Personal Loan
Personal loans are any purpose loan which is given without any collateral or guarantor. This is a very unique loan product wherein the borrower is at his/her discretion to do whatever they need. In other words, unlike any other loan product viz a car loan or a consumer durable loan or a housing loan, a personal loan can be used by the borrower for any of his/ her personal needs. There is no restriction for the usage of such loans though it should not be used for speculative purposes and investment in tax saving instruments. The loan can be repaid like all other loans through the equated monthly installment (EMI) process where a fixed amount is paid each month.
Personal Loan Features:
- They are not secured.
- They are any purpose loan.
- They come at an attractive rate of interest.
- They are relatively short term loans vis a vis other loans, (i.e 3 to 5 years)
Personal Loan Advantages:
- First and foremost advantage of a Personal loan is that it is an any purpose loan. Be it be holidays, wedding in family, to pay off your dues in credit cards, sending your child for higher education, buying jewellery, buying a piece of plot which otherwise no banks fund, and to meet any contingencies. You neednot have to furnish the end use of loan to the bank.
- The loan doesnot require any security or collateral. It doesnot require a guarantor either.
- The documentation involved is very minimal.
- The time taken for processing is minimal.
Documentation:
The documentation for personal loans is one of the simplest. Basic KYC documents and income documents would suffice to get a Personal Loan.
The general lists for obtaining a Personal Loan are as follows:
1. Photograph
2. Identity proof
3. Address proof
4. Income proof
5. Bank Statements
6. Continuity Proof
7. Qualification proof (applicable only for Self Employed Professionals)
The detailed documents are as below:
Identity Proof (Any one of the following)
- Copy of PAN Card
- Copy of Passport
- Copy of Driving License
- Copy of Government ID card
- Copy of Voter ID card
- Copy of Company ID Card ( for select Corporate)
Address Proof (Any one of the following)
- Copy of Passport (Can also be used as proof of identity)
- Copy of Telephone Bill (both landline and post paid mobile connection)
- Copy of Driving License
- Copy of Voter ID card
- Copy of Ration card
- Copy of Electricity bill
- Copy of bank statement ( computerized statements only)
- Copy of Life Insurance premium receipt
- Copy of any title deed( Sale deed/ Index II)
- Copy of Property tax receipt
- Copy of Leave & License Agreement
- Copy of latest credit card statement
Age Proof (Any one of the following)
- Copy of PAN card
- Copy of Passport
- Copy of Birth Certificate issued by competent authority
Signature Verification Proof (Any of the following)
- Copy of PAN Card
- Copy of Passport
- Copy of Driving License
- Signature verification from Bank
Income Documents:
For Salaried individuals:
- Copy of latest three salary slips
- Copy of appointment letter or Form No. 16 indicating proof of continuity in employment
- Bank statements for the last 3 months
For Self-employed Individuals:
- Copy of last two year IT returns along with computation of income, Balance sheet and Profit & Loss a/c , audited reports ( in case of audited financials)
- CA certified financials ( in case of unaudited financials)
- Bank statements of last six months of the main business banking
FAQ's:
Personal Loans are unsecured loan which does not require any security or collateral .It also does not require any guarantor
Who can apply for a Personal Loan?
Any individual who has got a source of income as salary or business income can apply for a personal loan. Please note salaried individuals working in proprietorship business and partnership firm are not eligible to apply for this loan.
When can one apply for a personal loan?
You can apply for a personal loan in order to fulfill any of your personal needs which require financial assistance. The loan can be used for buying a plot, wedding expenses, hospitalization expenses, holiday packages, buying jewellery, higher education etc.
Where can I get a personal loan from?
Personal Loans are offered by nationalized banks, private banks, foreign banks and a few Non Banking Finance Companies.
Is there any security or collateral for a personal loan?
A personal loan does not require any collateral or security. Exceptionally in some cases, a Co-applicant is required if certain norms are not met by the applicant.
What is the maximum one can get as a personal loan?
Personal loans are available in the range of Rs. 50,000 to Rs.30 lacs depending on the income eligibility of an applicant. However banks also have specially designed products to offer higher loans.
What is the maximum tenor for a personal loan?
The tenor of personal loan ranges from 12 months to 60 months. However it should be noted that tenor is the discretion of the bank and also in most of the case, the tenor is restricted to 36 months.
Is there any fee for availing a personal loan?
Yes, you have to pay processing charges as decided by the bank from time to time. Generally it varies from 2% to 2.5%.
How do I repay a personal loan?
Personal loans are generally repaid by way of equated monthly installments (EMI)
Is there any moratorium period for repaying personal loan?
No, moratorium is not applicable for personal loans. Generally first EMI starts within 45 days of the disbursement of loan.
What is the rate of interest that will be charged on my personal loan?
Rate of interest is a factor of prime lending rate (PLR) as announced by respective banks from time to time which varies with market conditions. Generally the rate varies from 13.5% to 22% depending on the loan amount and profile of applicant.
How much time does it take to get a personal loan?
Generally it takes 3 to 7 working days to sanction a personal loan after completion of all formalities in terms of compliance in documentation.
Can I get a rebate on the interest rate & processing fee?
Yes, a few banks offer special rates for those who have a relationship with their bank. The relationship could be a bank account, existing loan, a credit card etc.
What if I want to prepay my personal loan?
Most banks allow its customers to prepay personal loans after 6 months of disbursement. Generally banks charge a penalty of upto 5% as prepayment charges on the principal outstanding.
What if a few EMIs are not paid in time?
It is in the interest of the borrower to repay all the EMIs as per schedule. Delay in payment of EMIs or default would badly affect the credibility of the borrower. Moreover getting a loan at a later stage would be difficult. Generally banks share the credit history of a borrower with credit bureau and in turn they share data of credit history of a borrower with other banks.
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