Rating: 
Welcome to the FAQ Section of this site. We've compiled a list of the most commonly asked questions in order to further assist you in your quest for a perfect loan. Insurance matters are also handled here.
If you have a further question please don't hesitate to contact us.
We have completed our
negotiations with CreditProvider.com,
who have no joined our charity support program. They provide auto refinancing.
Regrettably, Titan Loans
is no longer offering support for our charities due to its recent change
of ownership.
Loanapp.com
has announced changes to their intrest rates. They are slightly higher,
however they now accept a longer payment term.
Financial expert Mr. Truman
Phuong is in the process of writing an article specifically for us. The
topic of his paper will be internet financing and the direction for the
future. Expect it to be available soon!
- What exactly is a personal loan?
- What then is a consumer loan and how is it different from a personal loan?
- What should I consider before taking a consumer loan through a dealer?
- Who can avail a personal loan?
- What about self-employed people? Can we get personal loans too?
- How do I take a personal loan?
- Now that I've applied for my loan, what are the modalities involved?
- How do financiers go about assessing my loan application?
- Once I've handed in all the required documents and personal information, then what?
- How soon will I get my loan money?
- Will I need to provide any collateral for my loan?
- Who can be my co-applicants?
- How large a loan can I get?
- What is the maximum tenure of a personal loan?
- How do I repay my loan?
- How much do I have to pay every month?
- Are there any penalties if I pre-pay my loan?
- How is my loan eligibility determined?
- What are the fees and charges payable and when are they payable?
- What is the rate of interest that will be charged on my loan?
- What are the formalities for acquiring a personal loan?
- What can I produce for proof of residence?
- How can I prove my age?
- In what form do I have to furnish proof of income?
- Should I disclose the reason for which I need the loan?
- I am an IT (Information Technology) professional, will my loan application be treated differently?
- Do I need security to get a personal loan?
- What's the difference between a secured loan and an unsecured loan?
- Is it possible for me to get an unsecured loan?
- Which are the organizations that offer unsecured (ad hoc) loans?
- What is 0% financing and how does it work? Is it beneficial?
What exactly is a personal loan?
A personal loan is a large sum of money given by a bank to an individual
for purely personal reasons. In short, you don't tell the bank what the
money will be used for. A personal loan is easy to get, as you do not
have to provide any security or collateral except your own repayment ability
and financial standing and is ideal if you need the money urgently.
What then is a consumer
loan and how is it different from a personal loan?
Well, a consumer loan is a type of personal loan. The only difference
is that a consumer loan is given against some specific consumer durable,
like a television or a stereo system. Let's say you want to buy a washing
machine on a loan - the finance company or bank would provide you up to
85% of the cost, you would have to chip in the rest! How much you actually
get will depend on the product you're going in for. On personal computers,
for example, most banks offer only up to 70% while they will give you
up to 90% for a television. However, remember that the product you buy
will remain hypothecated to the financier till you repay the loan. For
all other purposes you would be considered the owner. So if someone messes
around with your TV or damages it in any way, you and not the bank would
have to pay for fixing it!
What should I consider
before taking a consumer loan through a dealer?
Before you zero in on the right consumer loan, here are some steps you
should follow -
Research financing options and check if you qualify for a loan before
visiting dealers to shop for your choice of washing machine or television.
After all, the point of going to a dealer for a consumer loan is to see
that you get a larger range of financing options from competing banks.
When shopping, don't discuss financing until after the price of the product
is settled to your satisfaction.
Avoid discussing prices with dealers in terms of monthly payments.
If you want the best deal, you need to shop quite aggressively by comparing
loan options and asking lenders to give you their best rates. See yourself
as a customer searching for the best deal among vendors competing against
each other for your relationship. That's the truth
Who can avail a personal
loan?
Any salaried individual between 21-58yrs, with a gross annual income of
Rs. 72,000 and above is eligible for a loan. Some financiers require the
applicant to be in employment for at least 2 years. All in all, a very
accommodating set of parameters!
What about self-employed
people? Can we get personal loans too?
Certainly! If you are a practicing professional like a doctor, an architect,
an engineer, a chartered accountant, a dentist, you can avail of what
is known as a 'professional loan'. Normally, the same guidelines regarding
age, income and tenure that are applicable for salaried individuals, apply
for professionals as well.
At the same time, some other factors come into play. Many financiers insist
on the following -
That you should have been living at your current residence for at least
the past 2 years.
