How will I Qualify for a Personal Loan?

A personal loan is one of the easiest loans that you can apply for to buy a new gadget, furniture or for renovating your home, or even for planning a much-anticipated vacation. Moreover, a personal loan is also used to consolidate debt such as multiple credit cards, medical bills, etc.

Everyone, be it a salaried individual or a self-employed and nonprofessional, can apply for a personal loan to complete various tasks in life. If you are a salaried person, your age, monthly income, and proper documentation will fix your loan amount, like how much money you can borrow from a bank. On the contrary, for a self-employed individual, personal loan eligibility is calculated on the basis of their business stability, age, and supporting documents.

Note that the eligibility criteria for a personal loan vary across banks in India. This article highlights personal loan eligibility by top banks in India:-

SBI personal loan eligibility:

Your eligibility to get a loan from SBI is your income and repayment capacity. Any applicant who is an Indian citizen can avail a loan of up to 2.5lacs from SBI at 1% processing fee. In metropolitan cities, applicants can avail a personal loan of 5lacs. SBI also provide loans to pensioners below 75 years of age.

HDFC Personal loan eligibility:

Known for its easy approval process and minimal documentation, HDFC bank provides personal loans to people who meet the following criteria:

1. Should be between 21 to 60 years of age

2. Should have 2 years of work experience with minimum one year of tenure in the current company

3. Should earn at least 12,000/- per month and 15,000/- if he/she resides in metropolitan cities.

HDFC provides special personal loan offers for women applicants. With HDFC, you can get your personal loan disbursed in two days.

ICICI personal loan eligibility:

Both salaried and self-employed individuals are eligible to get a personal loan from ICICI, provided they fulfill the following criteria:-

1. An applicant should be aged between 23 to 58 years

2. Should earn minimum 17,000/- pm. and 25,000/- per month if an applicant resides in metro cities.

3. Should have 2 years of work experience

4. Should be staying at the present address for at least one year

5. On the contrary, a self-employed applicant should be in the current business for 5 years. For doctors its 3 years.

6. A self-employed applicant needs to be 28 to 65 years of age. For doctors, the minimum age to apply for an ICICI personal loan is 25.

7. Minimum earnings should be Rs.40lacs for non-professionals and Rs.15lacs for working professionals. Whereas for self-employed individuals, the minimum profit after tax should be 2lacs.

Axis bank personal loan eligibility:

To be eligible for a personal loan from Axis bank, an applicant should be:

1. Minimum 21 years of age and the maximum age should be 60 years at the time of loan maturity

2. Net income should be 15,000/-

Documents to get a personal loan:

The documents that an applicant need to furnish to these banks to get a personal loan are:- One Identity proof (voter ID/driving license/passport copy), one address proof ( passport/utility bill/ration card), income proof (salary slip of last 3 months/bank statement (3 to 6 months)/passbook (3 to 6 months) along with the application duly signed, photographs and processing fee amount in cheque.

The Bottom Line: Getting a personal loan is easy if you go through the fine print carefully and understand the clauses associated with it. A word of advice: personal loan have higher interest rates as compared to other loan types, therefore it is good to look beyond interest rate and contemplate on other factors too. Always choose the loan amount that you can easily pay off. And lastly, never sign up for a personal loan without comparing.

What are the requirements to apply for SBI Personal Loan?

The StateBank of India is the largest public sector banking entity in the country and it offers personal loans to individuals for various cash requirements in their day to day lives. SBI personal loans are quite popular due to the attractive rate of interest and low processing charges along with the seasonal offers provided by the bank from time to time. These offers further decrease the amount of EMI payable every month. No security or collateral is required to apply for SBI personal loan. A person can get a loan of up to 12 times his or her net monthly income whether you apply online or at a branch of the bank. Once you have submitted the necessary documents, the loan will be approved by SBI within 2-3 working days provided you meet the eligibility requirements and all the documents are in order. There is a wide range of personal loan products offered by SBI for different requirements like business expansion, foreign trip, debt consolidation, weddings, home renovation, emergency medical expenses and others.

Why you should opt for SBI Personal Loan?

