A Complete Guide to Personal Loan

31 Oct 2022

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What is Personal Loan?

  • A personal loan does not require the borrower to provide collateral and so it is an unsecured loan.
  • The purpose or intention of a personal loan is to fund immediate financial contingencies.
  • It could be for business capital, marriage, medical expenses, or even foreign trips, though the end use of the capital really depends on the borrower, as long as it is for a legitimate financial need.
    Let us look at the different aspects in this complete guide to personal loan.

What are Different Types of Personal Loan?

  • Unsecured Personal Loan - borrowed without any asset or collateral.
  • Secured Personal Loan - borrowed against collateral, such as a home, car, savings account, insurance, gold or another asset.
  • Personal Line of Credit - borrowed whenever needed by accessing a line of credit up to a specific amount.
  • Personal Loan Against Credit Card - borrowed against credit card’s available balance.
  • Pension Loan - borrowed by retired personnel or senior citizens.
  • Wedding loan - borrowed to meet wedding expenses.
  • Vacation loan - borrowed to finance a holiday trip.
  • Home renovation loan - borrowed to make renovations to the home. It helps to increase the value of the house in the real estate market.
  • Consumer durables loan - borrowed to buy consumer goods such as home and electrical appliances.

Eligibility for A Personal Loan

Since these loans are unsecured- at what rate of interest you will get the loan and how much, whether or not you will get the loan-depend on the credit quality of the borrower. If you have good creditworthiness, you are likely to get the loan at an attractive rate of interest. If you have been a long time customer with the bank, with sound track record of financial discipline, you may also get a pre-approved personal loan sanction.

List of Individuals who are Eligible for Personal Loan

Bank of Baroda lists the following types of employees/self-employed individuals who are eligible for personal loans.

  • Employees of Central / State Govt. / Autonomous Bodies/ Public / Joint Sector Undertakings, Public Limited Co. / MNCs & Educational Institutions – with minimum continuous service for 1 year
  • Employees of Proprietorship, Partnership firms, Private Limited companies, Trust - with minimum continuous service for 1 year
  • Insurance Agents- doing business for minimum last -2- years
  • Self Employed Professionals (Doctor, Engineer, Architect, Interior Designers, Tech. and Management Consultants, Practicing Company secretaries etc) -- with minimum 1 year stable business.
  • Self Employed Business individuals - with minimum 1-year stable business.

Documents Required for Personal Loan

  • Two passport-size photographs
  • Income proof: Bank Statement for the last 3 months (if salaried)
  • Identity proof: Passport/PAN Card/Driving License/Voters ID/Aadhar Card
  • Residence proof: Passport/Aadhaar Card/Utility Bill/Voter ID
  • Continuity in Current Job Proof - Form 16/Company Appointment Letter (if salaried)
  • Income Tax Returns for the last 2 years (if professional/self-employed)

Personal Loan Fee & Charges

  • Processing fees: It is a maintenance & administration fee varying between 0.5% and 2.50% charged by banks while processing a loan.
  • Verification charges: To check the loan repayment capacity of the loan applicant, the bank usually hires a third-party agency for verifying the credentials. This extra cost is borne by the applicant.
  • Penalty on late EMI: When a borrower fails to repay the EMI on time, a penalty is imposed on him.
  • Penalty on prepayment or foreclosure of loan: In case of prepayment or foreclosure of a loan before the stipulated tenure the bank might charge a penalty at the rate of 2% to 4% on the borrower.
  • Fees for duplicate statement: A bank might charge a fee of Rs.200 and Rs.500 for generating a duplicate statement of the payment schedule and outstanding loan balance.

Your CIBIL Score for Personal Loan

Your CIBIL Score for Personal Loan enables you:

  • To know your credit status
  • To get twice or even three times higher loan eligibility
  • To get a loan at a lower interest rate
  • To get instant personal loan for a longer duration
  • To get a loan with minimum paperwork
  • To get fast processing & quick loan approval
  • To get easy loan approval on rented or leased properties like homes, commercial complexes, apartments, etc.
  • To have a higher negotiation authority to bring down your interest rate, customize your loan payment tenure or ask for other benefits of personal loan and privileges

Calculate Your Personal Loan EMI

The formula used to calculate EMI on personal loan is:

EMI = [P x R x (1+R) ^n] / [(1+R) ^ n-1]

Where P= Principal loan amount
R= Rate of interest &
n= Number of monthly installments.

