Ultimate Personal Loan guide – PL buyer’s guide in India 2019
What is a Personal Loan?
Personal Loan is generally a unsecured loan which a individual take to cater their financial needs. Personal Loan do not require any collateral in India, but to get personal loan you may have to provide a few mandatory documents to the bank or the financial institution who is providing you the Loans.
A predefined set of documents are required by salaried or self employed individual to get a personal loan from any bank or financial institution, based on these document the lender may be able to understand your financial capacity to repay the loan. Based on this a bank may approve or reject your personal loan.
Here is a ultimate guide to understand more about Personal Loan in India, This personal loan guide will help you understand the process and the details required to get personal loan easily in India
Types of Personal Loan
Generally, Personal Loan can be used anywhere, Bank may not ask the end use of your personal loan, But, still personal loan are categorized in a few type.Here are the types of Personal Loan offered by various banks in India which a salaried or self employed can avail.
Marriage / Wedding Loan
This is a loan which can cater to your wedding expenses like hall booking, hotel booking, wedding invitations printing, jewelry shopping for different occasions, deciding on the caterers, etc.
Home Renovation Loan
A home renovation loan is a loan that can meet your home repair and renovation expenses like repairing ceilings, changing wooden flooring, painting walls, furniture repairs, etc.
Such a loan is also tax-free. So now for your home renovation expenses, there is no need to touch your savings.
Consumer durable Loan
Such a loan is taken to buy home appliances and gadgets like TV, refrigerator, mobile phones, microwave, and tablets.
Almost all banks offer 100% amount for such purchases.
Now you can go on your dreamed holiday destination without affecting your monthly budget or savings. Such loans depend on your creditworthiness and travel destinations. This loan also has low-interest rates.
Even though you have already taken a personal loan, still you can apply for more loan amount. A top-up loan can be taken after 6 or 12 months and has lower interest rates and tax benefits.
The agricultural loan helps a farmer to meet his agricultural expenses like crop cultivation, buying agricultural machines, etc. Such a loan has low-interest rates.
A Bridge loan is taken to pay off bigger loans. This is a loan that is useful for short term fund requirements. Such loan has a tenure of 1 year.
Such a loan is taken to meet the festival related expenses. They have low-interest rates.
Such a loan sees that your account will have sufficient amount of money in emergency times.
Such loans can be given to those who just started getting a salary.
NRI Personal Loan
Such loans are specially given to those who are NRIs.
Complete Personal Loan buyer’s guide (2019)
Eligibility for a Personal Loan
Following are the minimum criteria / conditions for salaried and self employed individual to check before you apply for a personal loan.
|Particulars||Salaried employee||self-employed person|
|Age||21-60 years||25-65 years.|
|Minimum Income||₹ 25000||₹ 25000|
|Loan Amount||Minimum Loan Amount ₹ 75,000.|
Maximum Loan Amount ₹ 15 Lacs.
|Minimum Loan Amount ₹ 300,000.|
Maximum Loan Amount₹ 20 Lacs.
If you want to check your eligibility of personal loan amount, then there are a lot of online eligibility calculators available to check your Loan Eligibility. These eligibility calculator may not provide you the exact same eligibility, but it will show you somewhat approximate loan amount which you may get based on your salary.
Documents required for Personal Loan
|Document Type||For a salaried employee||For a self-employed person|
|Government Approved ID||Required||Required|
|Shop Act License||NA||Required (Mandatory)|
Personal Loan Rate of Interest for various Banks
|Bank Name||Interest Rate|
|HDFC Bank||11.25% to 21.50%|
|Tata Capital||11.75% to 18%|
|Citibank||10.99% to 17.99%|
|SBI||12.75% to 14.75%|
|ICICI Bank||11.25% to 22.00%|
|Kotak Mahindra||11.25% to 19.99%|
|Bank of Maharashtra||12.70%|
|Dena Bank||13% to 14%|
|Yes Bank||20% to 22%|
Generalized Steps for Personal Loan processing in India
Below are the generalized step which may give you a rough Personal Loan process in India. This steps are not the exact loan processing steps followed by all the bank, but overall to the steps are some or what same for all Personal Loan processing in India.