The personal loan products offered by SBI are among the top choice for borrowers because of the following reasons:

• The procedure of loan transaction is transparent

• There is a minimal processing fee and no hidden charges

• The rates of interest on the different personal loan products are quite attractive

• The loan tenure ranges from 1 to 5 years

• You can apply online for the personal loan

• The bank provides dedicated 24x7 customer service for the customers

• You can get multiple options for personal loan products depending on your requirement

Features of SBI Personal Loan

1. The amount offered as loan is high
2. The SBI offers some of the lowest interest rates available in the market
3. The approval and disbursal of the loan is quite fast
4. There are specific loan schemes for every borrower
5. You can apply for loan in any part of the country due to the wide network of operation

Eligibility Criteria:

There are slight variations in the eligibility criteria for different personal loan products offered by SBI. For instance for the SBI saral personal loan, you need to be a salaried individual employed in a reputable company or a self-employed person or professional like doctor, architect, engineer, MBA or chartered accountant with minimum of 2 years standing. On the other hand the eligibility for SBI Xpress personal loan is as follows:

The employees of the following bodies having a salary account in SBI:

1. Central and state government
2. Quasi government
3. Profit making PSUs
4. Central PSUs
5. Selected companies
6. Educational institutes of national repute

The following individuals are eligible for SBI festival Personal Loan

• Employees of the government, PSU, profit making public or private limited companies and institutions and others with a minimum of 2 years of service

• Self-employed individuals having 3 years of work experience

• A person who has a regular source of income from verifiable channels like pension or interest certificates from NSCs, TDR, government securities etc.

• The borrower should have a net monthly income of at least 3000

• If a spouse becomes a guarantor for the loan then his or her income will also be considered while calculating the loan amount

Documentation Required for SBI Personal Loan Application

• Passport size photograph

• Proof of official address for professionals and self employed individuals which includes shop and establishment certificate, lease deed or telephone bill

• Latest form 16 and salary slip for salaried individuals

• IT returns of the past two financial years for self employed individuals and professionals

You can apply for SBI personal loan on the official website of the State Bank of India or on various sites which provide such facilities for all the home loans available in the market. You can also visit a bank branch in order to apply for the loan.

Is ICICI Bank Personal Loan the Best?

ICICI Bank offers personal loan at lowest rate of interest to those who want to achieve such facility on their urgent requirements. There several benefits of seeking personal loan from the bank at a fixed rate of interest with least number of documents.

Survey says that the ICICI Bank is rated 4.2 out of 5.0 by several customers for their flawless services. Also, seeking loan from the ICICI Bank ensures quick disbursal of the money. Also, the bank offers special discounts and schemes for employees of big companies.

The good news is that ICICI personal loan is offered at a reasonable rate of interest. Do you know that ICICI personal loan interest rate depends upon on a number of factors?

The depending factors: 

• Loan amount- The interest rate on personal loan sought from the ICICI Bank depends upon the loan amount. If the loan amount is higher, the interest rate is lower.
• If you are looking for a bank that offers personal loan at a reasonable lower rate of interest, then the ICICI Bank is the right bank. The bank has its own list of companies, and if you are working in any of these companies, you can get a lower rate of interest.
• Also, your income determines the rate of interest on personal loan. The ICICI personal loan interest rate varies according to your income.

What are the ICICI personal loan bank charges?

Foreclosure charges are paid off if an individual wants to repay the whole loan amount before the end of the period. Also, ICICI Bank ensures pre-payment of personal loan through six EMIs that include one prepayment charges. Besides, the ICICI Bank charges processing fee between 0.25% and 1.50%. The minimum loan amount is Rs. 999 which comes with applicable tax.

Assess the ICICI personal loan EMI calculator

There is a ICICI personal loan EMI that you need to pay for repayment of your personal loan until the end of the tenure. The lowest EMI provided by the ICICI Bank is Rs. 2,199 per lakh loan amount. 

The personal loan EMI of the bank depends upon:

• The rate of interest that affects the EMI. If the rate of interest rate is high, EMI is also high
• The longer the tenure the lower if you monthly EMI per lakh
• EMI also depends upon the personal loan that you have borrowed. The loan EMI tends to be higher if you apply for a higher loan

What are the advantages of calculating ICICI personal loan EMI?

The calculator helps you to calculate your monthly EMI at various rate of interest. Also, the ICICI EMI calculator assesses your capacity to repay the loan after you are maintaining a standard of living. After calculating with the EMI calculator, you can set the budget for other things.

What are the eligibility criteria for ICICI personal loan?

