is that the loan amount is small, making it more straightforward to repay quickly and avoiding high-interest costs.
When deciding between a Credit Card Loan and a Personal Loan from a bank, consider the purpose of the loan, the amount needed, and your repayment capabilities. A Credit Card Loan might be suitable if you require quick access to a smaller amount and can repay it promptly. However, if you need a more significant sum and prefer lower interest rates with flexible repayment terms, a personal loan from a bank is likely the better choice.
While both Credit Cards and Personal Loans are unsecured credit tools readily available for mandatory and lifestyle needs, the customer must remember that all credit comes at a cost.
To maintain a Personal Loan, keep enough balance in the account to clear the monthly instalment. An EMI bounce shall be charged interest daily and will always reflect in your credit history.
Whereas a Card Loan is billed as per regular spending. Always remember to avoid over-usage as the addition of the Loan instalment can attract overspending charges.
Additionally, if the bill is not cleared on the due date, the pending amount will incur interest of 36% per annum. This applies to the Loan installement too! With an inflated charge, non-payment of dues can lead to a debt crisis.
If your Credit card debt is not manageable, you can save on the interest by a
transfer your unpaid dues to a Personal Loan by a Balance Transfer to an alternate Bank. The Bank will clear your outstanding Credit card bill, which can be repaid with a reasonable interest.
Axis Finance, an integral part of Axis Bank, enables the transfer of Credit card dues to a Personal Loan.
Whether you opt for a Credit Card Loan or a Personal Loan from a bank, it’s essential to borrow responsibly and evaluate your financial situation carefully. Remember that borrowing money incurs costs in the form of interest, and timely repayment is critical to maintaining a healthy credit score. Understanding the differences between these borrowing options will empower you to make a well-informed decision that aligns with your financial goals and needs.