There are various types of loans that cater to the different requirements of a person. There are various people who do not possess any collateral and therefore does not get qualified for secured loans. For such people, a loan scheme has been designed that does not require any asset to pledge. This loan is known as -Personal Loan-. It is a convenient option for the people who do not want to risk their valuable assets.
A Personal Loan is tailored to meet the personal requirements of the people. It is an all purpose loan that can be availed to meet a variety of personal works. Usually a person applies for this loan for the following purposes:
Going for an expensive and luxurious occasion.
Wedding in the family.
Paying medical bills or electricity bills.
Purchasing a new vehicle.
Home renovations or improvements.
Expanding the existing business and many more.
There are many financial firms that offer personal loan to the people at an attractive rate of interest. The major banks in India that provide unsecured loan are HDFC, SBI, PNB, Fullerton, Citibank and so on. So, there are various options that come up to a person. The person should have a good plan to get the best Loan in the market. One should check and compare the various deals and make a wise decision.
As a personal loan is unsecured in nature, the lender has nothing to authenticate in case of non repayment of the loan. Therefore, it is offered at a high rate of interest as compared to secured loans. In case, the person does not refund the loan in time the lender can easily avail the money through interest rates. But, it is a better opportunity for the people who are unable to provide collateral.
The basic requirements to apply for a personal loan are income and credit score of the person. The loan is sanctioned on the basis of the repayment capability of the person. A person with poor credit and low income cannot apply for this loan. The minimum credit rating required to avail this loan is 650. The tenure of the loan ranges from 5 to 10 years. This tenure can be extended by some lenders in case of a big loan amount. The person should always go through the details of the loan before applying for it. This is because it is the person who has to pay the loan in the future.
State Bank of India said it will extend its 8 % concessional home loan scheme, popularly called teaser rates, by another 3 months till December. “We will extend it(concessional home loan scheme) till December,” SBI Chairman O P Bhatt told reporters on the sidelines of an event to launch Para Military Salary Package here. The popular home loan and car loan scheme by SBI was due to expire on September 30. Bhatt’s comments came close on the heels of HDFC relaunching its teaser rates and its chairman Deepak Parekh’s announcement that the schemes were going to stay permanently. For the first year, SBI home loan is offered at 8 % interest rate and at 9 % for the second and the third year. From the fourth year onwards, home loans up to Rs 50 lakh attract 9.25 % interest while higher loans carry 9.75 % interest rate. At present, the scheme carries 10 % interest rate from the fourth year onwards. SBI Car loan is also available at 10 % concessional rate. SBI had last extended the special scheme till September 30 from June 30, 2010, owing to a huge demand from its customers. The scheme was originally supposed to end by April 30, 2010. Meanwhile, SBI launched specially designed products and services for the Central Para Military Forces Central Reserve Police Force (CRPF), Sashastra Seema Bal (SSB), Border Security Force (BSF), National Security Guards (NSG), Indo Tibetan Border Police (ITBP) and the Central Industrial Security Force (CISF). A number of concessions in interest rates on loans and waivers in service charges are extended to account holders, he said. Other features, which form the Para Military Salary Package include waiver of service charges for non-maintenance of minimum balances in salary accounts, free drafts, free cheque books, free remittances within the bank and other benefits, he said. Last year, SBI had designed special packages for the Armed Forces–Defence Salary Packages for the Army, Navy and Air Force–through which the bank garnered about 13,00,000 accounts
State Bank of India is the foremost and most trusted banks in India. SBI along with its combine branches has a distribution more than 16,000 branches, which is the largest in any network of banking. BNP Paribas, Euro Zones leading Bank and is the oldest foreign bank having an existence in India. BNP Paribas Assurance has a chief presence in Latin America, Europe and Asia and is among the top15 insurance company in Europe. The company has other joint venture in Asia in countries like Vietnam, Taiwan, Thailand and South Korea.
SBI Personal Loan is the best options for individuals who require the urgent money. SBI also provides the attractive rates and easy flexible repayment options. Below are the various features, eligibility criteria and documentation required for the loan approval.
Features: People can avail SBI Personal Loan for various different purposes or events in life such as domestic or foreign travel, medical emergencies, marriage, education, paying the bills, consolidates the debt, dream vacations, small business establishment and home renovation. The bank provides the minimum loan amount up to Rs. 24,000 in metro cities and Rs. 10,000 in semi urban or rural cities. The maximum amount is 12 times net monthly salary for pensioners and salaried person and the maximum loan amount is up to 10 Lacs.
There is no need to give any security or collateral to the person for availing Personal loan. The maximum repayment period is up to 4 years.