The personal loan is available to salaried people aged between 23 years and 58 years. Also, the bank set a minimum level of income to let you become eligible for the loan. Individuals with minimum income of Rs. 25,000 are eligible for the loan. Also, you have to ensure job eligibility and performance to become eligible for the ICICI personal loan application. Remember, past CIBIL history and also the repayment record of your existing loans along with credit cards has affect on your personal loan eligibility. You should know that the ICICI Bank offers personal loan that depends upon your income. To help yourself improve your chances of approval, you should apply for loan that you are eligible for.

Thus, seek ICICI personal loan that comes with an affordable rate of interest which depends on various factors.

Top 3 Banks Offering Lowest Rate on Personal Loan

Personal loans can help you meet all the expenses that are difficult to handle due to a financial crisis. Whether it is the marriage of your son/daughter that has to be solemnized or perhaps your much-awaited tour that you have been planning since long, a personal loan makes sure you deal with all such financial expenditures with ease. However, personal loan attracts some of the highest rates of interests as these loans do not require any collateral and are regarded as high risk by the lenders. If you are the one willing to get a personal loan to meet the financial crisis easily, listed below are key details of top 3 banks in India offering lowest rate on a personal loan.

SBI Personal Loan Interest Rate

Regarded as one of the top banks in the country, the State Bank of India offers several types of personal loans at competitive interest rates. A few of SBI’s personal loan options are listed in the subsequent section along with other features of these loan schemes.

1. Xpress Credit Personal Loan: The specific scheme for SBI is meant to fulfill various financial needs. The interest rate on this personal loan scheme is about 15% which is lower in comparison to other banks. The rate of interest in this scheme is also dependant on the check-off level. That means for partial check-off, the rate of interest will be 13 or 14%, whereas, for complete check-offs, a borrower needs to pay interest at 15% on the loan amount.
2. SBI Saral Personal Loan: This is a loan scheme designed for people from every walk of life. It helps them meet various urgent financial requirements. The limit under this scheme is defined as per the income of the borrower and his capacity to pay. The rate of interest on this personal loan is a few basis points above the applicable MCLR.
3. SBI Pension Loan: This is specifically for those applicants who are less than 76 years of age and get pension from the Central or State governments and those who are receiving a monthly pension from the government. The interest rate is often less as compared to other personal loan options.

In addition to these three personal loan schemes, the state bank of india also offer festival Loans that allow people to deal with the festival related expenses with ease. This option is suitable for relatively smaller loan amounts and features a higher interest rate that other SBI Personal Loan schemes.   

Axis Bank Personal Loan Interest Rates

Axis bank offers several features and benefits on its personal loan schemes. Be it your much-awaited vacation or your child’s wedding, the axis bank personal loan helps you fulfill all your urgent financial needs without worrying about extra cash. The rate of interest in case of an Axis personal loan ranges from 11.49% to 24%, which is quite reasonable as compared to other banks. Low processing fee, minimal documentation, and simple application procedure are some other key benefits of getting a personal loan from Axis bank.

HDFC Personal Loan Interest Rates

Personal loan scheme offered by HDFC is quick and easy to apply. The loan scheme offered by HDFC include nominal processing fee with zero hidden charges and convenient repayment options. The interest rate on HDFC personal loans ranges from 13-20% and is on a monthly reducing basis. As part of the personal loan, HDFC offers life protection cover of up to 8 lacs for sudden hospitalization due to accident and up to 1 lac for death or permanent disability of the loan borrower. In addition to this, HDFC cardholders can connect with the customer care center via phone calls, chats, and emails in case of any issue. Customers can even get a personal loan from HDFC in 1 day in case they have all the relevant documents in place.

Why It Is Better To Finance Your Business With A Personal Loan

A personal loan is the easiest and quickest loan option in today’s market. It does not take a lot of days to get it approved and has a quick approval procedure if you fulfill the required criteria. Banks these days give you an instant Personal Loan approval on the basis of your credit score, employment status, repayment history (credit card payments), age, etc. While you can opt for a personal loan for many reasons, one of the reasons can be financing your business. Many would say to go for business loan if you are looking to fund your business but that can be tricky. Here are some of the reasons why a personal loan makes sense to finance your business.

To Start a New Business Venture:

When you want to start your own business, you will surely encounter some obstacles on the way. Taking up a business loan is a little hard for a brand new business organization. It is best to opt for a personal loan in the early stages of your business so you can get your business started.

