Blogs

Money requirements are so unpredictable that you just cannot plan each and every necessity of life. As with all other discoveries in various other fields financial experts have come up with tons of solutions to overcome this requirement. Applying for a loan is a win-win situation to both lender and receiver. A loan applicant is satisfied that his financial requirement is solved in the given time frame and the lender is happy that he earns profit in that given time frame. So in a very simple word Loans are the best buddies to solve planned and unplanned money requirements. And as life has different phases our requirements also vary from the span of time and age. Apart from this plan, there is certainly money matter which does not have the proper shape but may have a valid purpose, so these are called unplanned loans. Education Loans, Vehicle Loans, Home loans, and many others come under the planned category. And unplanned money requirements come under Personal Loan. 

Some of the reasons for taking a personal loan are as follows:

• Weddings arrangement
• Home revocation
• Registry of land
• Buying furniture for home
• Down payment for a new car
• Medical emergency
• Business expansion
• Vacation or trips
• Buying valuable gifts
• Paying credit cards bills

A quick guide needs to be followed when you are planning to apply for a personal loan

Defined Requirement

Calculate and evaluate your requirement rationally, as you have to repay this amount with interest. 

Loan Eligibility

Nowadays loan eligibility criteria are available on the bank and finance-related websites, go through these eligibility criteria as the bank will also approve a loan on basis of these criteria.

Salaried Class Personal Loan Eligibility Criteria 

Age Group	21 years to 60 years
Minimum Monthly Income	Rs. 15,000
Work Experience	months with the current organization
Documents Required	Residence Proof Identity Proof Pan Card Bank Statement of last 3 months Income Proof of last 3 months Photographs passport size

Self-Employed Applicant Personal Loan Eligibility Criteria 

Age Group	25 years to 65 years
Minimum Annual Turnover	Rs. 15,00,000
Minimum Profit excluding Tax of Previous financial year	Rs. 2,00,000
Minimum Business Experience	3 years
Documents Required	KYC Documents- Identity Proof, Residence Proof, Birth certificate matched   with Aadhaar Card Firm Address proof Financial Documents  PAN Card Bank Statement of last 6 months

Below are the easy steps to apply for a personal loan

Product Comparison

Every product has an eligibility criteria and approval process so before you start or move your personal loan application, it goes through all producers, features, and eligibility criteria. And then is compared with similar products of different lenders. This comparison will lead you to the best product available in this market.

Some of the points of comparison are as follows:

1. Documentation - Documents are your financial representation in front of the approval team of the lender. So don’t give false commitment and submit verified and clear documents. Go through the list of documents required for loan approval and submit those in the same sequence as it is required by the bank. Every bank drafts a list of documents according to their loaning ideology. Like some require Form-16 A & B with a 3-month salary/income statement to access your financial liabilities, some require a 6-month statement, so you need to be cautious while going through the list of these documents. Don’t process your file if you do not have the documentation required as almost 80% of loan cases get rejected in this documentation check step
2. Interest Rate - The rate of interest is one that varies from bank to bank, so you need to choose a low-interest rate offer, as the lower the interest rate the lesser interest you have to pay. For this, you can negotiate with banks as banks are also flexible to attract new customers.

Below is the list of Interest Rate of some of the leading banks and lenders of India:

Name of Bank	Interest Rate
SBI	9.60%
HDFC	10.50%
ICICI	10.75%
AXIS	10.49%
KOTAK	10.40%
RBL	13.99%
BAJAJ FINSERV PERSONAL	12.99%
IDFC FIRST BANK PERSONAL	10.49%
TATA CAPITAL	11.25%
IIFL	12.99%
HDB FINANCIAL	13.99%
KARUR VYSYA BANK	12.00%
MUTHOOT	14.00%
YES	10.40%
STANDARD CHARTERED BANK	11.50%
UNION BANK OF INDIA	11.00%
CANARA BANK	13.00%
BANK OF MAHARASHTRA	10.85%
FEDERAL BANK	11.49%
SYNDICATE BANK	13.40%
BANK OF BARODA	10.50%
PNB	8.95%
INDIAN OVERSEAS BANK	11.50%
INDIAN BANK	11.05%
CORPORATION BANK	12.95%

