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Personal loan

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Personal loan

  1. 1. What is Personal Loan? A personal loan is a type of debt which is made for personal, family, or household use, and which is neither a business loan nor a long-term mortgage loan.• Secured Loan• Unsecured LoanRange: Rs 10,000 – 1 Cr
  2. 2. Sources of loans Commercial banks Savings institutions Finance companies Credit unions Some automobile manufacturers Friends Family members
  3. 3. Personal Loan ProcessDocumentation Loan Contract Loan Repayment Schedule Maturity Collateral
  4. 4. Loan Application Format
  5. 5. Documents required - Self Employed• 2 photos + ID proof• PAN mandatory• Residential proof• Ownership• Utility bill• 1 year banking• 3 years ITR + Business proof (tin/service tax, company profile)
  6. 6. Documents required - Salaried• 2 photos• ID proof• PAN mandatory• Residential proof• Ownership• Utility bill• 6 months banking• 3 month salary slip or 2 years form- 16
  7. 7. Loan Contract “A contract that specifies the terms of aloan, as agreed to by the borrower and thelender” Know Your Customer (KYC) Amount of the loan Interest rate Tenure
  8. 8. Loan Repayment Schedule• Amount• EMI – Estimated Monthly Installment/Equated Monthly InstallmentEMI = (P * R/12) * [ (1+R/12)^N] / [ (1+R/12)^N-1],Where; P = Principal (loan amount); R = Annual Interest Rate; N = No. of Monthly Instalments• Number of Installments• Interest: Rate and Type
  9. 9. Top of Form Payment Due No Month/year Interest (Rs.) Principal (Rs.) Balance (Rs.) (Rs.) 100000 1 Oct-2012 4992.41 1500.00 3492.41 96507.59 2 Nov-2012 4992.41 1447.61 3544.80 92962.79 3 Dec-2012 4992.41 1394.44 3597.97 89364.83 4 Jan-2013 4992.41 1340.47 3651.94 85712.89 5 Feb-2013 4992.41 1285.69 3706.72 82006.17 6 Mar-2013 4992.41 1230.09 3762.32 78243.85 7 Apr-2013 4992.41 1173.66 3818.75 74425.10 8 May-2013 4992.41 1116.38 3876.03 70549.07 9 Jun-2013 4992.41 1058.24 3934.17 66614.89 10 Jul-2013 4992.41 999.22 3993.19 62621.71 11 Aug-2013 4992.41 939.33 4053.08 58568.62 12 Sep-2013 4992.41 878.53 4113.88 54454.74 13 Oct-2013 4992.41 816.82 4175.59 50279.15 14 Nov-2013 4992.41 754.19 4238.22 46040.93 15 Dec-2013 4992.41 690.61 4301.80 41739.13 16 Jan-2014 4992.41 626.09 4366.32 37372.81 17 Feb-2014 4992.41 560.59 4431.82 32940.99
  10. 10. Maturity“Life or duration of the loan” EMI INTEREST LOW HIGH INTEREST EMI
  11. 11. Collateral “Assets of a borrower that back a secured loan in the event that the borrower defaults” Secured Loan: A loan that is backed or secured by collateral which could be repossessed if the lender defaulted on the loan Unsecured loan: a loan that is not backed by collateral
  12. 12. What You Need To Know?• Interest Rate• Loan Eligibility• Compare between different banks• Know your CIBIL Credit Score
  13. 13. Annual Percentage Rate “The interest for the whole year rather then themonthly rate as applied on a personal loan”