The Amount Required Is Less:

A personal loan makes sense if the amount you require for your business is not substantial. A business loan is best if the amount you require is quite large. It would also take a lot of time as the procedure takes more days when compared to personal loans. Business loans also require a lot more documents when compared to personal loan. For a business loan, documents include business model, service taxes and more. A personal loan is quickly approved and is easily available.

No Collateral or Guarantor Needed:

For a business loan, your company’s reputation, credit history and cash flow are some of the factors that are considered. You will be asked to keep something as collateral too. Whereas in a personal loan, they are given to an individual. The bank or a financial institution will evaluate your personal income, credit history, bank details rather than that of your business. Personal loans are more flexible and allow you to use the funds as you wish to. In comparison with business loans where you have to keep something as collateral, personal loan do not ask for any collateral.

Freedom of Using the Amount As You Wish:

In a business loan, there are very strict terms how you use the money. You cannot use the money as you wish to. A business loan is taken so that companies can pay for expenses that they are unable to pay. They are used to pay for salaries until the company is stable. They are also used to fund office supplies and projects. You also have to show the lenders where you used the borrowed money. While in a personal loan, the amount is given to an individual. There are no questions asked where the money is going to be used. It is your wish how you use the money in helping your business grow.

A Personal Loan can do you no harm unless you do not make the monthly payments and pay your dues on time. You do not need to be afraid of a Personal Loan anymore. All you need now is to research about which bank gives you the best option on easy approvals, hassle-free documentations and lowest Interest Rates. You can compare all this on several online loan aggregators, such as www.paisabazaar.com and know more. Each bank has a different set of payments options and pre-closure rates. Make sure you find everything before going in for the loan which will only benefit you. Consider these scenarios to learn if a personal loan is the right match for your business.

Why Gold Loan Is Better Than Personal Loan?

When faced with a financial crisis or a large expense, a loan might just be your best bet to get out of a financial hole. In this context, a personal loan or gold loan are often considered to be the best options. Both options are equally capable of meeting any of your expenses. The difference between the two is that in the case of personal loan you cannot give any type of collateral to pay off the debt sooner whereas the gold loan is backed up by your gold in the form of ornaments or gold coins (bullion is not currently acceptable by Indian banks and NBFCs). Listed below are some other key aspects that justify why gold loan is better than personal loan:

1. Zero processing fees: As personal loans are given to you without any collateral, you need to submit your income proof documents along with 0.5 percent to 1 percent of the loan amount as part of the processing fee. The benefit of the gold loan here is you do not have to pay any or at most a nominal processing fee and only minimal documentation is required. But banks offering gold loan may need for some document proofs such as you ID and address proof. And you need to submit your gold with the bank to get the Gold loan application processed within a few hours at the most. 
   
   
2. Lower interest rates: If you keenly observe the gold loan interest rate in the market, you will find them floating around 12 to 15 percent per annum mark as they are secured loans. Whereas personal loan interest rates though they start at 11.49% you would be quite hard-pressed to get a offer cheaper than the18 percent to 24 percent range as they are unsecured. The substantial difference in the two loan types makes gold loan the preferred choice among a large proportion of borrowers. 
   
   
3. Easy payment options: Generally in case of personal loan, you need to repay your loan through EMIs spanning over a fixed period of time.  And if you pre-pay any amount, a bank will charge you a prepayment fee that would be around 2 percent of the current outstanding principal amount. However, this is not the case with the gold loan. You can make payments in advance and close your gold loan account anytime you wish to without incurring extra charges.
   
   
4. No EMI Payment: This is the most important aspect of gold loan which a bank will never offer you on a personal loan. As part of this facility, there will be no EMI option given to you which combines the interest amount plus primary compensation. This is because the lender already has your gold which is more expensive than the loan amount, so you only have to keep paying the interest amount and the lender will be more than happy to keep the loan account active for years. The reason behind this clause is to give you flexibility in hard times when you cannot pay the bank loan due to a medical emergency, loss of job, etc.
   
   
5. The More the Value of Your Gold, the bigger the Loan Amount Will Be: Unlike personal loan where your loan amount depends on your salary, the gold loan amount will vary as per the amount of your gold. Let’s suppose you are earning Rs. 50,000/- per month then you will easily get a personal loan of about Rs 10 lakh for a period of 5 to 7 years.   But in the case of a gold loan, you can normally expect the loan amount of up to 70 percent of the current market rate of your gold. And this amount can go up to 90 percent if you can pay the higher rate of interest. This is based on individual company schemes.