For example:
Let us assume, P= Rs. 3 lakh, R= 15 percent per annum= 15/12= 1.250 per month, N= 60 months then,
EMI = [300000*1.250/100*(1+1.250/100) ^60]/ [(1+1.250/100) ^60-1] = Rs. 7,137

Prepayment of Personal Loan

Prepayment refers to paying off your personal loan before the designated repayment tenure ends. It helps the borrower save on the interest compounded on the principal loan throughout the repayment tenure. It also enables the borrowers to successfully clear the debt and free up his/her finances.

Personal Loan Tenure

Personal Loan tenure may vary from a minimum of 12 months to a maximum of 84 months depending on the borrower’s income, credit history, etc.

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Are you looking for information on CIBIL score for home loans? Have you been wondering what is the minimum CIBIL score for home loans and how you can bring your credit score within that range? If so, then you’ve landed on the right page! Continue reading the article to know all there is about CIBIL score for housing loan application.

Established in 2000, the Credit Information Bureau Limited (CIBIL) is a credit information company that maintains records of individuals and organisations. A lending agency/company/bank gives out loans on the basis of the CIBIL score generated.

What is the relevance of CIBIL Score for home loan?

The CIBIL score is basically a three-digit number that ranges between 300 and 900. The higher the score, the greater are your chances of getting a home loan easily. Lenders mandatorily check your credit score to know your creditworthiness when you apply for a home loan.

Here is a quick look at how the CIBIL score impacts your home loan application:

● The CIBIL score is essentially the first impression that your lender gets of you as a borrower
● Borrowers applying for home loans with low CIBIL scores might face a harder time in getting their applications approved
● Having a good or high CIBIL score allows you to get the better interest rate


Can a good CIBIL score help you get a home loan at a lower EMI?

Having a good CIBIL score when you apply for a home loan not only makes you eligible to get one but also helps you get funding at a lower interest rate. Lower EMIs will help bring down the overall cost of your housing loan. As we all know, a home loan is long term debt that runs into decades. So, even a small reduction in interest can see you potentially save lakhs of rupees.

Thus, having a higher CIBIL score can prove to be immensely helpful for a housing loan.


What is considered to be a good CIBIL score for home loan applicants?

Generally higher CIBIL score is considered good. It increases chances of getting easy approvals and better rates of interest. Bank of Baroda requires a minimum credit score of 701 for a customer to be eligible for a home loan.


Want to know how to increase your home loan eligibility?

Here are a few tips that can enhance your chances of getting a home loan:

● Paying off existing loans:
This is the major tip which will help you increase your chances of getting your home loan sanctioned. Ensure that you are paying your existing EMIs on time regularly and there is no default. If you have a habit of using your credit card, make sure you pay off your entire card debt on a regular basis so that you don’t have to pay any interest on those expenses. In short, pay the whole balance and not just the minimum due.
● Record your variable pay:
Another way to increase your eligibility is by giving the bank proof of your variable pay apart from submitting your income documents.
● Opt for a joint home loan:
You can add your close relatives as co-applicant, while reviewing an application for a joint home loan, the lender considers the income of both the parties. Hence, a combined monthly income will appear higher and increase your chances of getting the loan value you need.

Quick tip: You can use an online tool called the Home Loan EMI Calculator to understand what your monthly payments will look like for a certain loan amount. Knowing what kind of EMIs you can expect will help you plan your finances better. This will save you from defaulting on your payments and help you keep your credit score in good standing throughout the tenure of your home loan.

Steps to check your CIBIL score online

These days, we have become accustomed to the new normal of doing as many things as possible online, from transferring money to someone to applying for cards and opening bank accounts too. In the same way you also check your CIBIL score digitally!

Simply follow these quick steps to easily check your credit score online:

Step 1 - Go to the official CIBIL website, log in and select “Know Your Score”

Step 2 - Fill up the digital form that appears and enter relevant details such as your name, date of birth, past loan history, ID proof etc.

Step 3 - After the form has been properly filled, a payment page will appear. You can choose your preferred form of payment method like debit/credit cards or net banking.

Step 4 - After successful payment you will have to answer five questions CIBIL asks about your credit history, out of which three need to be correct, in order to get your identity authenticated from CIBIL.

On approval, you will get your credit report mailed to you in the next 24 hours, and you can check your CIBIL score, also existing BOB customer can check their CIBIL score through bob World mobile banking app.

Conclusion

Now you can be the proud owner of your very own dream home with the easy home loan options given by Bank of Baroda. Our home loans have low interest rates, affordable processing fees, and longer tenures too. At Bank of Baroda, you can also enjoy many other benefits such as a free credit card when you apply for a home loan. Choose from our wide range of home loans including pre-approved home loan, home improvement loan, and loan takeover scheme, among others. You can check your home loan eligibility online on our website and even apply for your home loan online too. It’s that convenient!

Get in touch with us today to know more.

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