Personal Loan

Personal loan eligibility criteria can vary from one lender to another due to their varying credit risk policies. It can also vary as per the loan variant and the occupation profile of the applicant. Here are some of the personal loan eligibility criteria used by most lenders:

• Age: 18 - 60 years
• Salary: At least Rs 15,000 per month for salaried customers
• Income: At least Rs 5 lakh p.a. for self-employed customers
• Credit Score: Preferably 700 and above as having higher credit scores improve the chances of loan approval
• Employment Stability: Usually 1 year with some lenders requiring longer work experience
• Business Continuity: Usually 3 years of business continuity with some lenders requiring longer period of business continuity
• Employment Type: Salaried employees working with government, public sector undertakings, MNCs and other reputed corporates

Personal loan lenders require documents from their applicants to establish their identity, income, loan repayment capacity and place of residence. These documents are more or less the same across lenders. Here are a few common set of documents that you will need to submit when applying for a personal loan:

While the fees and charges of personal loans can vary widely depending on lender and the credit profile of the loan applicants, the following table will give you a fair idea of the personal loan fees and charges levied by the lenders:

Other fees and charges levied by the lenders include documentation charges, verification charges, duplicate statement charges and NOC certificate charges.

How to Get a Personal Loan with Zero Processing Fees

The personal loan processing fee charged by lenders can go up to 4% of the loan amount. However, some lenders waive off processing fees during special festive offers or promotional periods. Additionally, some lenders also waive off waivers or discounts in processing fees to their existing customers and/or applicants meeting predetermined cut-offs in terms of their credit score, income, occupation, etc. Thus, it is always a good idea to first approach the banks and/or NBFCs with whom you have your deposits, loans and/or credit card accounts. This should be followed by visiting online financial marketplaces like Paisabazaar to compare various personal loan processing fees offered by multiple lenders and then make the loan application.

Apart from processing fees, loan applicants should also factor in the interest rates while comparing loan options. They should use online APR calculators to compare various personal loan options on the basis of their overall borrowing cost.

You can calculate EMI on your personal loan using the formula: EMI = [P x R x (1+R)^N]/[(1+R)^N-1],

where,

• ‘R’ denotes the rate of interest
• ‘P’ denotes the principal amount
• ‘N’ denotes the loan tenure

As manual calculations can be time-consuming and prone to errors, using an online personal loan EMI calculator would be preferable. The calculator requires just a few basic details for EMI calculation, including interest rate, loan amount and tenure. Once the details are entered, the calculator will display the EMI, total interest amount and amortization schedule basis which you can compare various personal loan offers based on your loan repayment capacity.

Factors Affecting Personal Loan EMI

Three major factors that influence your personal loan EMIs are:

• Principal Amount: An increase in the principal amount leads to an increase in your EMI, provided the values for loan tenure and interest rate remain unchanged.
• Interest Rate: Personal loan EMIs increase with every increment in the interest rates.
• Tenure: Choosing a longer tenure on your loans results in lower EMIs. However, it also leads to higher overall interest cost on the loan.

The unsecured nature of personal loan increases credit risk for lenders as it leaves them with no collateral or security to compensate their losses in case of loan default. To mitigate this risk, banks and NBFCs factor in various aspects of their applicants’ credit profiles and follow strict eligibility policies when evaluating their loan applications. Those planning to avail personal loan can improve their chances of approval through these tips:

1. Maintain your credit/CIBIL score above 700
2. Check for inaccuracies in your credit report, as they might adversely impact your credit score and thereby, reduce the chances of loan approval
3. Compare the offers available from banks and NBFCs before finalising any loan deal
4. Apply for the loan from a bank/NBFC where you have the highest chances of approval
5. Avoid making multiple loan applications within a short period

Before applying for a personal loan, here are a few things you should know:

1. Many banks and NBFCs offer pre-approved instant personal loan offers to their existing customers: Many lenders provide pre-approved offers to their select existing customers based on their credit profiles. Such pre-approved offers feature quick disbursals and require minimal to no documentation. Many lenders also offer lower interest rates to their existing customers.
2. Having a higher credit score increases your chances of loan approval at lower interest rates: Banks and NBFCs prefer sanctioning personal loans to those having higher credit scores of 700 and above. Many lenders also set lower interest rates for such applicants. Having higher credit scores also increases an individual’s eligibility for pre-approved loan offers.
3. Increase your EMI affordability by choosing longer tenure: Longer tenure leads to lower EMIs. Hence, consumers wanting to increase their EMI affordability can select longer tenures and/or lower loan amounts when making the loan application.
4. No charges are levied on prepaying or foreclosing floating rate personal loans: RBI has barred banks and NBFCs from levying prepayment/foreclosure charges on floating rate personal loan. In the case of fixed rate, lenders can choose to levy these charges.
5. Making multiple loan applications within a short span might reduce your chances of loan approval: Lenders fetch credit reports of every loan applicant as part of their loan evaluation process. Such lender-initiated credit report requests are known as hard enquiries. Having multiple hard enquiries within a short period can lead to a sudden decline in your credit score, thus, reducing your chances of availing personal loan.