  14. 14. Sample APR TableEMI 2300.89 Amount ₹ 1,00,000.00 Amount Paid Amount PaidSl.No Interest Amount after EMI toward Loan Towards Interest 1 13.50% ₹ 1,175.89 ₹ 1,125.00 ₹ 98,824.11 2 13.50% ₹ 1,189.12 ₹ 1,111.77 ₹ 97,634.99 3 13.50% ₹ 1,202.50 ₹ 1,098.39 ₹ 96,432.49 4 13.50% ₹ 1,216.02 ₹ 1,084.87 ₹ 95,216.47 5 13.50% ₹ 1,229.70 ₹ 1,071.19 ₹ 93,986.77 6 13.50% ₹ 1,243.54 ₹ 1,057.35 ₹ 92,743.23 7 13.50% ₹ 1,257.53 ₹ 1,043.36 ₹ 91,485.70 8 13.50% ₹ 1,271.68 ₹ 1,029.21 ₹ 90,214.02 9 13.50% ₹ 1,285.98 ₹ 1,014.91 ₹ 88,928.04 10 13.50% ₹ 1,300.45 ₹ 1,000.44 ₹ 87,627.59
  15. 15. Loan EligibilityFixed Obligation to Income Ratio (FOIR)• 45-50% of monthly income• Average Banking balanceBank Account Requirements• AverageLoan Eligibility: (Gross Monthly Income - Gross monthly income * 45-50% – all other obligations) / EMI
  16. 16. How FOIR is CalculatedIncome ₹ 50,000.00 New Dips Inc ₹ 14,500.00FOIR 45%FOIR Amount ₹ 22,500.00 Personal loan for 1 lac ₹ 1,00,000.00 EMI as Calculated Earlier 2300.89Disposable Income ₹ 27,500.00 Eligibility ₹ 6.30Existing LoansCar Loan ₹ 3,000.00House Loan ₹ 10,000.00Total ₹ 13,000.00
  17. 17. How and What to Compare?• Check all the existing schemes• EMIs• Interest Rates• Processing Charges• Prepayment Charges
  18. 18. Bank Interest Processin Tenure BenefitsName g feesSBI 18.25% 2- 3.5 % 7 years ROI, EMI less, Top up, can apply for OD and CC , no prepayment chargesICICI 13– 20 % 2- 3.5 % 3 -5 years Existing Bank customers, no prepayment penalty, wealth management service, funding HL or ODHDFC 13-19 % 2 -3.5 % 3–5 Existing Bank customers, no Years prepayment penalty, ask for Rs. 25 – 30 k salary slabAXIS 15-19 % 2 -3.5 % 3-5 Existing Bank customers, ask for Years min.1 Rs.5 k salary slabCITI BANK 16 % 2-3.5 % 3-5 Easy process, credit card and loan, Years provide loan on phone, salary slab Rs.25 – 30 k.HDBFS 16– 24% 2.5 – 3 % 3 Years Easy processing.
  19. 19. For Salary Between Rs 50,000 - 75,000/- Loan Amount Rs 1,00,000/- (All figures in INR) Total Prepayme Loan Processin No of Processi Prepayme BANKS EMI Amount nt Interest g Fee EMIs ng Fee nt Charges Paid AmountSBI 18.25% 0.00% 48 2951 0 141628 0.00% 0ICICI 16.00% 2.25% 48 2834 2250 138283 5.00% 5000HDFC 16.25% 2% 48 2847 2000 138649 4.00% 4000AXIS 16.00% 2% 48 2834 2000 138033 0.00% 0CitiBank 15.00% 2% 48 2783 2000 135588 3.00% 3000HDBFS 17.00% 2% 48 2886 2000 140504 4.00% 4000
  20. 20. Additional Informations -Predatory Lending’s• Lender charging high loan fees• Lender provides home equity loan with the expectation of default so he can take ownership• Lender ties other products to loan approval• Lender includes balloon payment at end of loan• Loan agreement includes confusing information
  21. 21. Credit Information Bureau of India Limited (CIBIL) Credit Information Company: rates all loans taken from banks.• Registration• Credit Score from 300 – 900 90% of loans sanctioned are to individuals with a credit score of 700 and higher!
  22. 22. To increase loan eligibility• Clubbing income• Increasing tenure• Additional income• Step- up loan• Pre-closure of existing loan• Employer- Bank Relationship

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