However, the unusual terms of their employment can create some roadblocks to the smooth processing of a personal loan request. Being aware of these issues may make the personal loan journey easier and help avoid delays.

Submit the proof of Employment continuity.

 Seafarers and officers of the merchant navy work on contracts lasting 6 to 8 months. After completing their contracts, which involve sailing for extended periods and infrequent shore visits, they are entitled to a well-deserved break of 3 to 4 months. This break may be misunderstood by lenders, who might assume the applicant will be unemployed during this time and may doubt their ability to meet financial commitments.

• To address the Banks’ concerns about the break period, during which the applicant does not receive any remuneration, the applicant can provide additional proof and records of past and further re-employment.
• Additional documents include a contract letter for the past two years and a letter from the company confirming that a future contract can be submitted when applying for a personal loan. 

 The amount of Salary received by the applicant.

 The salaries of merchant navy applicants working with a foreign company are credited to the NRI account, allowing funds to be deposited in a foreign currency. The applicant receives remuneration for the duration of the contract. Banks will average the total funds received over a year to determine the monthly income. 

• The average monthly income over the year must exceed ₹200,000, as per the HDFC Bank policy. ICICI Bank requires a net salary credit of ₹ 200,000 per month.
• The Bank considers the average salary from the last contract while processing the personal loan. The amount received in foreign currency must translate into the monthly average required after conversion.

 Applicants may receive irregular salary transfers.

Merchant Navy employees receive their salary from the employer in accordance with the terms of the contract. The company can credit the salary monthly or quarterly. Some organisations allow applicants to draw funds as required against the salary credits and settle accounts after the contract ends, and they leave the ship. Systematic salary transfers and receipts may vary according to the terms of the contract.

Unconventional salary credits can leave the bank uncertain, as regular salary transfers to the account are required under personal loan rules. 

• In such circumstances, the applicant can submit the contract or appointment letter that gives the details and breakdown of remuneration paid.
•  Lenders that process personal loans for Merchant Navy applicants, such as HDFC Bank and ICICI Bank, are familiar with such transactions and consider the applicant’s total net earnings of the contract period.

Official confirmation and verification of employment.

As part of the personal loan process, banks verify employment and document validity by contacting the company’s HR or administrative officers. If a foreign company employs the applicant without a local office in India, communication may be challenging.

• Since visiting the office is not possible, the applicant can request a verbal communication by phone at a mutually convenient time, taking into account the time difference between the two locations. 
• An email from the officer in charge’s official email ID, confirming employment details, can also serve as confirmation from the company.

Requirement for Residence ownership.

Policy requirements for HDFC Bank include that the applicant has a self-owned residence, as a merchant navy member is away on the high seas for most of the year, and self-owned residence ownership is mandatory.

Documentary proof of self-owned residence is mandatory. The acceptable documents for residence proof are as follows:

• A utility bill, such as the water or electricity bill, for the past three months.
• Ownership documents and a copy of the registry of the property.

Further documents are required to apply for a personal loan.

To apply for a personal loan from ICICI Bank for employees of the merchant navy, applicants must submit the required documentation. The documentation required is more extensive due to the unusual job profile of a merchant navy applicant.

The extra documents besides the KYC and income documents are:

• Continuous Discharge Certificate, or the CDC, as it is popularly known, is a mandatory document issued to all seamen. A copy of the CDC is required for a personal loan, as it serves as proof of identity and contains details of all voyages or contracts of an employee at sea.
• All Indian citizens need a passport to cross Indian borders and travel abroad. Merchant Navy employees require a valid passport because they will be sailing to foreign ports. The immigration stamp on the passport also serves as proof that the employee has left India, joined the vessel, and returned.
• A valid contract letter for the next voyage, confirming further employment by the company. A letter confirming that the applicant will rejoin the ship after a break period allowed upon completion of the present voyage as an engineer or deck officer.
• Merchant navy employees applying for a personal loan with HDFC Bank are required to submit physical copies of self-attested documents with the application request.

Only select Banks process a personal loan for merchant navy employees.

Personal loans are unsecured; not all Banks and NBFCs will process personal loans for seafarers. HDFC Bank and ICICI Bank are the primary lenders that issue personal loans up to ₹ 40 lakhs to merchant navy officers who meet the salary criteria.

• Banks will process personal loans for merchant navy officers. Seamen looking for a personal loan can apply to the bank as account holders with good balances.
• Applicants in need of funds can apply for a loan against property or a gold loan, both of which are easily accessible and secured.

The best time for an applicant to apply for a personal loan is soon after the contract is completed. This is when all required documents are readily available to the applicant, allowing them to complete the formalities before rejoining a ship for the next contract and returning to employment.

The post Challenges Faced by Merchant Navy Officers in Obtaining Personal Loans first appeared on Yourloanadvisors.

 Credit cards and personal loans have become essential parts of daily life, and they are being used more frequently due to their convenience and quick processing. Merchant navy officers also appreciate the benefits of using credit cards and personal loans.

Apply Personal Loan for Merchant Navy

What are the facilities of a Credit Card?

A credit card is easy to carry and fits into your wallet, making it ideal for seafarers who are always on the go. There’s no need to carry large amounts of bulky cash that can attract unwanted attention. Feel free to go on a shopping spree or enjoy an exclusive dinner and cover your expenses with a simple swipe of your credit card.