To summarize, a gold loan being a secured loan features a lower interest rate and also offers an additional flexibility to pay the amount as per your convenience. To know more about gold loans option, you can visit www.paisabazar.com.

Do Personal Loans Have Tax Benefits?

Personal loan has become one of the popular loans these days that help individuals meet their current financial needs such as the marriage of their son/daughter, construction or renovation of their home or any other. A personal loan is an unsecured loan that people often apply for as there is no security required for it and the processing time is short. It is usually taken by those who necessitate quick and easy loans with low-interest rate and minimum documentation.

Typically, a personal loan is not considered as part of your income, so this loan will not be considered as a taxable fund when you are filing income tax returns. But you need to make sure that the loan should be taken from an authorized bank or any other financial body as loans from unidentified sources are considered as part of your income while calculating your taxes.

Exception to the Rule

If you can prove that you have used the loan amount for a few valid expenses, you can actually use your personal loan for tax savings and can claim tax relief on the same. A few examples where you can claim tax benefits on personal loan include cases such as if you use the loan amount to finance your business expense or if you have taken a personal loan for your house such as performing renovations.

Personal loan to buy a residential property

Section 24 (b) of the income tax act provides relief to the home buyers by giving them the privilege of tax deduction on personal loan if it is taken to buy a residential property or to renovate it. If you use a personal loan for the down payment of a property, you can claim tax exemption. This clause is also valid if you use the loan amount to pay for home repairs, renovation, or for reconstruction, all these are considered valid expenses for the tax deduction.

Note that you can only claim the tax deduction on the interest amount, not on the principal amount of the loan. In case you are currently living in a house on which you have spent your personal loan amount, then you are eligible to claim tax reduction for interest amount of around Rs. 1,50,000. But if you are living in a rented house, then there is no limit on the interest amount that can be claimed.

Also if you have invested in a house that is under construction, you cannot claim the tax deduction until the property is completely constructed. Also, you need to assure that the property will be ready to acquire within three years if taking the loan. Preserve all the documents needed to provide proof that you have spent the loan amount in construction or renovation of your house. If you have used the amount to carry out the repairs or renovations, preserve the bills for materials and labor. These are needed to claim your tax deductions.

Personal Loan for Financial Business Expenses

The exception to the rule also applies for the financial business expense. You must be personally liable for the loan and should be able to enumerate what portion of the interest paid is attributed to legal business expenses. Similarly, if you use a personal loan to buy a motor vehicle that you use solely for business i.e. commercial purposes, then all of the interest on the loan is tax deductible.

Conclusion

A personal loan is considered as an ultimate option to meet immediate financial needs. They can also be used as tax saving tool if used properly. So you need to understand how you can get a personal loan for your assistance while claiming tax benefit from it too.

Would a Personal Loan for a Vacation Be Irresponsible?

A tepid economy is leading to a sluggish claim for loans. However, personal loan segment has seen a good response in both urban and rural areas.

Personal Loan for Vacation

The data that we have collected shows a rise in the number of people taking a personal loan for a vacation.

Usually customers in India take personal loan to pay high interest Credit Card dues, meeting hospital emergencies, weddings, home renovation and also for vacations. Although on paper there is nothing wrong in taking a personal loan for vacation but the logic seems Topsy- turvy.

Why taking a personal loan for a vacation doesn’t make much sense:

A personal loan is a collateral free loan and a borrower can take it for any purpose, in that sense a borrower has full rights to use it for a vacation. But being collateral free, personal loan comes up with very high interest rate.

A borrower, hence, should always know the variation of good loans and bad loans. The whole segment of personal loan is considered as bad loans, but taking it for a vacation tops it. It defies sense that a borrower would take money for a say 5-10 days holiday and then pay interests of somewhere between 14-23 % for the next two years or maybe more.

For instance, a borrower takes a loan of Rs 3.5 lakh at an interest rate of 17.5 % for 3 years, which is Rs. 12566 in EMI. The worse part here is that in the 3 years you will end up paying over Rs. 1 lakh as an interest. If the holiday ends for a week, it means you have spent over Rs. 4.5 lakh just for a vacation. A personal loan can give you a week of great holiday but with three years of debt and most likely no more holidays for those three years and interest to pay on top.

