Photo courtesy Geralt on Pixabay.
A personal loan is the amount of money a person can borrow from a bank or a non-banking financing company to meet his personal needs. It allows him to borrow money for personal expenses and repay back over a period of time. The personal loan can be availed for medical bills, wedding expenses, home renovation, family vacation, child’s educational expenses, purchasing electronic items, and any other unexpected expenses.
Personal loans are of two types; secured and unsecured. A secured personal loan is a loan that requires collateral for loan approval while an unsecured loan does not require collateral such as an asset like a car or even a fixed deposit. The unsecured loan is considered riskier because there is no collateral so it may entail paying a higher rate of interest.
The eligibility criteria for a personal loan are different for various banks but the general criteria consider age, income, occupation, capacity to repay, and even the place of residence. A person should have a regular source of income whether from salary or self-employment. The loan duration can be from 1to 5 years. The bank mostly limits the loan amount to 40-50% of your monthly income. For self-employed persons, the most recent profit/loss statement is considered and any existing loan being serviced by a person is also considered. The bank considers the credit score, and a high credit score leads to a higher loan amount being sanctioned, as it makes the lender feel safe.
A person can apply for a personal loan either singly or with a co-applicant. The co-applicant has to be a family member and the loan would be processed for a higher amount. The lender charges processing fees which are normally 1-2% of the loan principal.
Documents required when applying for a loan-
The documents that you have to submit with the loan application are-
- Income proof (salary proof for salaried or the ITR returns for self-employed).
- Address proof.
- Identity proof.
- Certified copies of degree/license ( for self-employed individuals)
How to choose the best possible loan?
To choose the best loan you have to compare the various features of the available loan offers some of which are-
- Interest rates-
The interest rates determine how much you will have to pay over the entire tenure of the loan in addition to the principal amount. The loan you avail of should have low-interest rates. Shop around for the best available rates.
Fess associated with the loan-
Every loan has different ranges of fees associated with it. The processing fees are charged on the loan amount being disbursed. The lower the processing fees the better it is for the borrower.
Partial payment or foreclosure-
Check before applying for the loan if it allows you for partial prepayment of the loan amount or the full foreclosure at minimum extra cost. This will allow you to save on the interest component whenever you decide to close the loan before the designated due date.
Flexible payment tenure-
The personal loans come with a tenure of repayment between 1-5 years and this allows you to repay as per your convenience with the least impact on your monthly budget.
Affordable EMI-
Before taking a loan make an estimate of the EMI you would be comfortable paying every month without any chance of penalty. Any default will mess up your credit score.
SBI Personal Loans –
SBI pension loan-
SBI pension loan can be used to fund your child’s marriage, buy a house, plan a trip or get medical aid.
The pensioner should be below 76 years of age and the pension payment order is maintained with SBI.
For family Pensioners
For Central and State government pensioners
SBI Express Credit-
This is a loan up to Rs. 20 lakhs and could be used for your wedding, vacation, or any unplanned emergency.
This is for individuals who have a salary account with SBI and a minimum monthly income of Rs. 15,000. It can be for employees working with central and state governments, educational institutions, or selected corporates with or without a relationship with the banks.
The minimum loan amount is Rs. 25,000 and the maximum loan amount is Rs. 20 lakhs.
Loan against shares-
This loan is for meeting contingencies and loans of personal nature. Loans will be permitted for subscribing to rights issues or new issues of shares.
The minimum loan amount is Rs. 50,000 and the maximum loan amount is Rs. 20 lakhs.
This facility is available to customers of SBI and maintains their accounts with SBI Cap securities.
SBI Quick Personal Loan-
This is a loan to salaried customers not maintaining accounts with SBI. It can be utilized for weddings, vacations, unplanned emergencies, or also planned purchases.
The minimum loan amount is Rs. 24,000 and the maximum loan amount is Rs. 20 lakhs. It is available for the age group between 21-58 years.
Individuals with a net monthly income of Rs. 15,000 are eligible. They could be from Central or State governments, PSU educational institutions, or the corporate sector.
