A Personal Loan is an unsecured credit given to meet current financial needs. Individuals needing funds for lifestyle needs or emergencies can apply to lead Banks and NBFCs.
A Personal Loan is conveniently processed based on documents readily available at hand. Salaried employees and Self-employed persons with a regular income can readily secure funds when required as a Personal Loan.
To get a Personal Loan, a loan seeker needs to apply to a lender leading Personal Loan givers are HDFC Bank, ICICI Bank, Axis Bank, and Kotak Bank.
After processing, the loan amount approved is transferred one time to the applicant’s bank account. These funds can be used as and when needed without any restrictions.
The borrower has to repay the loan amount with interest to the lender in equal installments over a fixed term or tenure. As a Personal Loan requires no security to receive funds, lenders seek surety of repayment via verification and documentation.
Any citizen of India above 21 years of age with a regular income of 18000/- and above is eligible to apply for a Personal Loan. The applicant should have a Bank account to show the consistent income received and valid documents for proof of identity and contact ability.
Though the essential criteria are similar, Lenders offering Personal Loan can specify their terms and conditions for the segment they are ready to serve.
Funds received as a Personal Loan are meant to realize lifestyle expenses. They can be used for various purposes such as family celebrations, vacation expenses, school fees, and even debt consolidation. Medical emergencies and hospital expenses can also be met with a Personal Loan.
A valid reason is to be provided when Applying For a Personal Loan if the purpose is deemed invalid, the application can be rejected. The loan amount cannot be used for investments or nefarious activities.
With digitalization, Banks have been speeding up processes. Advertising a” Personal loan in 10 seconds,” which may not work for most applicants, the turnaround time has reduced, particularly for applicants with a pre-approved offer or a salary account.
The average application process time for a Personal Loan range from 3 to 5 working days this is the turnaround time from applying to receiving funds.
No charges are to be given upfront when Applying For a Personal Loan, neither in cash nor by a banker’s instrument. Banks and NBFCS charge fees on the approval of the loan amount after processing the application.
The processing fees charged are from nil up to 2.5% of the loan amount disbursed, depending on the policy. This amount is deducted from the loan amount approved and transferred to the Bank account.
The minimum amount given as a personal is ₹ 50k, and the maximum is ₹ 35 lakhs.
An applicant is free to apply for the amount needed, but it is the prerogative of the lender to decide on the loan amount to be issued. Banks and NBFCS forwarding personal loans have their matrix to calculate the eligibility for the loan.
The primary concern is the affordability of the loan and the capacity to repay the monthly installment.
Personal Loans are not taxable, as it is money borrowed, which is to be repaid with interest.
The GST @ 18% applies to process fees and any amounts imposed as penalties, such as unrealized cheques and delayed monthly installment payments.
GST is also payable on all extra services provided by the Bank concerning a Personal Loan, such as duplicate statements, change of Bank for payments of installment, and foreclosure penalty.
Funds received as a Personal Loan are deposited as a lump sum in the applicant’s Bank account. The repayment is made via EMI (equated monthly installment) for the tenure period from 12 months to 60 months.
The EMI comprises the principal & interest amount; deducted automatically by ECS (Electronic clearing services) on a designated date which is convenient and stress-free to obligate.
The CIBIL (Credit bureau of India Ltd) records and shares the credit transactions of individuals, the number of loans and credit cards, and the payments made toward the same. A score is also generated for the individual based on the credit history.
Banks are keen to deal with individuals with a good CIBIL score, which reassures them of timely returns. Financial institutions use your credit history and score to determine whether to lend you money or how much.
A Personal Loan is simply borrowing from an associate when in need. It has numerous advantages.
Borrow wisely for Usage of a Personal Loan as, if not appropriately managed, the cons listed below outweigh the pros.
The Amortization Schedule is a document issued at the time of disbursal of the personal loan; informing the customer about;
Transferring the principal amount balance to an alternate lender is the Balance Transfer of a Personal Loan. Enhanced loan amounts and a lower interest rate are offered to customers with a sound repayment track for the transfer of an existing Personal Loan.