Multiple usages: A Credit card, such as the ICICI Bank Coral credit card, can be used at all merchant outlets, such as department stores, retail outlets, and restaurants, as well as for travel purposes, including airline bookings and hotel stays. It is helpful in emergencies for medical treatment, paying hospital bills, and purchasing medicines. You can pay your utility bills with your credit card and also draw cash.

Rewards and Bonus Points: Banks issuing credit cards add special features to attract customers, such as reward points for spending that can be redeemed at partner outlets and cash back offers. Discounts are applicable for using your credit card for dining, and Banks also tie up with department stores to encourage spending on credit cards, offering interest-free EMI and discounts on purchases.

Domestic and International Usage: Merchant navy officers travel worldwide, and when the ship docks, they are allowed ashore to take a break. This gives them the chance to visit exotic locations that might not be easily accessible otherwise, allowing them to shop, sightsee, and enjoy local cuisine. Most credit cards, including the ICICI Bank Rubyx credit card, support international use, enabling Merchant Navy officers to use their cards and avoid the hassle of dealing with foreign currencies.

Carrying a credit card as a backup is a valuable asset that offers financial security in situations where cash might not be accessible, such as during travel. Merchant navy personnel can use their credit cards to cover unexpected expenses that may occur when funds are hard to access. An additional card can also be issued and given to the spouse or parents for emergencies.

What are the Benefits of a Personal loan for seafarers in India?

A personal loan is available without security or guarantees. Personal loan requests are processed efficiently, allowing applicants to receive funds quickly. Merchant navy officers can apply for an ICICI Bank personal loan or an HDFC Bank personal loan, both of which are among the top providers of personal loans. Applicants can apply for a personal loan online if they have the required documents for a merchant navy personal loan.

Can be used as needed: The funds approved for a personal loan are released once by the Bank, allowing the applicant to utilise the funds according to their requirements. A personal loan is intended for individual needs, such as home renovation, purchasing the latest gadgets and appliances, travel, children’s education expenses, family celebrations, or emergency requirements.

Secure the necessary funds: A merchant navy employee can borrow a personal loan of up to ₹35 lakhs. The salary received during employment is spread over 12 months, so the monthly income must meet the minimum requirement of ₹200,000 per month. If the applicant is paid in a foreign currency, their total annual earnings must exceed ₹96 lakhs.

Repay via an affordable EMI: A personal loan can be repaid over affordable instalments over a tenure best suited to the customer. The tenure for repaying a personal loan is determined based on the loan amount and other existing obligations. An applicant can use the personal loan EMI calculator to check the applicable instalment for the required loan amount.

Reasonable rate of interest: The interest rate charged for a Personal loan begins at 10.5% with a reducing balance. The personal loan interest rate remains fixed and does not change for the entire tenure. The interest rate varies from lender to lender, depending on the loan amount required and the CIBIL score. 

Is a Personal loan for Merchant navy or a credit card a more suitable option?

What would work better, a personal loan or a credit card? Both have their advantage and drawbacks. Listed below is a comparison:

Convenient to use

• Credit Card: A credit card can be easily carried and is ready for use whenever you need it. You can spend within your set limit and repay the amount by the due date; your credit limit is then restored for future use. If you do not use your card, your monthly spending limit will remain unchanged.
• Personal Loan: The approved amount is credited to your account in one go, and your monthly instalment is deducted regularly from the following month over the specified tenure. You must repay the amount with interest, whether you use the entire loan or only part of it.

Interest-free period

• Credit Card: Using a credit card comes with an interest-free period of 30 to 45 days, depending on your payment cycle. If the amount due is repaid with interest, no additional charges are incurred for the amount spent.
• Personal Loan: There is no interest-free period associated with a personal loan, and the EMI for repayment is deducted from the customer’s Bank account starting from the following month. Each instalment repaid consists of a portion of the principal and the interest.

Prepayment penalty

• Credit Card: You can repay the amount spent via your credit card at any time during the month. If a merchant navy employee has funds available to repay credit card spending, they can do so without waiting for a bill to be generated.
• Personal Loan: The prepayment and foreclosure policies for a personal loan will depend on the lender’s terms. Personal loan amounts of ₹10 lakhs and above can be prepaid after 12 EMI without any extra charges if self-funded; however, charges apply for other amounts.

Interest Rate

• Personal Loan: The interest rate for personal loan funds is most reasonable, starting at 10.99% with a reducing balance. The annual percentage, therefore, works out to be 6% or more.
• Credit Card: Although no interest is applicable on credit card spends during the interest-free period, if the total bill is not cleared on time, most banks charge an interest rate of 36% to 42% per annum, with a compounding effect that can lead to an escalation of debt.

A credit card is issued based on an account with the Bank, offering greater freedom of use, but payments must be made on or before the due date to avoid an escalation of debt. Funds secured as a personal loan require documentary proof, and the merchant navy applicant must meet the bank’s personal loan eligibility criteria. Merchant navy applicants require a CIBIL score of 750 or higher to secure a credit card and a personal loan. Both of which are unsecured funds provided for personal use. 

Both a credit card and a personal loan share similar basic functions and can help build a healthy credit score quickly. With online banking facilities available via Wi-Fi on most merchant navy ships, account holders can monitor their credit card bills and ensure their personal loan EMI payments are made on time.

Should a merchant navy employee apply for a personal loan, a credit card, or maybe both, the decision depends upon the individual’s financial requirements.

FAQ

The post Which is better for Merchant Navy officers—a personal loan or a credit card loan? first appeared on Yourloanadvisors.