HDFC Bank Personal Loan-
The personal loan offered by HDFC bank can be used for a wide variety of needs. It could be for marriage, travel, emergency use, debt consolidation, home renovation, and loans for teachers, students, women, salaried, and government employees.
- The person must be between 21- 60 years of age.
- It is for salaried employees at select private sector companies and public sector undertakings. For self-employed individuals, they should have a specified minimum income and documents that show the stability of income.
- For an HDFC bank salary account, the individual must have a minimum net monthly income of Rs. 25,000 and for a non-HDFC salary account the individual must have a minimum net monthly income of Rs. 50,000.
- The interest rate for salaried employees is between 10.5% to 21%, with loan processing charges of up to 2.5% of the loan amount.
- No prepayment in part or full is permitted until payment of 12 EMIs. From 13-24 months the prepayment charges are 4% of the principal outstanding. 25-36 months onwards it is 3% of the principal outstanding amount and more than 36 months it is 2% of the principal amount.
Axis Bank Personal Loan-
The Axis Bank personal loan can be used for medical emergencies, wedding receptions, travel holidays, high-end home theatre systems or can be used for expanding business. The repayment period of the loan ranges from 1to 5 years.
- One should be of a minimum age of 21 years to avail of the loan and the maximum age should be 60 years at the time of maturity of the personal loan.
- The minimum net monthly income should be Rs. 15,000.
- Salaried employees, doctors, and employees of the public and private sectors can avail of this loan.
- The personal loan amount can be from Rs. 50,000 to Rs. 15 lakhs.
- The rate of interest is from 12% to 21%.
- For foreclosure, there are pre-payment charges on the loan outstanding.It is 5% for the period from 0-12 months, 4% for 13-24 months, 3% for 25 to 36 months and 2% for greater than 36 months.
Aditya Birla Capital Personal Loan-
Aditya Birla Capital offers personal loans up to Rs. 50 lakhs with a repayment tenure of up to 84 months. The eligible age is from 23 to 60 years. There is no security or collateral required to avail of the loan and an applicant can club the income of the co-applicant to enhance eligibility.
The personal loan can be used for medical emergencies, purchase of household or electronic goods, children’s education, wedding expenses, home improvement, or traveling.
Bank of Baroda Personal Loan-
Bank of Baroda personal loan can be used for home renovation, higher education, travel, wedding, and medical emergencies.
- To be eligible for a loan the applicants should be employees of government bodies or private companies with a minimum service of 1 year. The self-employed individuals who want to apply for this loan should have a business practice of at least 1 year.
- Applicants should be at least 21 years of age and the maximum age to apply for a personal loan; the age of borrower plus repayment should not exceed 60 years for salaried, and 65 years for non-salaried persons.
- In metro and urban areas, the loan amount can vary from 1 lakh to 15 lakhs and in the semi-urban and rural areas, the personal loan amount is from Rs 50,000 to Rs 15 lakhs.
- The interest rate is 10.5% on the loan amount for persons having an account relationship with the bank and 12.5% for applicants having an account relationship with another bank.
- There are no foreclosure charges. You can also make part pre-payment with no extra charges.
- The repayment period is a maximum of 5 years.
- The processing charges are 2% of the loan amount.
Bajaj Finserv –
The Bajaj Finserv personal loan helps in going to your dream destination, renovating your home, wedding plan, debt consolidation, purchasing of a used car, furnishing your home with modern furnishings, and a medical emergency.
- The loan amount can be up to 25 lakhs.
- The rate of interest starts at 12.99%.
- Processing fees are 2%+GST.
- The repayment period is from 1 year to 5 years.
- The loan eligibility is between 21 to 67 years of age.
- You should be a salaried employee with MNC, public or private company.
- The minimum salary required depends on the city where you reside. It starts with Rs. 22,000 and is based on the city of residence.
The personal loan provides individuals with finances for their various personal needs. It is necessary that they repay the loans on time to have a good credit score. They should compare the interest rates and avail of a suitable tenure for the loans, paying EMIs which are comfortable and don’t put them under stress. These loans help in their journey towards various life goals.