Along with a regular proof of identity, your last six months' bank statement
and income tax returns for the past 2 years.
Proof of your office or clinic though copies of utility bills or any other
documents that establish the same proof.
A copy of the highest professional qualification you've attained.
How do I take a personal
loan?
First of all, do a bit of scouting! Check out the loans being offered
by different banks. Find out what the eligibility criteria for each of
them is and what kind of documents they require. Once you've chosen the
bank that suits you best, submit the application form and other supporting
documents that the bank has asked you for. That's it.
Now that I've applied
for my loan, what are the modalities involved?
After filling in the application, the ball is in the financiers' court.
What they do is basically assess your credit worthiness and your ability
to return the principal and interest on schedule.
How do financiers
go about assessing my loan application?
On receiving a loan application from you, a lender basically tries to
check the likelihood that you can and will repay the money. He does so
by examining, rather in a textbook fashion, the "Three Cs" -
character, capacity and credit.
Here's what they mean -
Character
A lender gets to know of your financial and personal character through
such details as how long you have lived in one place and how long you've
been working at your current and previous jobs.
Capacity
This basically refers to your ability to repay the loan given your income
and savings. To estimate your capacity, a lender looks at your existing
living expenses, debts on loans you've taken earlier and the additional
strain the new loan would impose on you. All this information comes from
your loan application itself. Don't try and hide details of your existing
loans from the potential lender of the new loan - everything can easily
be discovered through your bank statement. Avoid any cloak-and-dagger
stuff, it will only work against you!
Credit
Basically, this is test of your willingness to repay loans on due dates.
The lender will look at your track record of current and past credit relationships.
Do you pay your credit card dues on time, or do you habitually exceed
limits? What are your current credit limits, and how close are you to
those limits? All the answers would be factored in to arrive at a creditworthiness
statement.
Once I've handed in all the required
documents and personal information, then what?
Once they financier has received all the required documents and personal
information, a 'diligence check' is carried out. That's when someone from
the financier's may land up at your home or call and ask you some detailed
questions. This is done only to verify whether the information you've
provided is accurate or not, so don't be alarmed or taken aback!
After the routine diligence check, the finance company will let you know as soon as the loan is sanctioned. If the financing organization is a non-banking finance company, and the type of personal loan you've taken is a consumer loan, they would send the loan amount straight to the dealer. You could crosscheck with the dealer's delivery schedule and pick up the asset or product you've taken the loan for accordingly. In case the financing organization is a bank, chances are that you would receive a pay order in favour of your dealer. You would then have to present the pay order to the dealer and collect your product!
How soon will I get my loan money?
Quite speedily! Usually banks promise to disburse your loan within seven
working days. To make sure that happens and to avoid any unnecessary delays,
you should keep all your documents ready, especially the post dated cheques
(PDCs). The bank from which you are getting your PDCs requires at least
a day's notice to give you the cheques, so keep that in mind as well.
Will I need to provide any collateral
for my loan?
No, that's the best part about personal loans! No collaterals, no guarantees.
In fact, personal loans have been especially designed for people like
you - who don't want to go through the hassles of providing security or
hypothecation. The only time banks do ask for a guarantor or a co-applicant
is in the case of software professionals.
Who can be my co-applicants?
Only some very special people - your spouse or the parents!
How large a loan can I get?
Well, that depends on how large your take-home salary is! (And of course,
your age and the tenure of the loan.) Usually banks provide up to 11 times
your net salary, which is calculated after deducting your other constant
outflows. However to give you an idea of how much you can look forward
to - personal loans are available for sums ranging from Rs. 10,000 to
Rs. 10 lakhs.
Each financier follows a specific method for calculating your loan amount. If you are a salaried person, banks restrict these loans to public limited companies or sometimes, only a select few among the public limited companies.
What is the maximum tenure of a personal
loan?
Personal loans are, by nature, short tenure loans. Most of the banks provide
loans for maximum 3 years (36 months). However, in some cases there are
options of 5 years (60 months) also. Basically the idea is ready cash,
readily repayable!
How do I repay my loan?
As mentioned earlier, at the time of your application, the bank will ask
you to submit all the post dated cheques (PDC) required. The numbers of
cheques, of course, depends upon the tenure you've chosen. You also have
an option of prepayment after completing the lock-in-period of 6 months
where you only have to pay the outstanding principal. What you won't have
is the option of part payment.
How much do I have to pay every month?