3. Processing fees - It is one of the extra burdens on loan applicants, as he will get the loan amount after detecting this amount. The bank takes this amount as internal fees for accessing your candidature for loan approval. Normally the bank doesn't return if he rejects your file, so please be very particular on submitting your documentation and in-person verification. But nowadays to attract new customers some of the banks do not charge processing fees. So please go through the bank feature before applying for a loan and negotiate with the bank officer to completely wave off this fee. These two cases are explained with the help examples: 

CASE-1

CASE-2

BANK-X CUSTOMER NAME- Mr. Alok’s Case Mr. Alok wants to expand his small business and he zeroes down his requirement. Mr. Alok required 10 Lakh immediately, he approached Bank-X and without going through the feature he moved the file and the loan got approved. But at the time of loan disbarment, he got shocked as he received the amount after detecting 2% processing fees. Mr. Alok would have saved 2% if he had negotiated to waive off processing fees.

BANK-Y CUSTOMER NAME- Ms. Pratigya’s Case Ms. Partigya wanted to purchase Scooty but she was short of some amount. She zeroes down her requirement and researched and compared loan proposals of different banks and landed with Bank-Y which has a low-interest rate with low processing fees. She then negotiated with the bank and they waved off the processing fees.

4. Approval Process Time - A personal loan is unsecured and has fewer eligibility criteria for approval. Hence the approval process of a personal loan is not more than 5 working days, even some banks give approval just in 24 hours. Nowadays submitting and in-person verification is so fast the lender gets all the information in a single click.  To avoid a prolonged approval time to submit and provide all verified documents and information.

5. Tenure Options - Personal Loan is a solution but EMI’s are a burden so please do not get for a lesser amount of EMI, it may be attractive to borrowers, but understanding the principal paying lesser EMI  means the loan is for a longer tenor and the borrower is paying more interest. So it advisable to go for a shorter tenor. 

By calculating the EMI 

Equated Monthly Installment i.e EMI consists of interest and principal amount. A simple calculation of EMI is the loan amount and decided interest is divided by the time span.

Formula to calculate EMI:

E= P x r (1+r)n /((1+r)n -1

E = EMI

P = Loan Amount

r = rate of interest calculated on a monthly basis

 (i.e., r = Rate of Annual interest/12/100. If the rate of interest is 13.65% per annum, then r = 13.65/12/100=0.0011375)

n = tenure / number of months

For example, if the loan amount is Rs. 10,00,000 at 13.65% interest for the tenure of 5 years then if you apply the formula you can calculate EMI 

E= P x r (1+r)n /((1+r)n -1

E=10,00,000X0011375x(1+0011375) 60/{(1+0011375)60 -}

EMI= 23,087

Be Careful while choosing EMI

For immediate fund arrangement, going to the bank or to any RBI approved financial Institution is the best professional solution, by this, you will actually save yourself from many other social obligations and problems, but we have to be very cautious while going for a loan, as now we are actually dealing with law and government bodies. So after this signing, you are bound to pay according to the mutually signed agreement. And if failed then you will be a finance defaulter, so before going for Personal Loan calculate the monthly expenditure budget and check your financial paying limit for the whole repayment tenure. While checking and calculating you will yourself be zeroing the actual loan amount you are comfortable in paying. 

Flexible Repayment

In today’s age where you have plenty of options to raise your income, the Flexible Repayment feature is very important. This feature gives you the liberty to close your loan well before the fixed tenor, simply if you have money personal loan before the tenor and save money. Yes, this service is payable and is called foreclosure fees. These foreclosure fees differ from bank to bank and you have to compare this Flexible repayment option before applying for a personal loan. We have discussed Ms. Pratigya's case for processing the charger. After discussion with the lender, she proceeded for the loan, but after some time she got a bonus from LIC, now she wants to close the loan, she availed the offer and closed the personal loan before tenure and saved almost Rs. 5,000 to Rs. 10,000.

So you are suggested to choose the product according to your requirements. Compare the product with other banks and other financial institutions, read loan offers, check loan eligibility, documentation required, and repayment schedule. Here it is important to always believe in written documents, verbal assurance doesn’t have any space in money matters. Make sure to submit verified documents and you will get a personal loan to solve your immediate money requirement. A personal loan   is unsecured and has fewer eligibility criteria for approval. The approval process of a personal loan is also less time taking, you will get approval in not more than 5 working days,  whereas  some banks even provide approval in just 24 hours.

Moreover, be very careful while applying for the loan and decide upon its tenure wisely as you would not want to pay a higher interest rate as compared to the other loans.