Some Chat Questions on Personal Loan

• Would taking a personal loan at the end of the financial year, for tax planning, and repay in next would be a good decision?

Personal loans can be pretty expensive and the repayment charges and EMIs make them even more so. If the requirement is of credit for a few weeks, then it would be better off by making the investment through the credit card rather than by taking a personal loan.

• Have heard that some banks provide personal loans at floating rate of interest. Which is the best way for PL?

Fixed rate of interest for personal loans and also most banks provide these only.

• Outstanding bill of Rs 55,000 on credit card. Is it a good idea to take a personal loan and clear all outstanding on credit card?

It is a good idea as long as you are not going to use your credit card for taking up fresh debt. Also,there are chances of you facing difficulty in getting a personal loan if you have already defaulted on your credit card payment.

• Is personal loan useful for running a business or are there other options available?

A better option is a secured personal loan or commonly known as loan against property / security (such as a house/ office/ shop or financial security such as jewelery, shares, units, insurance policies, etc) which are cheaper than normal unsecured loans.

Banks revise deposit rates for Personal Loan

The 50-basis-point CRR hike by the RBI in its midterm monetary policy review has led to several banks revising interest rates on fixed deposits.

State Bank of India cut its peak interest rate on the 550-day deposit by 25 basis points to 8.75 per cent.

SBI has also revised their deposit tenures. The bank was offering 8 percent on deposits of1-2 years; it will now offer 8 per cent interest on 1 year to 549-day deposits, 8.75 per cent on 550-day deposits, and 8 per cent on deposits over 550-day deposits to two years.

Centurion Bank of Punjab announced a cut of 0.50 per cent on fixed deposits for one year and above, from 8.5 per cent to 8 percent. Also a 0.25 per cent cut fixed deposits for the 13 months and 15 days term, to 9 per cent.

Other banks, such as Union Bank of India and Punjab National Bank had cut their deposit rates across various maturities last week.

Avail The Best Personal Loan Deals

Hey Guys,

Just yesterday I was browing through this website - apnaloan.com and saw that they have really got some good connections with Banks for providing Personal Loan to their users.

I think we should all have a look at the same, if we require one:

www.apnaloan.com/personal-loan-india/apply/index.php

Process of takig a Personal Loan

Below mentioned are the step-by-step process of getting a Personal Loan through a Bank:

1. Enquiry with the financiers
2. A banks agent visits you and collects all the required documents for the same along with getting the agreement signed. You may be required to produce copies of IT returns, salary slip, ration card, passport and driving licence.
3. A field investigation person re-vists you so as to confirm all the details
4. Loan Approved
   

Personal Loans vs Education Loans

Personal Loan can be taken in for any kind of purpose. Although most of the people take in personal loan as a business loan, but according to a survey conduct by IIMT, most youngsters take it as an education loan.

Let us view the difference between taking loan as in the form of personal loan or education loan:

• As in the case of personal loan - repayment of both the Principal Amount and the Interest begin just as immediately as you take it. Whereas, in case of education loan you start paying the principal amount and the interest after you have finished your education and have started working. Hence, from your salary you pay the same.
• Personal Loans always have higher ROI.
• For Loan tenure for Personal Loan is lower as compared to education loan as it varies from 1-5 years for tenure period.
• Although Personal Loan can be used as an education loan, but the cost and the repayment requirement as not as beneficial as that of an education loan.

Hence, it is advisable to take education loan as it is and not as a personal loan otherwise you might not be able to avail the fringe benefits attached with it.

Personal Loan News

Axis Bank, Banque Privee Edmond de Rothschild Europe tie-up to offer services to NRI's

Axis Bank and Luxembourg-based bank Banque Privee Edmond de Rothschild Europe have signed a memorandum of understanding (MoU) to provide wealth management solutions to Indians abroad.

Banque Privee Edmond de Rothschild Europe will provide wealth management solutions, while Axis Bank will handle the customer relationship.

Axis bank will offer the product through its branches in Hong Kong, Singapore and Dubai.

Personal Loan Interest Rates

A great way of knowing the market and the current ROI offered by various banks so that get a stronger bargain rate from banks on your personal loan.

http://www.apnaloan.com/personal-loan-india/rates.html

Solve your problems regarding Personal Loans

I know there are many times that we are confused about? so clear all your confusion regarding personal loans by contacting me at - surabhee.gupta@gmail.com

Quick Tips on Personal Loan

Personal loan has always been a confusing loan for banks as they hardly get to know why a person has taken the personal loan for? Hence, they charge a high ROI on personal loans so as to minimize their risk ultimately proving it to be a disadvantage for the loan seekers as well. This way they discourage the users to go in for personal loans.

