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  • What is a Personal loan?
  • 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.

  • How does a Personal loan work?
  • 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.

  • Who can apply for a Personal loan?
  • 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 loans can specify their terms and conditions for the segment they are ready to serve.

  • What can a Personal loan be used for?
  • 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.

  • What is the turnaround time for a Personal loan?
  • 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.

  • Do I need to pay any fees upfront to get a Personal loan?
  • 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.

  • What is the maximum and the minimum amount given as a Personal Loan?
  • 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.

  • Are any taxes payable for a Personal loan?
  • 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.

  • How does the personal loan repayment work?
  • 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.

  • Why is it essential to have a good CIBIL score to get a Personal Loan?
  • 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.

  • What are the benefits of a personal loan?
  • A Personal loan is simply borrowing from an associate when in need. It has numerous advantages.

    • A Personal loan is unsecured and is given without any security or collateral based on income and KYC documents.
    • Funds via a personal loan are quick to get in an emergency, and the processing time is within 72 hours.
    • The interest rate for a personal loan is low compared to other credit sources, and the repayment tenure is flexible.
    • A personal loan helps to consolidate all debts under a single umbrella and build a good credit score.
  • What are the disadvantages of a Personal loan?
  • Borrow wisely for Usage of a Personal loan as, if not appropriately managed, the cons listed below outweigh the pros.

    • Interest on the outstanding loan amount will be charged daily for non-payment of an EMI. In addition, penalties will be levied with bouncing or EMI return charges adding to expenses.
    • The CIBIL score will be inversely affected by delays in repayment; the track of the loan will forever show the return of the EMI and the number of days after which the payment has been cleared.
    • An applicant wanting to repay the loan before the expiry of the tenure will have to adhere to the terms of the lender and may have to pay the penalty on the principal balance amount repaid to close the loan.
  • Amortization Schedule
  • The Amortization Schedule is a document issued at the time of disbursal of the personal loan; informing the customer about;

    • The loan amount disbursed
    • The rate of interest levied.
    • The repayment tenure for the loan amount with interest.
    • The installment amount will be paid monthly for the tenure allotted.
    • The scheduled dates for the repayment of the loan.
    • The breakdown of each installment paid gives the interest and principal component.
  • Balance Transfer of a Personal Loan.
  • 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.

  • CIBIL Score.
  • 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.

  • Co-applicant.
  • 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.

  • Disbursal of funds.
  • 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.

  • ECS (Electronic clearing services)
  • 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.

  • EMI (equated monthly installment)
  • 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.

  • Foreclosure of a 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.

  • Lock-in Period for a Personal loan.
  • 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.

  • Personal Loan
  • 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.

  • Processing fees.
  • 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.
  • 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.

  • Part-payment
  • 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.

  • Personal Loan Top Up.
  • 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.

  • Rate of Interest.
  • 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.

  • A reducing rate of interest.
  • 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.

  • Tenure of a Personal Loan
  • 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.