A Guide To Personal Loans

An increasing number of Indian households are considering taking credit to fulfil their financial needs. From making big-budget purchases to meeting emergencies, getting a Loan is a sought-after choice. Now, there are various types of Loans in the market. They are meant to fulfil specific needs. For instance, you get credit for financing a car, house, wedding, vacation, or medical emergency.

But if you do not wish to restrict yourself with a specific purpose, Personal Loan is an ideal choice. It lets you decide the end-use based on your discretion without intimating the lender. Also, you need not submit any collateral to avail of it. This makes it convenient for everyone. But several aspects determine your eligibility and affect Loan approval. You should understand them and prepare accordingly. Let us know them better:

Eligibility criteria

This is the first aspect to understand for effectively planning your Loan application. Although the eligibility for Personal Loan differs from bank to bank, the general parameters remain the same. They include your age, income, employment, existing debts, credit score, etc. The lending amount, tenure, equated monthly instalments, and interest rate gets decided based on them. Hence, you should check the same before applying.

Loan tenure

Lenders sanction the Bank Personal Loan for a period of one to five years. The EMI's get spread out for the duration, making it easier to repay flexibly. Although you have a longer time to repay, you need not stretch the tenure to five years. You may choose to shorten it as much as possible to pay off the Loan faster. This reduces the interest pay-outs and overall Loan burden. On the other hand, a longer tenure reduces the EMI amount but increases the Loan cost.

Borrowable amount

You get up to Rs. 25 lakh as the Loan amount. This is ideal to fulfil diverse expenses without compromising. But it is not necessary to take up the maximum amount. Moreover, lenders finalise it based on your eligibility. Instead, you should decide the borrowable amount depending on your affordability. Check the Personal Loan interest rates it attracts and choose accordingly. Lenders let you calculate this with tools on their websites.

Interest rate and charges

Being unsecured, this Loan type does not require collateral submission. Hence, lenders need other means to protect their interests. Hence, they charge a higher interest. At present, most leading banks charge up to 12% interest. But this also depends on specific eligibility factors. Therefore, never go by the quotation. Check it against your eligibility. You get to do this conveniently with eligibility and an EMI calculator.

Besides interest, banks also levy specific changes throughout the Loan application process. They include documentation expenses, processing fees, administrative charges, etc. Check this carefully to estimate the accurate Loan cost. The information is accessible on their websites and the Banking app.

5 Factors That Affect Personal Loan Approvals

Earlier, getting financial assistance caused hesitancy in the minds of people. The burden of obligation stressed them out. But getting credit is no longer considered the last resort. Most applicants consider it wise to safeguard savings and get instant funds to meet financial demands. Whether it is for making big-budget purchases, financing emergencies, or fulfilling financial obligations, getting a Personal Loan is preferred.

Banks make it easier to apply for it through their websites and the Banking app. It gives you access to funds instantly with minimal paperwork, quick verification, and competitive Personal Loan interest rates. However, as lenders do not ask for collateral, they have stringent parameters to judge your eligibility. This impacts your application approval. Let us understand them in detail:

Existing liabilities

The Loan providers make it easier for you to manage the Loan with flexible repayment terms. They spread out the repayment in equated monthly instalments throughout the tenure. But this is only useful if you have sufficient funds to deploy for prepayment. In the presence of debts, it becomes challenging to manage an additional financial burden. Hence, if the amount of existing EMIs is higher, the Loan approval gets affected.

Income

Your revenue is the prime factor affecting your repayment capacity. If you have a higher income, you are better positioned to distribute it. We all have monthly financial obligations like rent, bills, maintenance fees, and other expenses. Having limited earnings makes it a struggle to fulfil them.

Adding a Loan to the list is not feasible. Hence, lenders consider this aspect while evaluating your eligibility. You get to check the same and plan your application with eligibility and an EMI calculator.

