Personal Loan

Personal Loan in India

A personal loan is a loan for your personal use, be it your child’s wedding, a dream vacation, or a shopping extravaganza. A personal loan does not require any security or collateral and can be availed without much fuss. Typically, personal loans range from Rs. 50,000 to Rs. 30 Lacs with a tenure typically ranging from one to five years. Getting a Personal loan is quite stress free and there are typically a number of offers in the market most of the time. A personal loan is a loan for your personal use, be it your child’s wedding, a dream vacation, or a shopping extravaganza. A personal loan does not require any security or collateral and can be availed without much fuss. Typically, personal loans range from Rs. 50,000 to Rs. 50 Lacs with a tenure typically ranging from one to five years. Getting a Personal loan is quite stress free and there are typically a number of offers in the market most of the time. A personal loan is a loan for your personal use, be it your child’s wedding, a dream vacation, or a shopping extravaganza. A personal loan does not require any security or collateral and can be availed without much fuss. Typically, personal loans range from Rs. 50,000 to Rs. 30 Lacs with a tenure typically ranging from one to five years. Getting a Personal loan is quite stress free and there are typically a number of offers in the market most of the time.

Apart from the rate of interest banks also charge some fees which are usually of two types. Once when you are applying for the loan and once when you are pre-closing the loan. The fees when charged at the time of processing called as Processing Fees vary from 1-3% of the loan amount. This could be reduced if you have the ability to bargain. the second charge is the prepayment penalty paid at the time of pre-closure. This too varies from 1 – 3 %. Similar to processing charges, you can also try to get this fee reduced.

Personal Loan Eligibility Criteria

Personal loans eligibility criteria can be fairly stringent, considering banks need to mitigate their risk. Most people with a regular source of income such as salaried individuals or self-employed individuals can avail a personal loan. Banks consider salaried individuals, self-employed professionals and self-employed business people.

Personal Loan Amount

An individual can borrow as much as they can repay. This in banking terms would mean a personal loan that has an EMI that does not exceed 65% of your monthly take home income, where the EMIs for existing loans are also deducted.

Personal Loan Interest Rates

Personal loan rates vary from bank to bank, and are anywhere between 10.50%-24% depending upon your profile and the policies/scheme you decide to opt for. In case you need to find out more about personal loan rates from different banks, please take a look at our compare personal loans page.

Jindal Fintech loans works with a wide range of personal loan providers to get you the best deals and interest rates for your financial profile.

How Fast Can I Get a Personal Loan? (Instant Loans)

Personal loans don’t take too long to process. Banks usually disburse your loan within four working days. However, it is recommended that you keep all your documents ready and in order, especially the postdated cheques (PDC), to avoid any delays. How fast you get your personal loan is dependent on your document collection process.

Personal Loan Co-Applicants

Personal loans can be taken with Co-Applicants to help you increase the loan amount you are eligible for. The income of the co-applicant also features in your valuation and helps in increasing your chances of getting a personal loan.

Personal Loan Eligibility Criteria

While lending money the lenders take into account various factors to arrive at the decision whether to lend the money or not and how much to lend. This universal rule of lending equally applies to personal loans extended by the banks and Non-Banking Finance companies (NBFC). Since personal loans are given without any security or third-party guarantee, the lenders are extra cautious and have stringent norms for establishing eligibility of borrower.

Profile of the borrower

A lender advances loan in the expectation of it being repaid within specified period. So, income of the borrower is the main criteria to establish the eligibility for personal loan. Due to this reason, students, housewives and retired people are not eligible for personal loan facility from the banking system. Since a loan has to be repaid within certain period and that too with the current income, one can avail personal loan during his working life and not beyond that.

Salaried people can apply for personal loan anytime between 21 years till completion of 60 years of age assuming that the age of retirement is 60 years. In case the age of retirement specified for any particular organization is lower than 60 years, the eligibility to apply for the personal loan will come down accordingly.

