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

Sources of loans

Commercial banks Savings institutions Finance companies Credit unions Some automobile manufacturers Friends Family members

Personal Loan ProcessDocumentation

Loan Contract

Loan Repayment Schedule

Maturity

Collateral

Loan Application Format

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)

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

Loan Contract

“A contract that specifies the terms of a loan, as agreed to by the borrower and the lender”

Know Your Customer (KYC)Amount of the loanInterest rateTenure

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

Top of Form

No Month/yearPayment Due

(Rs.)Interest (Rs.) Principal (Rs.) Balance (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

18 Mar-2014 4992.41 494.11 4498.30 28442.70

19 Apr-2014 4992.41 426.64 4565.77 23876.93

20 May-2014 4992.41 358.15 4634.26 19242.67

21 Jun-2014 4992.41 288.64 4703.77 14538.90

22 Jul-2014 4992.41 218.08 4774.33 9764.57

23 Aug-2014 4992.41 146.47 4845.94 4918.63

24 Sep-2014 4992.41 73.78 4918.630.00

Bottom of Form

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Maturity

“Life or duration of the loan”

HIGHLOW

EMI INTEREST

EMIINTEREST

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

What You Need To Know?

• Interest Rate• Loan Eligibility• Compare between different banks• Know your CIBIL Credit Score

Annual Percentage Rate

“The interest for the whole year rather then the monthly rate as applied on a personal loan”

Sample APR TableEMI 2300.89 Amount ₹ 1,00,000.00

Sl.No Interest Amount Paid toward Loan

Amount Paid Towards Interest Amount after EMI

1 13.50% ₹ 1,175.89 ₹ 1,125.00 ₹ 98,824.112 13.50% ₹ 1,189.12 ₹ 1,111.77 ₹ 97,634.993 13.50% ₹ 1,202.50 ₹ 1,098.39 ₹ 96,432.494 13.50% ₹ 1,216.02 ₹ 1,084.87 ₹ 95,216.475 13.50% ₹ 1,229.70 ₹ 1,071.19 ₹ 93,986.776 13.50% ₹ 1,243.54 ₹ 1,057.35 ₹ 92,743.237 13.50% ₹ 1,257.53 ₹ 1,043.36 ₹ 91,485.708 13.50% ₹ 1,271.68 ₹ 1,029.21 ₹ 90,214.029 13.50% ₹ 1,285.98 ₹ 1,014.91 ₹ 88,928.04

10 13.50% ₹ 1,300.45 ₹ 1,000.44 ₹ 87,627.59

Loan Eligibility

Fixed Obligation to Income Ratio (FOIR)• 45-50% of monthly income• Average Banking balanceBank Account Requirements• Average

Loan Eligibility: (Gross Monthly Income - Gross monthly income * 45-50% – all other obligations) / EMI

How FOIR is Calculated

Income ₹ 50,000.00 New Dips Inc ₹ 14,500.00

FOIR 45%

FOIR Amount ₹ 22,500.00 Personal loan for 1 lac ₹ 1,00,000.00

EMI as Calculated Earlier 2300.89

Disposable Income ₹ 27,500.00

Eligibility ₹ 6.30

Existing Loans

Car Loan ₹ 3,000.00

House Loan ₹ 10,000.00

Total ₹ 13,000.00

How and What to Compare?

• Check all the existing schemes• EMIs• Interest Rates• Processing Charges• Prepayment Charges

Bank Name

Interest Processing fees

Tenure Benefits

SBI 18.25% 2- 3.5 % 7 years ROI, EMI less, Top up, can apply for OD and CC , no prepayment charges

ICICI 13– 20 % 2- 3.5 % 3 -5 years Existing Bank customers, no prepayment penalty, wealth management service, funding HL or OD

HDFC 13-19 % 2 -3.5 % 3 – 5Years

Existing Bank customers, no prepayment penalty, ask for Rs. 25 – 30 k salary slab

AXIS 15-19 % 2 -3.5 % 3-5Years

Existing Bank customers, ask for min.1 Rs.5 k salary slab

CITI BANK 16 % 2-3.5 % 3-5Years

Easy process, credit card and loan, provide loan on phone, salary slab Rs.25 – 30 k.

HDBFS 16– 24% 2.5 – 3 % 3 Years Easy processing.

For Salary Between Rs 50,000 - 75,000/-Loan Amount Rs 1,00,000/- (All figures in INR)

BANKS Loan Interest

Processing Fee

No of EMIs EMI Processi

ng FeeTotal

Amount Paid

Prepayment Charges

Prepayment

Amount

SBI 18.25% 0.00% 48 2951 0 141628 0.00% 0

ICICI 16.00% 2.25% 48 2834 2250 138283 5.00% 5000

HDFC 16.25% 2% 48 2847 2000 138649 4.00% 4000

AXIS 16.00% 2% 48 2834 2000 138033 0.00% 0

CitiBank 15.00% 2% 48 2783 2000 135588 3.00% 3000

HDBFS 17.00% 2% 48 2886 2000 140504 4.00% 4000

Additional Information's -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

90% of loans sanctioned are to individuals with a credit score of 700 and higher!

Credit Information Bureau of India Limited (CIBIL)

Credit Information Company: rates all loans taken from banks.

• Registration• Credit Score from 300 – 900

To increase loan eligibility

• Clubbing income• Increasing tenure• Additional income• Step- up loan• Pre-closure of existing loan• Employer- Bank Relationship