So here are few quick tip on personal loan:

1. Although a the paperwork in personal loan is less, as it is without any security or anything, but the qualifying criteria for the same are strict. (as I said earlier it is a risk for bankers as well)

2. Working a good and reputated organization not only adds value in your CV but also adds value to your credibility and wold make you eligible for getting the personal loan much quicker.

3. Although Personal Loans have got a higher ROI but then also in many cases it has proved itself to be cheaper than a credit card... ;)

4. Always read the fine prints in your contract for any hidden charges.

Personal Loan FAQs

What is a personal loan?

Personal loan is an all-purpose loan, which is given in most cases without any kind of security like a car, home, shares etc.

Who are the lenders?

Most of the nationalised, foreign and co-operative banks offer personal loans. Besides banks, some other finance companies and financial institutions also offer them. For more information, visit our product browser section.

What are the lending rates for personal loans?

Lending rates differ for different financiers and currently range from 12 to 30 per cent. Visit our product browser section for more information.

What is the minimum and maximum amount that can be issued as a personal loan?

Personal loans are available in the range of Rs 15,000 to Rs 10 lakhs.

What is the tenure possible?

The period varies widely; some lenders usually permit repayment up to a maximum of 60 months. However, most lenders restrict the tenure to a maximum period of 36 months. For specific information, visit our product browser section.

What are the eligibility criteria for personal loans?

a. Minimum take-home salary / gross monthly income of Rs 8,000

b. Minimum age —21 years

c. Maximum age — 60

(However, this requirement would vary from lender to lender.)

Who can get a personal loan?

a. Salaried individuals

b. Self-employed professionals

c. Self-employed non-professionals

d. Any salaried individual/self-employed professional is eligible for a personal loan and the amount of loan eligibility will differ based on the person's current earnings.

Do I have to pay service charges? If yes, what is the amount?

Service charges of up to 3% of loan amount are levied. This amount differs for various lenders. For details, see our browser section.

Why are personal loans called all-purpose loans?

Personal loans are called all-purpose loans because the financier is not concerned about the purpose for which the loan is taken.

Is a guarantor necessary?

No. Typically, you do not have to provide a guarantor; however, some lenders may demand one. For more details, you can visit our product browser section.

Can I club the income of my spouse with mine?

Yes. You can club the income of your spouse for the purpose of boosting your own eligibility for a personal loan.

How is the repayment done?

Repayment of a personal loan is done by issuing post-dated cheques for the entire tenure of the contract. The amount of the post-dated cheque would be the EMI i.e. equated monthly installment. Some lenders also permit repayment option by way of standing instructions to your bank account or deduction at source from your salary every month.

What is the difference between a personal loan & credit card ?

Unlike loans against credit card, in a personal loan, it is necessary for the borrower to draw out the entire loan and the loan is repaid by way of fixed monthly installments. In the case of a credit card, the interest is charged based only on the amount utilised.

Personal Loan Glossary

AFC (Additional Finance Charges): Penalty levied for paying installments late.

Amortisation: The repayment of a loan or debt in regular installments. Each installment is split into a principal repayment and an interest payment.

Asset: An immovable or movable property which can be used as security, against which credit can be offered.

Compound Interest: Interest charged or paid on the principal and the accumulated interest, unlike simple interest, which is paid only on the principal.

Credit Profile: The profile of an individual or a company, which reflects the person’s or the company’s capacity to receive credit and honour the terms and conditions of commercial credit.

CPA (Credit Processing Authority): The credit sanctioning authority which approves lending to a customer. Most banks and financiers have in-house credit teams, while some outsource CPAs.

Depreciation: The decline in value of an asset over a period of time.

DAS (Deduction against Salary): An arrangement where a salaried employee asks his employer to deduct the loan installment from his salary and pay it to the financier. This is done with the mutual consent of the employer and the financier.

DSA (Direct Sales Associate): An agency of the financier, which takes care of customer sales and service. Most car financiers do not have their own field sales force as their sales and service are handled by the agency. They are authorised by the financiers.

DMA (Direct Marketing Associate): Another name for DSA.

DPC (Delayed Payment Charges): Same as AFC. (Additional Finance Charges)

EMI (Equated Monthly Installment): A fixed amount you have to pay every month against the loan you have taken during the duration of your loan.

FCI/FI: (Field Credit Investigation or Field Investigation): The investigation done by an outside agency on behalf of the financier to authenticate the identity of the client and confirm his place of residence and office address.

FIR (Field Investigation Report): The report filed by the Field Credit Investigator or a field investigator after visiting the client's residence and place of work.

Franchisee: Another name for DSA and DMA.

Insurance Cover Note: A note issued by the insurance company before the actual policy document is issued to the client. It confirms that the asset has been insured. This is done because the policy takes a few days to be made, since it has to be processed by the company.

IRR (Internal Rate of Return): The rate of return which the financier would earn on the loan transaction.

Lease: A contract by which the owner of an asset lets it out for use to another for a specified time on payment of a specified amount called rental.