Since self-employed do not have any specified age for retirement and generally work beyond 60 years they can apply for personal loan up to 65 years of age. Moreover, as self-employed do not start earning as early as a salaried, the minimum age for applying for personal loan for self-employed is generally kept higher at 21 years.

Stable Employment

As a lender is interested in the timely and orderly serving of personal loan, regular flow of income is a prerequisite for availing a personal loan. So, the lenders advance personal loans to the persons who have regular and consistent income. Those who are in employment, should at least be working for minimum of six months. At least six months with the current employer is generally also insisted by the lenders. Likewise, for self-employed the lenders want consistent and established source of income, for which the borrower has to submit documents like six months bank account statement.

Financial Statements

For establishing your eligibility, you need to submit some financial documents to the lenders in addition to your regular Know Your Customer (KYC) documents. For salaried the financial documents required to be submitted are simple. Copies of the salary slips for past six months along with form no. 16 and or copy of the Income Tax Return (ITR) filed for previous two years are sufficient.

Employer Type

Since personal loans are very risky product from the lender’s perspective, the lender wants to ensure that the borrower will be prompt and regular in servicing the personal loan. For this purpose, the lenders take into account the employer where you are working, to assure themselves about lower risk of default on the part of the borrower. Most of the lenders have a categorized list of employers for the purpose of granting personal loans to salaried people.

People working with government department and those with government companies have better opportunity for being eligible for personal loan than those working with other employers. Likewise, persons working with top listed companies or reputed private companies including Multi-National Companies have better prospects of getting a personal loan.

Outstanding EMIs

Lenders assume that certain portion of your existing monthly income, generally 50% is available for servicing of any loan taken by you. So, your personal loan eligibility gets curtailed in case you are serving any existing loan. The amount of EMI of such existing loan being served will be reduced from the surplus available for serving any loan.  Accordingly, the amount of EMI which you can service for personal loan will also come down accordingly. As the amount of personal loan eligibility depends on how much EMI you can pay month after month, any running loan will significantly reduce your personal loan eligibility. In case the balance EMIs for running loan are not many, you can arrange to prepay that existing loan and thereby significantly enhance your personal loan eligibility. In such a situation, the personal loan eligibility will be higher than the balance of the existing loan outstanding being repaid.

Credit history of the borrower

With the advent of credit information bureau like CIBIL, the lending for banks and NBFCs has become easier as the complete history of credit transactions of the prospective borrowers is available to the lender. The credit information bureau provides the credit history and credit score of the borrower to the lending institutions on request. A good credit history and higher credit score, points towards disciplined dealings in credit and loan transactions. A good history and a better credit score provide a primary assurance to the lender about the borrower timely serving the loan taken. Moreover, with higher credit score, the lender may give you higher personal loan than what you would be eligible with lower score.

A better credit score also help you negotiate and get better interest rates on your personal loans with higher eligibility at the same time. Generally, a CIBIL credit score of more than 750 is considered satisfactory and higher the score higher comfort the lender gets and better terms the borrower can ask for from the lender.

Tenure opted

Since the repayment of a personal loan has to be made by way of an equated monthly instalment (EMI) which is generally fixed for the entire tenure of the loan, one can get higher personal loan eligibility, with longer tenure, as the amount of EMI one can service gets constrained by your disposable income. The tenure of the personal loan is also restrained by your age at the end of the tenure you wish to opt.

As personal loans carry high rate of interest and as the lenders charge prepayment charges in case you prepay the personal loan fully before the original tenure, one has optimized the tenure taking into account various factors.  A longer tenure is not necessarily good for each borrower.

Co-borrowers

For home loans the lenders allow your children, parents and spouse to be co borrowers to enhance your overall eligibility in terms of higher home loan amount but for personal loans the lenders, generally, do not allow any other person to join as co-borrower. So, the eligibility for personal loan is fully ascertained on the basis of your own income and you have no scope to enhance it by adding anyone else.

However, if the personal loan to be taken is in the nature of marriage loan, the bride and groom are allowed to make a joint application for such loan.  So in case of marriage loan making your future life partner as co borrower can help you get higher amount of personal loan if the other person is also earning.

