Personal loan
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The document provides information about personal loans, including what a personal loan is, the sources and process for obtaining a personal loan, the various documents required, terms included in the loan contract such as interest rates and repayment schedules, and factors to consider when taking out a personal loan such as annual percentage rates and credit scores.
![Loan Repayment Schedule
• Amount
• EMI – Estimated Monthly Installment/Equated
Monthly Installment
EMI = (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](https://image.slidesharecdn.com/personalloan-121002115318-phpapp02/85/Personal-loan-9-320.jpg)
Personal loan
- 2. 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 Loan Range: Rs 10,000 – 1 Cr
- 3. Sources of loans Commercial banks Savings institutions Finance companies Credit unions Some automobile manufacturers Friends Family members
- 4. Personal Loan Process Documentation Loan Contract Loan Repayment Schedule Maturity Collateral
- 6. 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)
- 7. 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
- 8. 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 loan Interest rate Tenure
- 9. Loan Repayment Schedule • Amount • EMI – Estimated Monthly Installment/Equated Monthly Installment EMI = (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
- 10. 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
- 11. Maturity “Life or duration of the loan” EMI INTEREST LOW HIGH INTEREST EMI
- 12. 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
- 13. What You Need To Know? • Interest Rate • Loan Eligibility • Compare between different banks • Know your CIBIL Credit Score
- 14. Annual Percentage Rate “The interest for the whole year rather then the monthly rate as applied on a personal loan”
- 15. Sample APR Table EMI 2300.89 Amount ₹ 1,00,000.00 Amount Paid Amount Paid Sl.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
- 16. Loan Eligibility Fixed Obligation to Income Ratio (FOIR) • 45-50% of monthly income • Average Banking balance Bank Account Requirements • Average Loan Eligibility: (Gross Monthly Income - Gross monthly income * 45-50% – all other obligations) / EMI
- 17. 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
- 18. How and What to Compare? • Check all the existing schemes • EMIs • Interest Rates • Processing Charges • Prepayment Charges
- 19. Bank Interest Processin Tenure Benefits Name g fees 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 % 3–5 Existing Bank customers, no Years prepayment penalty, ask for Rs. 25 – 30 k salary slab AXIS 15-19 % 2 -3.5 % 3-5 Existing Bank customers, ask for Years min.1 Rs.5 k salary slab CITI 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.
- 20. 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 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
- 21. 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
- 22. 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!
- 23. To increase loan eligibility • Clubbing income • Increasing tenure • Additional income • Step- up loan • Pre-closure of existing loan • Employer- Bank Relationship