Lending Rate: The interest charged by the financier on the amount financed.

Loan Tenure: The duration for which a loan has been provided.

LPC (Loan Processing Charges): Service charge collected by a financier. Nowadays, few financiers collect it.

NeAR (Net Effective Annualised Rate): The net rate paid by the client after taking into account all discounts, other charges paid, subventions and advance installments. It is the rate to be used for evaluation of two or more offers.

NOC: No Objection Certificate

PDC (Post-Dated Cheques): Cheques issued in favour of the financier for repayment of loan.

Margin Money: Financiers do not fund the entire value of the asset being purchased. They expect the customer to bring a certain percentage of the total amount required for the purchase as margin, called Margin Money.

Octroi: A tax or cess applicable on goods which have entered a particular city/town.

Principal: The capital sum in a finance transaction as opposed to interest.

Registered Owner: The person in whose name a vehicle is registered.

Returns: Yields or profits made in a financial transaction.

Risk: Chance or danger of a loss of capital and/or interest in financial transaction.

Stamp Duty: Duty levied by the state government on certain legal documents and financial contracts.

Standing Instructions: Instructions to a bank to debit a fixed amount from your account and pay your financier.

Statutory Charges: Charges like stamp duty, sales tax etc imposed by the government.

Save Yourself from the Flat Rate Bouncers

I have come across people who have got this wrong notion that Flat Rate of interest are good. But do you know what, with Flat Rate of Interest you might be ending up paying more than you might be believing. Hence always be careful as per how much interest you are paying and always make a comparison with the reducing ROI so as to be on the safer side.

Let us understand this better through an example which my client recently shared with me:

Principal Amount: Rs. 1 Lakh
ROI: 11% (which is quite low as compared to 13-16% ROI for Personal Loan)
EMI: Rs. 3,700/-
Duration of loan repayment: 3 years
Total Amount Paid: Rs. 1, 33,200

So from the above mentioned figures clearly Rs. 33,200 (Rs. 1, 33,200 - Rs. 1,00,000) is the interest that is being paid for the total amount whereas @ 11% ROI Rs. 11,000/- had to paid.

Hence, I would always advice to go for reducing ROI. It is always better and you do not end up paying more even as ROI is always calculate on reducing Principal Amount.

Quick tips on ROI

• Don’t get carried away by a flat ROI, as they might also keep changing with market (read the fine prints before signing). Always opt for a loan where interest is calculated on the reducing balance.

• Get all the promises made by the bank on writing. Nothing oral otherwise you wont be able to make a claim of it later.

• Banks have got a band of rates. Always know that in which band you fall under and negotiate to get the lowest rate.

• Always have all the revelant documents and submit the same, then only can you would be able to get the best quote from the bank.

Common Problems attached with getting Personal Loans

Below addressed are few common problems, along with possible solutions, that are generally faced on customers while getting a personal loan:

1. Problem: Delay in giving loan as against promise made by the bank

Solution: This has become a habit of banks to delay their disbursement even though customers have submitted all their papers. The only solution is that customers to plan their budgets on a one week delay basis from the promised date. Through this you people will not face any kind of problem in your plans and budgets no matter even if the banks delays the payment.

2. Problem: Although the approval has been given then too the disbursement is canceled

Solution: Again a common habit of the banks due to approval hierarchy level. Just move your loan request to another bank

3. Problem: The interest meter starts running from the promised date even though their is a delay in getting a cheque from the bank.

Solution: Open an account with the bank and ask them to credit your loan amount to that account. This will ensure that the bank cannot charge interest for any delay in handing over the cheque as they will directly credit the amount in your account which generally takes half an hour after the deposition of the cheque.

How to negotiate a good personal loan deal

A very important thing to remember, which most of us are not aware about is that, all personal loan interest rates are negotiable. You can always play off between banks to some extent.

Once the interest negotiation has reached the limit, you can negotiate on other charges, especially down payment and upfront fees.

It is always better if you can club the loan requirement of your friends and colleagues together and thus offer a larger loan portfolio to the bank. This is ensure a much smaller ROI as banks charge more on smaller amounts than on large amonuts. The fact today is that banks usually bank on small amonuts more than large sum of loan amonut.

The‘month-end trick’ can also be used while dealing and negotiating with the banks till the 23rd or 24th of the month: "Every bank keeps monthly loan targets, attached with incentives, for its staff and as the month-end nears, these people offers slightly better terms to enable them to fulfill targets." However, this is unlikely to work where the income documentation is not absolutely clear.

Give full details of your existing borrowings (including any credit card borrowings) and show good repayment track record to all lenders: Remember that most banks will check with the credit bureau anyway to find out about your existing borrowings and repayment track record so it is better to be save than sorry. Also making full disclosure of your existing borrowings can actually be used to reduce rates further.