The Equated Monthly Installments vary for each financier based on the
interest rate as well as the method of reducing principal. Generally,
banks prefer it if your monthly installment does not exceed 30-40% of
your net salary. That way you can continue living the good life even as
you pay back your loan!
Are there any penalties if I pre-pay
my loan?
Yes. If you choose to complete your payment before the tenure of the loan
is over, you will have to pay a pre-payment penalty of about 2-3% of the
outstanding amount.
How is my loan eligibility determined?
The main factor is, what else, your ability to repay! Apart from that,
your profile makes all the difference ie. your age, your income bracket,
where you live, where you work, what your job designation is and so on.
Given the fact that personal loans don't ask for any guarantees, it makes
sense that they at least make sure your own credentials are impeccable!
What are the fees and charges payable
and when are they payable?
Usually two types of charges are levied. Once when you are applying for
the loan and once when you are preclosing or ending the loan. Thus -
Processing Fees
As the name suggests, these are charged to cover the cost of processing
your application. They need to be paid before your loan is disbursed.
The rates vary from 1-3% of the loan amount. If you happen to be a great
bargainer, chances are you could bring it down even further with a little
persuasion!
Prepayment Penalty
This has to be coughed up when you're preclosing your loan and varies
from 2-3 %. This rate too is open to negotiation!
What is the rate of interest that will
be charged on my loan?
That depends on your bank! Different banks charge different rates but
broadly speaking, they range from 17% to 26% depending upon bank policies
and the particular scheme you've opted for.
What are the formalities for acquiring
a personal loan?
Like we said, there are hardly any formalities involved! All you would
have to show at the initial stage are a few basic documents. These documents
provide proof of your place of residence, your age, your income and financial
stability.
In what form do I
have to furnish proof of income?
If you are a salaried employee, you would need to produce -
Latest salary slip from your employer.
Bank statements for the past 6 months.
If you are self-employed, you would need to produce -
IT returns for the past 2 years.
Computation of income or balance sheet and profit & loss account for
the past 2 years.
A bank statement for the past 6 months.
Should I disclose
the reason for which I need the loan?
Well, if it's for something as normal as higher education, marriage, furnishing
your home, travel and so on - there's no reason why you shouldn't! It's
not mandatory of course, but the bank should have a fair idea of -
your necessity and
your credibility, so telling all would definitely be in your favour!
I am an IT (information
technology) professional, will my loan application be treated differently?
In your case, since the perceived risk of loan repayment is higher, the
loan tenure might be restricted by a year or two as compared to someone
from another industry. Apart from that, the financier might also insist
on a co-applicant.
Do I need security
to get a personal loan?
The only security you need to put forward is yourself - No kidding, personal
loans, like we said before are totally unsecured! Just go get 'em!
What's the difference
between a secured loan and an unsecured loan?
Simply this - a secured loan is a loan that is secured against some other
asset, that is you provide some form of security to the lender. That way,
just in case you don't pay up, the lender has the right to liquidate or
sell off the asset and recover the loan amount. In case of a home loan
and a car loan, both the respective assets - the house and the car - are
considered securities, so you don't need to provide any additional assets
as security. An unsecured loan, on the other hand, can be acquired without
providing any asset as security.
Is it possible for
me to get an unsecured loan?
Absolutely! Financiers and banks would be only to willing to provide such
a loan, based of course on your financial status and your repayment ability.
Which are the organizations
that offer unsecured (ad hoc) loans?
Unsecured or ad hoc loans are offered by finance firms and banks based
on a certain assessment of your financial muscle. However, here's a handy
hint: with most banks, if you have a credit card, particularly a premium
card, you can flash it and get the loan sanctioned in a jiffy. The logic
is that the credit card issuer has already assessed you and hence no fresh
assessment is required!
What is 0% financing
and how does it work? Is it beneficial?
Zero percent financing is a very simple and interesting mechanism. A number
of dealers, manufacturers and financiers are involved in any consumer
finance deal. The dealer gets a commission or a cut from the sales price
of any product from his shop. This cut is invariably a large chunk of
the sales price, at times it is larger than the interest charged on the
loan amount.
Now with an intention of boosting volumes and availing volume-related incentives or for that matter even clearing old stock, dealers tie up with finance companies. They then forego or take a cut in their commission and adjust this amount with the finance companies. The consumer is then offered the product at zero cost financing!
As you can see, this is definitely beneficial for a consumer taking loans. However, if you have the cash and do not want a loan for the product, you could actually ask for a discount on the dealer's commission and get the product at a cheaper price!