Job stability

Since there is no collateral involved, banks rely on your repayment capacity to repay the Loan amount. Hence, they check your financial stability. Having a higher income does not mean anything if it is not secured. For this reason, they weigh your employment history and employer's reputation for assessing longevity. In the case of Personal Loan for self-employed, they factor in the years of business existence and profitability.  

Credit score

It is the most important factor affecting your eligibility for Personal Loan. It depicts your repayment behaviour to them. This is crucial as that reflects the possibility of smooth repayment. A score is essentially a three-digit number ranging from 500 to 900. Ideally, having a ranking above 700 is considered favourable. If you have a higher score, the chances of approval increase and vice versa. Hence, check it beforehand to improve your profile.

Age

Your age is an indicator of your financial stability. When you are younger, you have more working years left. This makes it easier to handle financial responsibilities. But this is not possible as you grow older. Hence, lenders prefer younger applicants.

What Are The Benefits Of An NRO Account?

 Every Indian love investing in financial instruments to increase wealth. Whether you settle abroad or in your home country, you never forget to generate wealth. It is a medium to create an emergency corpus. Banks allow you to fulfil your investment needs by offering different products to keep your wealth safe and earn returns.

A Non-Resident Ordinary Rupee or NRO Account is a Deposit, Saving, and Current Account allowing Non-Resident Indians to manage their income earned in India seamlessly. It is essential to open it if you earn income in India from rent, dividends, interest, etc. There are plenty of benefits discussed in detail:

Deposit rupee earnings

The majority of the NRIs have recurring income sources, such as rent and dividends within India. With the help of an NRO online Account, you deposit them securely and use the funds to manage your rupee expenses.

Easy investment

With an NRO Account in India, investing in Mutual Funds and Bonds becomes easy. The returns get credited to the account, acting as an emergency corpus for the future. Tracking your investments through the bank app or website helps you stay informed of your account balance, credits, and debits.

Attractive rates

You get attractive interest rates on an NRI Savings Account and preferential rates on remittances by the bank. With the help of online access, you can open an account, check your balance, transfer funds, and enjoy other benefits offered by the bank at your fingertips.

Joint accounts

Banks allow you to open a joint NRO Bank Account with a resident family member for managing all Indian financial commitments while you are in a foreign country. The account holders get a Debit Card and other bank documents while opening the account to debit funds whenever required.

Repatriation

If you have sold a property or liquidated investments and want to send the money to your resident country, you deposit the funds in this account for the transfer. The limit of repatriation is up to USD 1 million a year. Remember to pay income tax in India and fill out the repatriation forms. According to the Indian Income Tax Act regulation, your income attracts interest.

Other investment options

If you have financial commitments in India, opening a Non-Resident External or NRE Account is a wise option to save foreign income in rupees and make it easy to manage your Indian expenses. Whether you send money to your family, invest in Indian securities, pay utility bills, or earn interest, you meet all your needs by opening this account.

Conclusion

It offers NRI benefits, like saving foreign income in Indian rupees at competitive interest rates. Shop, donate to causes, pay bills, or invest in Mutual Funds from this account. Indian Share Market Investments are also possible by opening this account. You escape the hassle of arranging for currency whenever you visit India.

How Is An NRE Account Beneficial?

Money is necessary for everyone and a saviour in unfavourable conditions. You should have enough funds to meet your requirements, even during emergencies. It is safer to remain prepared for most financial needs and save today. Whether you live in India or elsewhere, you always require money for meeting daily expenses.

A Non-Resident External or NRE Account is a rupee account to facilitate NRIs transfer funds to India. Funds generated overseas in other currencies get transferred to India in Indian Rupees in this account. You receive multiple benefits by opening this account:

Indian Rupee account

The Non-Resident External Rupee account is an Indian Rupee account. The initial funding generally happens through fund transfer from any other NRE or NRO Account you hold or by depositing foreign currency or traveller’s cheques if available.

Joint account

You can open and transfer money from the account, considering the NRE Account interest rates. Only NRIs can hold a joint account. Holding it jointly with resident family members is not permissible. The account holder can issue a mandate authorising a family member to operate the account in their absence.