Major Risks:

Generally the best planned holiday sees budgets being crossed and one resorting to using a credit card. This can be a tricky thing to do. On one hand, you have a high EMI with high interest loan and you end up using your credit card. If the amount is small then it may not be a problem, but a large amount can turn into a chaos. It will be a double whammy where you have loan with high interest rate and even higher interest rates on credit cards, if you are not able to afford paying the amount in full.

Check Your Eligibility: Loan Eligibility Calculator

This also cut down your overall borrowing threshold. It means if you need a loan while you have the personal loan running on another side, there are chances that you won’t get the amount you want or you will be refused for a loan altogether, further things can get worse if you have a poor credit rating.

Bottom line: 

The best way to have a good vacation is to plan well in advance and save precisely for it. When your savings are built up, then it would be the right time to go on a trip. A vacation which leads to financial stress later on is not worth. In the end it is much of a personal choice in deciding how much the holiday is worth to you. A few days of joy which leads to a loan hanging around your neck for the next several years might not be the best plan.

Loans must always be taken for necessities, requirements, assets and emergencies. If it is for luxury, anyone could be living beyond their means.

5 Things to Consider Before Opting HDFC Personal Loan

Imagine yourself to be shopping in a mall where all shops keep similar products with just the packaging and probably the pricing altering a bit. Wouldn’t you find it confusing while making a decision to buy the product from which shop?

Similar is the situation among banks selling personal loan nowadays. With the aggressive tele-callers and bank officers trying to sell personal loans at the smallest of chances, it becomes increasingly difficult for the customers. How do you make a decision when you really require a personal loan? It is wise to go by a product which is being sold by a highly reputed and well-established bank. Taking up personal loan from HDFC Bank is one such decision.

In today’s date, HDFC bank happens to be a front runner as far as personal loan is concerned.The bank’s scientific and calculated approach to lending products has made it a leader of sorts in the financial markets. If you are an existing client of HDFC bank, you might have a pre-approved personal loan against your name. Having a pre-approved loan paces up the loan documentation and disbursal process. For non-customers too, taking up a personal loan is not a nightmare at all. HDFC bank has transparent procedures and proper laid down rule which aids in faster decision making of the loan department This suggests, that in case you are able to provide proper documentation at correct times, the disbursal of loan becomes much faster than most of its competition banks.

One can opt for a personal loan staring from Rs 50000/- to Rs 15, 00,000/- as an individual depending upon your income and credit repayment history. The interest rates for HDFC bank personal loan range between 12.50% and 19.50%. The tenure of the personal loan can be chosen between 1 year and 5 years.

Other common qualifying criteria for HDFC personal loans are as below:

• Applicant age between 21 to 60 years of age
• Minimum income for loan applicant is Rs 12000/- per month
• Submission of address proof mandatory for loan applicants
• Last 3 months of bank statement required for loan application processing.

Apart from the above, the bank may ask for more documents on a case to case basis as per their requirements.

Apart from taking up a new loan, customers who are having personal loans with other banks can also transfer their existing personal loans to HDFC with a very low processing fee and attractive interest rates.

Before you opt for a personal loan from HDFC bank, it is necessary to know about details which most customers do not enquire banks about. Few such information areas are presented for you:

1. HDFC bank does not allow part payment of your personal loan. In a situation the lender feels he has saved a higher amount in a particular tenor, he cannot deposit the amount to repay the personal loan partially. This would suggest that loan would be required to complete its entire tenure of paid back in full. Pre-closure of the personal loan account is only allowed after one year at HDFC bank at minimal charges.
2. One can increase the loan amount to as high as Rs 2500000/- in cases where incomes of both the applicants are clubbed together. Of course, this is subject to bank’s rules and other discretionary powers.
3. A lender can get a preferential rate and lower processing fee if he has a salary account with HDFC bank. Additionally, payment of EMI becomes easier since you can provide a standing instruction from your existing salary account with HDFC Bank.
4. HDFC bank does not ask for collateral or a security in order to process your personal loan request. One needs to be aware in case any imposter fraudulently seeks such details while claiming to process your loan application.
5. Payment of personal loan takes place by means of EMI or Equated Monthly Instalments. As the term suggests, each month a fixed amount of money is debited from your pre-stated bank account towards repayment of the personal loan towards HDFC Bank. A lender may provide HDFC Bank with PDC or Post Dated Cheques so that the same can be presented each month by the bank to collect the payments. A Standing Instruction (SI) or ECS (Electronic Clearing System) is much in vogue practice followed wherein debit towards payment of the loan can be raised by HDFC bank on fixed dates from bank of your preference.

