FAQs
Frequently Asked Questions
Am I eligible for personal loan?
You must have a regular source of income to avail a personal loan whether you are a salaried individual, self-employed business person or a professional. A person's eligibility is also affected by the company he/she is employed with, his/her credit history his/her residential location and other factors as per the lender’s criteria.
How is the maximum loan amount decided?
When calculating the maximum personal loan amount in case of salaried people, the bank/financial institution takes care that the EMI does not exceed 30% to40% of the applicant’s take home salary. Any existing loans that are being serviced by the applicant are also considered when calculating the personal loan amount. And, for the self employed, the loan value is determined on the basis of the profit earned as per the most recent acknowledged Profit/Loss statement, while taking into account any additional liabilities (such as current loans for business etc.) that the applicant might have.
What is the tenure of a personal loan?
Personal loans feature tenure of 1 year to 5 years or 12 to 60 months. In rare cases, shorter or longer personal loan tenures may be allowed by the borrower on a case by case basis.
Can I apply for a personal loan jointly with my spouse?
Yes, personal loan can be applied either by yourself (singly) or together with a co-applicant (jointly).The co-applicant needs to be a family member like your spouse or parents. By getting a co-borrower, your loan application will be processed in a higher income bracket, enabling you to avail a larger loan amount. However, keep in mind that if either you or your co-applicant have poor credit history, the chances of success of your loan application may be adversely affected.
What are the key steps in the loan approval process?
Approval of loan is at the sole discretion of the loan sanctioning officer who bases his/her decision on the basis of the criteria specified by the bank/ financial institution. The entire process can take from about 48 hours to about two week's time. Once all the necessary documents are submitted and the verification process is completed, the loan, if sanctioned, is disbursed within seven working days by the bank. In order to avoid delays in loan processing and disbursement, do keep all necessary documents ready along with the post dated checks (PDC) and/or signed Electronic Clearing System form.
How to decide which bank/financial institution to take the loan from?
It is always a good idea to compare the offers of individual banks before you decide to settle on a specific provider. Use online tools like the loan eligibility Calculator and personal loan EMI Calculator to find the loan option that suits you the best. Some of the key factors to consider when deciding on a loan provider include interest rates, loan tenure, processing fees and others.
Should I always choose the lowest possible EMI when choosing my loan provider?
Low EMI offers can typically result from a low interest rate, a long repayment term or a combination of the two factors. Thus in some cases, you might end up paying a lot more to your lender as interest if you choose the lower EMI option. Instead use online tools like the personal loan EMI Calculator to figure out your interest payout over the loan tenure and your repayment capacity before making your decision.
Is there any extra charge payable when applying for personal loan?
Yes. In addition to the interest payable on the principal amount, there is an additional non-refundable charge that needs to be paid when applying for a personal loan. Processing fees, which are usually 1%-2% of the loan principal, are charged by the lender to take care of any paperwork that needs to be processed as part of the personal loan application process. This charge may be waived by your lender in case you have a long term association with the lender.
Are personal loan interest rates fixed or floating?
In case of a fixed rate personal loan, your EMI amount remains fixed therefore every month during the loan tenure, you will pay the exact same amount as EMI. In case of a floating rate personal loan, the EMI amount will keep decreasing as it follows the reducing balance method of calculating interest payout on a personal loan. In case of a floating rate, the applicable interest rate may be varied by the bank periodically as per the new MCLR rules, floating interest rates may be changed either on a half yearly or yearly basis.
What is the difference between reducing and flat interest rate?
As the name implies, Reducing Balance Interest Rate involves the borrower to pay interest only on the outstanding loan balance, i.e. the balance that remains outstanding after getting reduced by the principal repayment. Flat Interest Rate is wherein the borrower needs to pay interest on the entire loan balance throughout the loan term. Thus, the interest payable does not decrease even as the borrower makes the periodic payments (EMIs).
What is relationship discount?
Relationship discount is an additional benefit that is provided by the banks or lenders to a prospective applicant if they have a pre-existing relationship with the lender. Such pre-existing relationship may include having a salary/savings account with the bank or having an existing credit card, fixed deposit or loan with the prospective lender. Relationship discounts may result in the lender providing you with discounts when applying for the loan like – waiver of the processing fees, lower interest rates or others.
How is the personal loan disbursed?
Once you get approved for a personal loan, you may either receive an account payee cheque/draft equal to the loan amount or get the money deposited automatically into your savings account electronically.
Is there any Balance Transfer offer on a personal loan? Are there any benefits of this balance transfer?
In some cases, a lender would allow you to transfer the current balance (amount still to be repaid) on your current personal loan from current lender to a new one. In this case, the new lender would pay off the balance amount to the current lender. At the end of the balance transfer process, you will owe the new lender whatever payments plus applicable interest that is left on your current loan.
A balance transfer helps you benefit from the lower interest rate offered by the new lender, however, there are a few charges such as balance transfer fee, pre-payment charges, etc. that may be applicable to the procedure.
What do the terms settlement, default and closed mean? Does it affect my credit score?
If you get a copy of your credit report, you might come across the terms – settlement, default or closed with respect to your old or current loans and credit cards. The term “settlement” means that you and the lender have come to an agreement according to which, you have paid a portion of your dues and the lender would no longer pursue you for the balance amount. Up to 40% of your total dues may be waived off by the lender as part of the settlement process however it should be used as a last resort when you are having problems with paying off your dues. If any of your borrowings is marked as a “default”, it means that you have not paid your dues with respect to that loan or credit card. Additionally, you and the lender were unable to come to an agreement regarding the outstanding dues. A “closed” tag is only provided to your prior loans or credit cards and it indicates that these loans/credit cards have been paid off in full.
How is personal loan different from loan against credit card?
Loan on credit card is an offer that you may be able to avail on your credit card. In many ways a loan offered on a credit card is similar, especially in terms of the interest rate and the loan tenure. However, a loan on credit card is only applicable to specific credit cards and you cannot approach any company other than your credit card issuer for a loan on credit card. In case of a personal loan, you can approach any lender for the loan. Moreover, credit card loans do not require any additional documentation unlike a personal loan application.