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.

Personal loan Scheme of SBI stands out cheaper than competitors

SBI has launched a personal loan scheme with much lower interest as compared to private sector banks. It has offered loan at rate 11.25% to the existing home loan customers. According to the scheme, the value of the property for which the borrower is paying EMI is being evaluated. 75% of the amount will be provided by lender to the customer applying for personal loan after deducting the outstanding property loan amount.

"It is too early to gauge how successful the scheme is since it was launched less than a month back," said an official from SBI on condition of anonymity.

Industry experts believe that this type of scheme which benefits home loan borrowers in opting for personal loans to will attract customers of other banks too. SBI has made a mark being one of the largest players in home loan segment.

Tips to select suitable Personal Loan

High interest rates are always an issue while selecting the personal loan option. So take into account various rates offered by different lenders. Carefully examine all the terms and conditions of the respective lenders. You have three options available for choosing interest rate payment – fixed, floating and flat rate.

You need to maintain a good credit history and a good rapport with banks. This helps in lowering interest rates to some extent.

Few main points to be kept in mind are:-

• Amount of loan

Lower the amount of loan, lower is the loan tenure and EMIs.

• Duration for Repayment

If the loan amount is large, opt for longer period for repayment. It lowers your EMIs but becomes more expensive in the long run.

• Fees or Charges

Calculate all the costs associated like processing fees, pre-payment or late payment charges, service tax etc.

Personal loans-Excellent mode to meet your regular expenses

Irrespective of how rich you are, at some point or the other you may feel to avail the personal loan to meet your financial needs. This could be either required to fulfil the simplest of the household requirements or the ones requiring meeting your family vacation trip demands. They can really help you to meet your demands in a short period of time. Being a parent you can avail such loan for marriage expenses and even at the time of medical expenses. You may be thinking to give a surprise to your wife or husband but the cost of the gift item is stopping you from purchasing it. Such loans can help you to fulfil that need.

Personal loans come helpful at the time of occasions such as marriages, honeymoons, holidays and many more but not for any business purpose.

Summary: Personal loans can really help you to meet your regular expenses are considered for a shorter period of time.

Personal Loan rate- On a rise

The best option available nowadays to clear off your household expenses in case you are struggling to do the same is by availing personal loans. But don’t forget there is always a certain amount of interest associated with it that you need to pay back along with the return of the loan. Check out the personal loan rates available with different banks (which obviously is on a rise) and go along with the one offering lower interest rate and a good amount of time frame is also been allotted.

Personal loans can be greatly used for various special events such as planning of any holiday’s trip or marriages but you should be careful about different bank policies behind the same. It is therefore a must to understand the personal loan rates with different finance companies so that you can enjoy a tension free time paying off your pending dues.

Summary: Personal loan rates may differ from bank to bank and hence should be considered very carefully.