Those who can get a personal loan the most easily are the salaried persons. No bank or Non-Banking Financial Company (NBFC) is ever likely to refuse you a loan if you have a regular income, especially a secure one as monthly salary. The higher your salary, the better your chances of getting a personal loan. Personal loans being unsecured loans – ones that don’t ask for any guarantee or collateral security – are quite risky from a financial institution’s perspective. Recovery of a personal loan becomes difficult if you do not have a regular income. So it is important for institutions to determine that you have a regular income, and a good repayment capacity.
The best part about personal loans is that you can take them for any reason. It could be for your wedding, a foreign holiday, a medical emergency, debt consolidation, interior decoration of your house, or education of yourself, spouse or child. No reason is too insignificant for a personal loan, as long as you have a good credit score and can convince the bank that you have the repayment capacity. You also need to ensure that you are providing all the required documents – PAN, identity proof, address proof, income proof, and income tax payment proof.
Let us look at personal loans from different financial institutions for a clearer idea.
SBI Saral Personal Loans for tenures of up to 4 years. The loan amount you can get depends on the city you live in and your salary. For metro and urban centres, the minimum amount you can borrow is Rs.24,000, while in semi-urban and rural centres, you can take as low as Rs.10,000 as loan. The maximum loan amount is 12 times your net monthly salary, up to Rs.10 lakh. The bank charges a processing fee of 2% to 3% of the loan amount in addition to service tax and the rate of interest is 3.95% more than the 2-year MCLR. The interest rate as on January 6, 2017, is 12.95%.
The bank also has the SBI Xpress Credit Personal Loan, which gives you up to Rs. 15 lakh over a repayment period of a maximum of 5 years. The processing fee is 1% of the amount and the interest rate is between 12.45% and 14.95% – that is, 345 base points to 595 base points higher than the 2-year MCLR.
With the Star Personal Loan from Bank of India, you can get both unsecured and secured loans. The minimum amount you can borrow is Rs.10,000 in urban and metro centres, and any amount in semi-urban and rural centres. The unsecured personal loan comes with an upper limit of Rs.5 lakh, while by providing a collateral security will allow you to take loans of up to Rs.10 lakh. The assets you can provide as security include mortgage of an owned house or commercial property, hypothecation of items bought with the loan, gold coins or ornaments, Bonds, LIC policies, National Savings Certificate and Indira Vikas Patrika.
The tenure of the loan is 3 years for unsecured personal loan and 5 years for secured personal loan. The bank will, however, consider a 5-year repayment schedule for unsecured loans as well, if you have a genuine reason. The bank charges a processing fee of 2%. The interest rate for the loan is as follows:
|Loan type||Interest rate||Current interest|
|Secured personal loan||4% + 0.3% (Business Strategy Spread) + 1-year MCLR||13.55%|
|Unsecured personal loan||5% + 0.3% + 1-year MCLR||14.55%|
ICICI Bank personal loan comes with quick approval and disbursement within 3 working days. The loan is unsecured in nature, and can be repaid in periods of 1 to 5 years. The maximum loan amount is Rs.20 lakh. You can also take an All Safe insurance on your loan to protect your family from liability in case you die before the loan is closed. The bank charges a processing fee of up to 2.25% of the loan amount in addition to service tax. The interest rate for ICICI Bank personal loans ranges from 11.59% to 22% p.a., depending on the company you work in, your salary, and the loan amount. You can negotiate a good rate if your credit score is high, and you’ve had an account in the bank for several years.
Bajaj Finserv is an NBFC, and the key benefit of getting a loan from an NBFC is instant approval and higher loan amount. You can borrow up to Rs.25 lakh, and repay it in 2 to 5 years. You have to pay a processing fee of 2.25% to 3% of the loan amount, and interest rates start from 11.99%.
One thing to remember about personal loans is that most banks and NBFCs charge pre-payment fees if you want to pay off your loan partially or fully. This fee may be up to 4% of the outstanding amount. Check with your bank about foreclosure charges before taking the loan.