Nomination facility

The NRE Savings Account also allows a nomination facility where you can repatriate both the principal and interest components. It enables you to access Savings Account, Current Account, Fixed Deposits, etc.

Deposit and withdrawal currencies

Deposit funds in foreign currency and withdraw them in Indian currency when you open an NRE Account. Another point is that the rupee account balances are subject to currency exchange risks.

Free from taxes

Taxation rules do not apply to the Non-Resident External account. You are exempt from wealth tax, gift tax, and income tax.

How to choose?

To choose the best NRE Bank Account, select a bank that offers service in the country of your residence. It can help when you need urgent customer support. Besides, opt for a bank that provides minimum account balance requirements and attractive interest rates on deposits in the account. These accounts work like regular Savings Accounts.

You get an international Debit Card for withdrawals. Learn about the charges and costs attached. In all, you must opt for ease of operations, such as simple documentation, a robust ATM network in your country of residence, customer-friendly mobile and net banking facilities, and an affordable money transfer solution. Compare based on these points while choosing the best NRI Account.

Documents required

When you open a Non-Resident Account in India, you must submit a valid passport, PAN Card or Form 60, proof of NRI statuses like work permit, visa, and valid Overseas Resident Card. Besides, give some of your recent passport-size photographs, initial payment cheque, and address proof. Attest them by the judge, the Indian embassy where you reside, or similar authorised personnel.

How Are Payday And Personal Loans Different?

 Applying for a Loan is a convenient manner to finance expenditure. Apart from your savings, you also benefit from planning for future expenses without worrying about the exhaustion of accumulated funds. Today, there are many options to help you avail of funds for emergencies. The kind of Loan highly matters.

Factors like interest rate and Personal Loan terms are necessary to help you assess your repayment capacity and differentiate between schemes. Knowing how it differs from Payday Loans help you make an informed decision.

Definition

Banks and institutions offer attractive schemes to customers. They differ between occupations. A Personal Loan for salaried is unsecured. You receive the amount according to the lender’s terms for legitimate purposes. You need to repay them according to the conditions laid down.

Payday Loans are for the short-term. Also known as advance cash, they get sanctioned quickly and require the borrower to repay them within a short tenure. The charges are also higher compared to a Personal Loan for the self-employed.

Eligibility

Follow the Personal Loan eligibility set by the lender. They allow you to borrow finance up to Rs. 25 lakh based on your eligibility, amounting to a larger sum compared to Payday Loans. The upper cap of your Payday Loans is the salary amount.

Tenure

Borrowers can opt for a Bank Personal Loan tenure of 12 to 60 months. On the other hand, Payday Loans require to be honoured between two to four weeks duration on the receipt of the paycheck. If you cannot honour the borrowed funds, you need to renew the Loan and other associated costs into a fresh set of fees.

Documents

To verify their eligibility, potential borrowers need to submit their KYC documents, bank statements, and income proof. You can also assess the repayment amount using the Personal Loan calculator. The only eligibility criteria for Payday Loans is a steady income equivalent to the borrowed sum.

Borrowing cost

The interest rates for Personal Loans are reasonable, starting from 11.9% per annum. Lenders also levy processing fees, insurance, and service charges. Payday Loans get instant approval. However, they attract a higher interest rate. Sometimes, you calculate the interest rate on a daily or weekly basis. You can apply for them from the banking app as well.

Age and CIBIL score

Applicants between the age of 21 and 60 years, self-employed or salaried, are eligible to apply for the Loan to finance their requirements. Candidates in cities should earn at least Rs. 25,000 and Rs. 20,000 monthly in other towns across India to be eligible for borrowing funds. Self-employed persons should make a basic net profit from the business they run. A CIBIL score above 750 is a necessity for approval.

What Does Digital Banking Mean?

 At its most basic level, Online Banking uses technology to deliver Digital Banking services. Some wrongly believe that it simply means using an online platform, but it involves more. Using the most updated technologies at all levels and across all service delivery platforms is what it means to be digital.