The CIBIL score of an individual is generated by the Credit Bureau of India Ltd based on the records of the credit dealings shared by Banks and financial institutions. Before sanctioning credit, financers check the CIBIL history of the applicant to confirm if all dues are being paid timely.
A financial Co-applicant submitted for a Personal Loan is either a spouse or a blood relative earning a regular income. The income of the applicant and the co-applicant is clubbed together to increase eligibility for the loan amount.
To facilitate lending, Finance providers refer to a list of approved companies the companies featured in this list have been vetted for turnover and performance and promising prospects. Financers build their list of approved companies as per the individual policy for lending and banking relationships. Most Banks provide loans to employees featured in the list of approved companies.
The Disbursal of funds is the process by which the funds approved via a Personal Loan application are transferred by ECS (electronic clearing services) to the applicant’s Bank account. The Disbursal is done one time for the entire loan amount approved.
The system through which the monthly installment is deducted from the Bank account for the payment of dues is known as ‘ECS.’ The ECS is presented to the Bank account monthly on a fixed date for the entire tenure.
The lender’s policy determines the applicant’s eligibility for a loan. The eligibility of an applicant is governed as per the following.
The EMI or the monthly installment is the payback tool of the Personal Loan. It is deducted from the salary account of the customer on a fixed date month on month for the entire tenure of the Personal Loan.
Personal loans are not taxable, as it is money borrowed, which is to be repaid with interest.The re-payment of the total loan amount before the expiry of the tenure is termed foreclosure of the loan. Most lenders have a lock-up period of 6 months to a year before the loan can be closed, and a charge may be applied as per the terms and conditions of the Financer.
The KYC or Know your customer documents are the Identity and Address proof to be submitted by the customer for processing of credit. The manuscript submitted must feature in the approved list as mandated by the Reserve Bank of India. For further details, please refer (to What are The KYC Requirements For Financial Services)
The Lock-in period for a Personal Loan is from 6 months to a year. During this period, the applicant is not permitted to partially repay the loan amount to reduce the principal loan amount or close the loan account fully.
An applicant is said to be “Overleveraged” in Banking terms if the amount of credit used is more than the monthly income as per the documentary proof submitted. Therefore, the request for additional credit will be rejected even if repayment is made on time.
A Personal loan is an unsecured loan offered by financial institutions for personal needs and emergencies. Funds are given without collateral or guarantees solely based on the applicant’s profile, proof of which is rendered through documents.
The Processing Fee is a one-time file charge by the financer for the disbursal of a Personal Loan. No funds are taken in advance the amount is deducted from the loan amount. The processing fees range from nil to 2.5% of the Loan amount. The prices are payable only on approval of the loan and deducted from the funds transferred.
Pre EMI is the interest amount charged for the gap time or the number of days from the funds received until the monthly installment cycle begins. A Pre EMI is set if there is a gap of more than 30 days before the first installment.
The Part-payment for a Personal Loan is the funds an applicant pays to reduce the principal loan amount. This amount should be more than the monthly installment and can be paid after the lock-in period expires.
A Personal Loan Top Up is an additional amount added to a pre-existing loan with a Bank or NBFC. A new loan account is created with the principal balance of the previous loan and the incremental amount issued as a Top-Up.
The interest rate is the cost of borrowed funds, the percent of the principal the lender charges to use funds. The interest rate for a Personal Loan is from 10.5% to 18% and is charged monthly, reducing the balance.
The interest rate for a Personal Loan is charged at a monthly reducing balance: the principal balance reduces with every EMI repaid. The interest for the following month is calculated on the current principal.
The tenure allotted is when the loan amount is returned to the Bank with the applicable interest. The assignment assigned for a Personal Loan is from 12 to 60 months.
An unsecured loan is a credit forwarded without any security or guarantees. Examples of unsecured credit are credit cards and personal loans issued on behalf of the credit profile and CIBIL score.