Going for personal loan, things to keep in mind

Personal loans are one of the most versatile loans, with no restriction on what one uses them for and are unsecured loans, that is they do not need any collateral, which is the reason why they come at such a high interest rate. Personal loans can be used to purchase consumer goods, wedding, personal use, etc.

However easy it may sound, one should be very careful while selecting personal loans. Few of the important factors that one should remember while selecting a personal loan are:

1. The amount should align with your needs, which means one should not take un-neccessary high amount of debt and end up paying for long durations.

2. The tenor of the loan should be kept as little as possible, because the interest paid is a function of time and longer the tenure of the loan, more interest you pay to the lender. If you have the capacity to repay the loan in 3 years it shouldn't be extended to 4 years.

3. Variable interest loans are not always better, although there are possiblities that the interest rate might fall in future, but the chances of it going up are equal, therefore one should play safe and take up fixed interest rate personal loans. Always do research before selecting the type of personal loan.

4. As opposed to personal belief, in case of default, the lender can impound the property of the borrower for a limited time ( till repaid) or permanently.

5. Holiday period or the duration when the loan is not serviced are good for maintaining liquidity, but at the same time they increase the tenure of the loan and the borrower ends up paying more.

Bajaj Finserv to offer online personal loans

Bajaj Finserv has announced a new personal loans product, which would allow the customer to apply for personal loan online. The scheme would allow the salaried customers to get their loans approved online without them having to visit company office.

The customer needs to punch in his details like PAN Card, salary and employment information and he/she can know the limit they are eligible for. If the customer meets the criterion and the loan is approved, the company picks up the required documents from the home.

Company claims if the documents are verified,the loan can be disbursed in 3 days of applying. The service however comes at a price, in addition to 1-2% of processing fee, the customers will have to shell out Rs.999.  The loan product will provide an additional benefits, which include accidental cover of Rs. 5 lakh, one year access to online tax filing, and 0% EMI card which can be used to make purchases on EMIs.

Personal loans are available for minimum of Rs. 1 lakh up to Rs. 25 lakh, however online loan applications are limited at Rs. 15 lakh.

Banks look to corporate segment to fuel personal loan growth

Banks are looking to increase their unsecured loans portfolio by providing personal loans to corporate sector. The banks are going cautious by checking the credit history of the borrowers, but are also lending to first time borrowers. In case of first time borrowers, the bank makes a more stringent checks.

The banks have also limited the principal amount to first time customers. Corporate customers can however benefit if their company has a tie-up with the lender, since banks allow advances to such customers even if they do not have a credit history. Also such clients get a quick appraisal and sanctioning within an hour. However the banks do not take into consideration any other debt which the customer has with any other bank.

HDFC Bank's Priority Pass is one such product for the corporate clients, setting up terminals outside their offices, where the application is received and processed at the branch office, and once the loan is approved, the amount can be disbursed within 48 hours. To attract more customers, the banks are also waiving off processing fees, which has resulted in higher queries for personal loans.