It acts the same in the branches,  head office, online service delivery platform, banking app, ATMs, and point-of-sale machines. The difficulty with viewing banking online overlooks the bank's other digital initiatives. The internet or mobile platform serves as the front end of the banking service delivery.

There are many middle and back-end functions, including risk management, treasury, product development, marketing, relationship-based sales teams, etc. These functions should get digitised for the bank to be considered a Digital Bank.

What does Digital Banking involve?

Is it worthwhile for banks to go digital if it means more than the Android or iOS apps? According to a survey, nearly half of them believe that digital adoption is crucial for developing client relationships and that it is also the most persuasive argument. Here are a few instances of how banks benefit from the same:

Efficacy

Despite holding many interactions with retail clients, banking has been unusually hesitant to take advantage of any technological potential. Many banking systems have got digitised, but unlike other customer-facing businesses, the entire system is still not operating as a single digital entity.

Airlines and logistics companies, for example, rely heavily on technology to run smoothly, yet most banks are yet to achieve that level of efficiency. Banks consider digital as a valuable tool than the foundation upon which their systems are built. It enables banks to encourage people to use Internet Banking to access their Savings Account.

Cost savings

Functions are automated. So, redundancies are lowered, and this results in cost savings. There are, however, additional benefits, such as synergies resulting from access to more qualitative data and shorter market response times. When customers open a Bank Account online, banks save a lot of money.

Increased competitiveness

Digital Banking in India lets banks reach a larger customer base and build closer relationships with younger, tech-savvy generations. Banks deliver services of equal quality to compete with new-age tech behemoths and innovative Fintech start-ups.

Agility

Digital banks are more adaptable than traditional banks. Their automated features are built to work differently and respond to market shifts. For example, during the financial crisis of 2008, there was a heightened emphasis on risk management. Banks require years to train and attract enough risk professionals to manage their assets properly.

Understanding The Difference Between Checking And Savings Accounts

We all need Bank Accounts to keep our money safe and optimise it rightly. You can select from different accounts, including Checking, Savings, and Salary Accounts. The decision to open a Checking and Saving Account depends on the purpose and the level of accessibility required.

To grasp the distinction between a Checking and Saving Bank Account, understand the meaning of both.

What is Checking Account?

This gets used for paying your daily costs. They are simple and do not have any restrictions on withdrawals. You can use it to pay bills, make online purchases, and carry out other routine operations. When you open this account, the bank offers a Debit Card, chequebook, and a passbook. Use the Online and Mobile Banking features to access your money from anywhere. Meanwhile, a Checking Account does not provide much interest.

What is Savings Account?

This lets you save money and build your capital by depositing funds regularly. It is a place where you can place funds that you do not require. Savings Accounts, unlike Checking Accounts, have a few limitations on how they can get used. For example, you can only withdraw money from banks and ATMs many times.

Your Savings Account comes with a Debit Card, passbook, chequebook, and Internet Banking, much like a Checking Account. However, unlike the Checking Account, the Savings Account pays out interest semi-annually or annually on deposited cash.

Difference Between Checking and Savings Account

Account Fees

Most transactions carried out through Checking Account are subject to a fee: ATM, overdraft protection, online access fees, etc. A Savings Account, meanwhile, is free of cost online. A bank only charges you if you exceed your money withdrawal limit or fail to meet the bank's minimum balance criteria.

Transaction frequency

Do at least one transaction monthly if you have a Checking Account. Your bank charges you a monthly maintenance fee if you do not comply. If you have a Savings Account, make a transaction once every six months to keep it active. The bank classifies your account, and the Debit Card associated with it becomes dormant if there is no activity. You can use a banking app to make sure the account is active.

Interest pay-out

The most notable distinction between Checking and Savings Account provides interest rates. Checking Accounts normally earn little to no interest from banks. You get interest on your deposits in a Savings Account. The Savings Account interest rates vary between banks and get decided mainly by the type of account you open and the amount you deposit.