Mistakes to Avoid When Applying for a Personal Loan

When applying for a personal loan, avoid these common mistakes to improve your chances of approval:

• Not checking your credit scores: Applicants having credit scores preferably of 700 and above tend to have greater financial discipline, which reduces the credit risk of lenders. This increases the chances of availing personal loans and at lower interest rates. Thus, before making the loan application, applicants should check their credit scores and (if needed) take appropriate steps to improve their scores.
• Not contacting your existing lenders: Many banks and NBFCs offer concessional interest rates on personal loans to their existing customers. Some even offer pre-approved personal loans to their select customers based on their credit profiles. Therefore, when looking for personal loans, one should first approach the banks or NBFCs with whom they already have deposits and/or loans and credit cards accounts.
• Not factoring in your repayment capacity: Lenders usually prefer sanctioning personal loans to those having their total EMIs, including that of the proposed loan, within 50-55% of their monthly income. Those exceeding this limit should select a longer repayment period on their proposed personal loans to increase their chances of loan approval.
• Applying with multiple lenders in a short span: Applying for personal loans directly with multiple lenders in a short span will lead to hard enquiries, which can cause your credit scores to drop. Reduced credit score will lower your chances of availing personal loans. Instead, use online financial marketplaces like Paisabazaar to compare personal loan options without affecting your credit score.
• Not considering prepayment charges and related terms: Prepaying or foreclosing personal loans availed at fixed interest rates can attract prepayment charges of up to 5% of the outstanding loan amount from your lenders. However, RBI bars lenders from charging prepayment charges on personal loans availed at floating interest rates. Many lenders also limit their fixed rate personal loan borrowers from prepaying their personal loans until a specific number of EMIs are paid. Hence, those wanting to keep their part prepayment or foreclosure options open, should also look into these charges and their related terms when looking at personal loan offers.

The differences between an instant personal loan and a regular personal loan are as below

What is a Personal Loan Top-Up and How Does It Work?

A personal loan top-up is an additional loan amount offered to existing personal loan borrowers over and above their outstanding personal loan amount. Like personal loans, top up loans are unsecured and can be used to pay for various financial requirements. They are also faster and easier to avail than a new personal loan, as top-up loans are offered to borrowers who have already undergone the lender's checks for their existing personal loan, allowing them to get approved much quicker. Top up personal loans are usually offered to existing personal loan borrowers having satisfactory loan repayment history and having completed a specified number of EMIs.

Given below are a few personal loan schemes offered by some of the leading banks and NBFCs in India:

HDFC Bank

The interest rate of HDFC Bank personal loan starts from 10.90% p.a. The tenure of the scheme can go up to 6 years whereas the loan amount can go up to Rs 40 lakh. The bank also offers pre-approved loans with ‘10 second disbursal’ to its select existing customers based on their credit profiles.

• Interest Rate: 10.90% p.a. onwards
• Loan Amount: Up to Rs 40 lakh
• Tenure: Up to 6 years
• Minimum Salary: Rs 25,000 per month
• Age: 21-60 years
• Credit Score: At least 650
• Processing Fee: Up to Rs 6,500

ICICI Bank

ICICI Bank extends personal loan to cater to the varied financial requirements of its borrowers. The bank also offers Fresher Funding, a special scheme for funding immediate and other financial requirements of younger salaried individuals. For its select existing customers, the bank offers overdraft facility, pre-approved offers and top up loan facility. Its pre-approved offers feature minimal documentation and 3-second disbursals.

• Interest Rate: 10.85% p.a. onwards
• Loan Amount: Up to Rs 50 lakh
• Tenure: 1 to 6 years
• Minimum Salary: Rs 30,000 per month
• Age: 20 to 58 years for salaried and 23 to 65 years for self-employed
• Processing Fee: Up to 2% of loan amount

Axis Bank

Axis Bank Personal Loan covers expenses related to wedding, home renovation, travel, medical emergency and much more. The bank also extends pre-approved offers to its select existing customers. Such offers have digital processing and instant approvals. Axis Bank has also collaborated with Paisabazaar to extend its select customers pre-qualified offers.

• Interest Rate: 11.25% p.a. onwards
• Loan Amount: Up to Rs 10 lakh
• Tenure: 6 months to 5 years
• Age: 21 to 60 years
• Minimum Monthly Salary: Rs 15,000
• Processing Fee: Up to 2%

Kotak Mahindra Bank

Kotak Mahindra Bank offers loans only to salaried individuals. Existing borrowers of other banks/NBFCs can avail balance transfer facility to transfer their outstanding loan to Kotak Mahindra Bank at lower interest rates. Those exercising balance transfer facility can also avail top up loans of up to 100% of their loan amount. Kotak Mahindra Bank also offers an overdraft facility, giving borrowers the flexibility of withdrawing their funds from their loan account anytime and repaying it as per their convenience.

• Interest Rate: 10.99% p.a. onwards
• Loan Amount: Up to Rs 35 lakh
• Tenure: Up to 6 years
• Credit Score: At least 730
• Age: 21-60 years
• Minimum Monthly Salary: Corporate Borrowers - Rs 25,000 (for corporate borrowers); Rs 30,000 (for non-corporate salary borrowers)
• Processing Fees: Up to 5% of loan amount

IndusInd Bank

IndusInd Bank offers multiple personal loan schemes including wedding loan, home renovation loan, loan for medical expenses and loan for education. The bank also offers balance transfer facility to existing borrowers of other banks and NBFCs. For those requiring quick financing, the bank extends instant personal loan online with quick processing and loan approvals.

• Interest Rate: 10.49% p.a. onwards
• Loan Amount: Up to Rs 50 lakh
• Tenure: 1 to 5 years
• Age: for salaried - 21 to 60 years and for self-employed - 25 to 65 years
• Processing Fee: Up to 3.5% of the sanctioned loan amount
• Minimum Salary: Rs 25,000 per month

Why should I avail personal loan from Paisabazaar?

Checking personal loan offers on Paisabazaar will make the process faster, easier and more convenient. Here are a few more reasons to apply for personal loans through Paisabazaar:

• Check and compare personal loan offers from 30+ partner banks and NBFCs without adversely affecting your credit score
• Get pre-approved offers with instant disbursals
• Know your chances of Instant loan approval based on your credit score and other aspects of your credit profile
• Personal loan apply online through end-to-end digital process