Eligibility: The salaried person who has two years experience from any reputed company is eligible for SBI Personal Loan. The self-employed individual with 2 years of experience is eligible for the personal loan.
Charges: The banks charge the processing fee from 2 to 3 percent of the loan amount. The banks also charge the prepayment charges up to 1% of the loan amount if the borrower repays the loan before 6 months of the loan period.
Documents Required: The documents required by the banks for salaried individual are Application form with recent two passport size photographs, latest salary slip, residence proof, ID proof and bank statement for last three months.
Self employed individual have to give the documents like the application form with 2 photographs, Income Tax Returns (ITR) for last two years, proof of Residence, identity proof and bank statement for last six months.
People can get the instant approval for SBI Personal Loan if they are eligible and provide all the required documentation to the bank.
Even as it chases new customers, State Bank of India has set its sights on offering existing customers second home loans to grow its retail portfolio.
Increase in disposable income as a result of substantial jump in the pay of employees working in the Government (Central and States), public sector enterprises, banks and private sector firms has prompted the bank to woo existing customers with good track record with an offer of a second home loan. The bank is also encouraging its employees to take a second home loan.
India’s largest lender wants to take advantage of the emerging trend whereby people own their first home by the age of 25 and second by 35. The second home is for investment purposes.
Currently, 96 per cent of SBI home loan borrowers are first-time borrowers.
Capacity to pay
We know that customers’ income is rising. Hence, we look at their Equated Monthly Instalment to Net Monthly Income ratio. If the higher income is sufficient to cover the second home loan, we would make the offer without any hesitation. We don’t look at the value of the property, but the customers’ capacity to repay his/her loan, said a senior official.
This year, SBI is eyeing a 32 per cent year-on-year growth in its home loan portfolio. It plans to disburse Rs 22,000 cr (Rs 17,130 cr in FY2010).
In the first two months of the current financial year, the home loan portfolio has grown by around Rs 2,800 cr, from Rs 71,193 cr as on March 31, 2010 to around Rs 74,000 cr.
Besides sourcing customers, sanctioning and disbursing loans, SBI is laying thrust on follow-up with customers in cases where they fall behind on their mortgage payments.
The bank has roped in SBI credit card which has expertise in soft recovery. The follow-up involves contacting customers on telephone, reminding them about the delay in payment, and reverting to the bank with their response.
The bank is also strengthening the capacity of its 116 retail loan processing centres so that they can process loan application faster.
Although the bank will continue with its 8% teaser rate which the SBI had introduced more than a year ago for the first year, it has increased rates for the subsequent years, effective April 1. The hike in home loan rates by SBI was triggered by the recent increase in its cost of funds.
Till March 31, SBI had two schemes The Easy Home Loan (up to Rs 50 lakh) and Advantage Home Loan (above Rs 50 lakh). From April 1, both the schemes have been merged and extended for a month,” an SBI spokesperson confirmed to TOI. The rates applicable for new loans sourced from April 1 till April 30 are 8% for the first year, 9% for the second and third years and floating rate at 1.75% below SBAR (SBI’s equivalent of prime lending rate, or PLR) thereafter,” the spokesperson added.
So in effect, the home loan rates for the second and the third years have gone up by 50 basis points (100 basis points=1%), from 8.5% earlier to 9% now. While fourth year onwards, at the current structure, the interest rate will be at 10% per annum, since currently SBAR is at 11.75%. Earlier, from the fourth year onward, the floating rate was at 2.75% below the SBAR and the effective rate was 9%.
Under the new rate structure (assuming a 10% rate from the fourth year), on a 20-year loan of Rs 30 lakh, a customer would have to shell out about Rs 3.9 lakh over the tenor of the loan. Thus the effective rate that the customer would be paying over the 20-year period is 9.5%.
Explaining the rationale for hiking rates on home loans, the SBI spokesperson said it mainly reflected the increased cost of funds from April 1 stemming from the new methodology for paying interest in savings bank accounts on daily balances.” In April 2009, Reserve Bank of India (RBI) had mandated all the banks in India to move to a new methodology of calculating interest rates on savings bank accounts that would add interest on a daily basis. This is a significant departure from the earlier practice of calculating interest rate on minimum balance after the tenth of every month.
For sometime now, with the annual rate of food inflation hovering around 20% level and the yields on benchmark 10-year government securities around the 8% mark, bankers and home finance veterans were talking about the possibility of a hike in interest rate in the economy. And now with SBI, the country’s largest bank, hiking housing loan interest rates, industry players are almost sure that interest rates have bottomed out in the current cycle.
Lately a number of banks and financial institutions, including the country’s home loan pioneer HDFC, have withdrawn their home loan products at 8% or at a slightly lower rates, and are moving to a more sustainable interest rate structure.