How to Calculate Your EMI For Personal Loan

There are multiple kinds of loans which are available to an individual ranging from housing loan to a car loan satisfying the particular financial need or requirement of an individual. A personal loan is a loan which an individual takes to satiate any urgent personal financial needs. The personal loan is taken by a borrower for the purposes like meeting financial requirement for a wedding, for meeting vacation expenses, for funding medical expenses, etc. Personal loans are unsecured loans in nature which do not need any collateral as a security against the loan amount. Also, such loans are readily sanctioned with the minimal requirement of documentation as compared to the other types of loans.

Meaning of EMI

An important aspect associated with the personal loan is the EMI. EMI denotes equated monthly installment, a periodic payment towards a loan repayment which a borrower makes on a regular basis.

EMI amount constitutes the principal value and the interest amount for the loan repayment. Initial EMI payments consist of a majority of the value as interest component, and as the tenure shortens, the EMI payments constitute more of principal amount which a borrower has to repay.

The Loan Amortization schedule is the representation of the EMI payment details in a tabular format which acts as a fact sheet for the borrower to scrutinize the loan status. It guides the borrower about the outstanding loan amount, remaining tenure, interest rate and outstanding principal amount status.

• Personal Loan Amount: It is the total sum which the borrower has taken as a personal loan from the lender.
• Rate of Interest: It is the amount which is expressed as a percentage of the principal amount charged by the lender.
• Term of the Loan: It is defined as a time frame which is mutually agreed upon by the lender and the borrower for the repayment of the personal loan amount.

Calculation of Personal Loan EMI

There are various ways to calculate the personal loan EMI amount based on the key determinants discussed above. The mathematical formula to calculate the EMI is[P x R x (1+R) ^n] / [(1+R)^ n-1]

Where
P represents the principal loan amount
R represents the rate of interest
n represents the total monthly installments

Some may find it tedious to calculate EMI using mathematical formula. The borrower may also calculate the EMI amount in excel with the formula EMI = PMT (Rate,Nper,PV,Type)

Where
Rate is the interest rate,
Nper is the total no. of installments,
PV is the present Value of the loan,
Type is either one or zero depending upon the EMI payment madeat the beginning or end of the month.

Relationship between Type of Interest Rate and EMI Amount

Interest Rates are usually of two types:

Fixed Rate of Interest: Interest rates,which are flat and fixed throughout the tenure of the loan repayment and have no correlation with the reducing loan amount. Such interest rates express a fixed percentage of the total personal loan amount.

Reducing Rate of Interest: Interest  rates,which reduces as the loan tenure reduces and expressed as a percentage of the outstanding personal loan amount.

In the event of fixed rate of interest in the personal loan, the EMI payments stand same and constant during the entire repayment tenure of the personal loan, whereas in the event of reducing rate of interest, the interest rates vary depending upon the outstanding loan. Therefore, the EMI payouts also vary with change in the rate of interest on the personal loan.

Relationship between the EMI and Pre Payment of Loan

Another variable on which the EMI payments are dependent is the pre-closure or partial payments made towards the loan. The number of partial payments for the loan is deducted from the base principal amount leading to the reduction in the interest amount which has to be paid otherwise. Borrower making a partial payment is endowed with two choices which are

1. To either retain the tenure same or
2. To keep the EMI amount same

If the borrower chooses the first option keeping the tenure constant, the EMI payouts towards the remaining loan repayment reduce where as if a borrower opts for the second option to keep EMI fixed then the loan tenure reduces.The borrower has to make a prudent decision when it comes to partial repayment of the loan.

EMI calculations are imperative to understand before taking a personal loan, and one has to ensure that the EMI amount is appropriate to be paid periodically as per the borrower’s budget and income. The quick personal loan sanction may be lucrative in nature, but being an unsecured loan type, the interest rates are higher on such loans. EMI amount consists of principal amount and the interest amount which is required to be paid back to the lender.

Understand your EMI periodicity and the amount beforehand, to have a smooth loan repayment structure.