Fill up the application form either online, or via a authorized Loan provider or by visiting the branch office.
Along with the application form, you have to give 2 passport-sized photographs and following documents
- Government-approved ID like Pan card /Voter’s ID/Passport /Driving License
- Address proof like ration card/electricity bill/passport
- Last three months of bank’s statement.
- Employment Certificate
- Last three months salary slips.
- If you are self-employed then education certificate is required.
- A Self-employed personal also has to submit his business’ shop act license
- A CA certified ITR of the last two years is also required for a self-employed individual.
After receiving the application, your credit score will be checked.
Now the submitted documents will be verified by the verification team. They will send a representative to your home for checking the address. (if required) They will also send a representative to your office to check whether you are really working there or not (if required) .
If the verification team gives a green signal for the further process, then the processing team will make the loan agreement having all the terms and conditions which you will be required to sign. After signing of the agreement, the personal loan amount will get credit in your account within 24 hours.
Amount & Tenure of a Personal Loan
Following are the general range of amount and loan tenure for Salaried and Self Employed Individuals
For Salaried Individual
- Minimum Loan Amount – INR 75,000
- Maximum Loan Amount – INR 15 Lacs
- Loan Tenure – 12 to 72 months
For Self Employed Individual
- Minimum Loan Amount – INR 300,000
- Maximum Loan Amount – INR 20 Lacs
- Loan Tenure – 12 to 48 months
Tax implementation on Personal Loan in India
- Currently, under the GST regime, service tax is charged at 18% on the processing fee.
- There is no tax charged on EMIs
- GST is imposed on prepayment penalties, late payment fees, and foreclosure charges.
Things to know before availing a Personal Loan
There are a few things which you need to understand before signing the loan agreement. These things may help you save few thousand bucks if you read the condition properly and negotiate with the banks. Here are the things that need to be consider before taking a personal loan.
- Processing fee
- Prepayment charges
- Part Payment charges
- Late Payment fee
- Credit Score
The processing fee is charged when you apply for the loan. It can range from 1 to 3% of the loan amount. Some bank also charge a flat amount like 2999 / 3999 if the loan amount is less. Some banks are ready to negotiate the charge as well. Here is list of the banks and their respective interest rate and processing fee.
It is a charge which you would be required to pay if you decided to clear your loan amount before the tenure. Some bank may not charge for the prepayment based on your relationship with the bank and your negotiations.
Part-payment is the payment of at least 3 EMIs at one go.
Late payment fees
If you are late to pay the EMIs on time, then you will be required to pay late payment charges.
A credit score tells whether you will be able to repay the loan amount or not. You should have above 750 scores for getting the loan.
For any other Questions regarding personal loan check out our FAQ Page here.
Personal Loan tips for the first time buyer
- Before applying for a personal loan, do check your credit score. Because if it is below 750 and you approach the bank and if the bank rejects your application because of the low score, then the rejection will lower your score even further.
- Apply for the loan amount which you will be able to pay within the stipulated time.
- Applying for the loan amount which is higher will make your application reject.
- A personal loan is the right choice if you require the fund for a short period of time and you don’t want anything to be kept as collateral.
- Before choosing the lender do thorough research.
- You can get a higher amount of loan amount if you apply for the loan jointly.
- Check you Loan Amount Eligibility using various Eligibility Calculators available online.
How LoansXpert can help with your first Personal Loan?
LoansXpert has a expert team of financial advisers who will help you in selecting the right lender based on your requirements. There are different bank and NBFCs that offer different interest rates for different companies, different salary range, etc. So LoansXpert’s team will guide you to get the best personal loan deal out of the many loan providers.
There are also different charges that are charged to you. And there are also various terms and conditions that you are required to know. LoansXpert’s team will guide you to understand the terms and condition which you may not be able to understand or which are ambiguous. This will help you in getting into the trap of charges and fees on prepayment, part payment etc.
And do keep in mind that if a bank is not satisfied with your application and if it rejects it then your credit score will be affected. Hence if you want to be safe from all of the above complications, then LoansXpert will help you in getting selecting the right lender.
We have a team of experts who are proficient in providing financial and loan consulting advice from a longer period of time.