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.