Personal Loan Tips

Now a days with easy availability of personal loans from banks as well as from Non-Banking Financial Companies (NBFC) people face a problem of plenty and find difficulty in choosing the right lender to minimize the cost and optimize the benefits. Here are some tips to do that.

1. First and most important tip is to check your credit score on any of the credit information bureau like CIBIL before you apply for any loan. Your credit score is the starting point for the lender to help to decide whether you can safely service the personal loan being applied for. Generally, a CIBIL credit score of 750 and more is acceptable to the lenders as most of the loans have been given to person with this minimum qualifying credit score. So, unless you have the minimum qualifying credit score, it does not make sense for you apply for personal loan as the application is most likely be rejected.
2. After you have checked your credit score and before you apply for personal loan, you should do a thorough research about the various personal loans available in the market. There are various websites like https://www.jindalfintech.com where you can get details of various providers of personal loans. While doing this research you need to ascertain who is providing the personal loan for the tenure for which you want as the maximum tenure of personal loan varies amongst various lenders. You also need to understand the processing charges levied by various lenders for processing your loan application. You should also do a thorough research on the various terms and conditions attached with prepayment charges because this is the major cost after the interest cost.
3. As personal loans carry very high interest rates, you should properly work out your personal loan requirement. The requirement of personal loan should be arrived at with detailed working rather than with just guess work. A good estimate of requirement of personal loan should neither be on higher side nor on lower side. This exercise will help you minimize the cost of the interest which you pay on personal loan as well as help you avoid payment of prepayment charges which are levied in case you prepay your personal loan before its tenure. Some of the lenders allow you to prepay your personal loan only after you have paid certain instalments. There are other lenders who let you part prepay your personal loan every year up to certain percentage of the amount outstanding. So, in case you are not sure of the tenure within which you would be able to pay the loan, it would be good idea to select lenders who offer you such flexibility in prepayment of the loan.
4. Generally, lenders do not allow you to have two personal loans at the same time. So, in case you are already servicing a personal loan, the probability of your getting another is low. So, ensure that there is a gap of at least six months between two application for personal loans.
5. The eligibility for personal loan is dependent on your ability to pay the certain every month. So in case you are not able to get the personal loan within the tenure initially opted by you and since the lenders do not allow any joint borrower except in case of wedding loan, the only option available to you to enhance your eligibility is to opt for the longer tenure of personal loan.
6. Since your loan amount eligibility is also dependent on the amount of any existing liability being serviced, it is advisable to pay up all your credit card outstanding in case you have opted for carry forward of the credit card outstanding due as allowed by the credit card issuer.
7. Deciding about the tenure of personal loan is the most difficult part of the entire process because in case you opt for the longer tenure you end up paying either interest for the longer period for extended period else you will have to bear the prepayment penalty. In case you opt for shorter tenure resulting in higher Equated Monthly Instalment (EMI) it may cause stress on your cash resources. This may sometimes may affect your credit score and credit history as well. So do a thorough calculations and deliberations on the amount which you can comfortably service month after month.
8. As the banks generally charge processing fee for processing your loan application, which adds to your cost, you will be able to reduce this cost if you have good credit score as well as have existing relationship with the lender. The processing fee is negotiable and can even be waived fully if you have strong credential and negotiating skills.
9. Since interest is the most important cost component of the personal loan, it is very important for you to understand the interest rate mechanism. Whether it is fixed rate or floating rate. It is important to understand how the interest is charged on personal loan being offered. In case of flat rate, the interest is charged on the entire amount of loan throughout the tenure of the loan without giving credit for the EMIs paid. You should opt for the loan where the interest is charged is on reducing balance of the loan instead of the original amount of the loan.
10. his the most important tip. As it happens in marketing. Do not rely on the promises verbally made to you by the representative. Insist for written confirmation for all the benefits or concessions offered by you.
11. Work out your overall cost taking into account the rate of interest as well as the processing charges which you may have to pay before you zero in on any particular lender.

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