- June 4, 2020
- Posted by: Ganeshcbani
- Category: Blog
Personal loans are Unsecured loans available to both salaried and self-employed professionals to help them meet their overall urgent and immediate personal or private expenses. Unsecured loans are loans that can be used easily, without any protections. The interest rate on personal loans is higher than on secured loans. Many personal loan providers are offering cheap and fast loans in India. You only need a new loan if:
You are in the midst of a financial crisis and need funds immediately.
You have no collateral for a secured loan.
Detailed documentation and loan processes don’t take time.
A short-term loan of not more than five years is required.
The advantages of personal loans are:
Unsecured in nature without collateral or security requirements
Fast turnaround in just a few hours with loan approval. Banks are now also offering immediate personal loans.
Minimum documentation based on basic KYC approval, fast background checks, CIBIL score and proof of revenue
How to get the best interest rates on personal loans?
Citibank provides the lowest interest rate of 10.50 percent at the present rate. Depending on the company in which you operate, you will get the best personal loan, the loan amount you applied for and your repayment potential. The higher the amount of the loan, the lower the interest rate.
The best personal credit banks are HDFC Bank, Tata Capital, RBL Bank, Citibank and ICICI Bank in 1-2 days, if you are looking for an instant personal credit. The interest rates of these banks range from 10.5% to 18%. These providers of loans offer online lending. You can receive online personal loan approval from these banks immediately and check eligibility without the need to submit paper documents. You may qualify for instant disbursement with no documents if you are an existing bank account holder or existing HDFC Bank, Tata Capital, RBL Bank, Citibank, ICICI Bank lender. In other cases, you can physically upload a few documents to a bank loan officer who will visit you before you disburse the loan.
Interest rates on personal loans
Banks regularly launch attractive schemes with low interest rates, in particular for people working with reputable large companies. Interest rates vary based on your company categorization into the internal categories of banks that can vary from bank to bank. Therefore, check always for personal credit deals from many banks to get the cheapest rates
Personal Loan processing fees
Most banks charge Rs. 999 to 2% of loans, whichever is higher. As these loans are short tenure loans, higher handling fees can lead to considerably high loan costs. It is therefore necessary to compare and list the top offer with the All Inclusive rates for personal finance loans. Get an in-depth analysis of interest rate, fees.
Since these are unsecured loans, banks seek an insurance policy from the borrower in case a loan is being used. The premium, however, varies between banks, depending on the risk coverage of various policies. Check the letter of the loan penalty carefully to learn the coverage and premium. You may also want to compare different policies so that you can choose a policy that gives you adequate coverage at a low premium.
Prepayment and foreclosure for personal loans
Nobody wants to pay interest on a loan if surplus money is available to reimburse it. Sometimes you want to repay a part of your loan, called part prepayment, before time. If you decide to pay the full amount of your loan before time, this is known as foreclosure. Banks typically charge personal loans from zero to 5 percent for prepayment or foreclosure. Check carefully if you receive a low interest rate personal loan with high prepayment or foreclosure charges. Some banks may not allow you to prepay your loans before a few months and the same must be taken into account when taking a loan.
Personal Loan Balance Transfer rates
Personal Loan Balance Transfer refers to the process whereby, for the better repayment terms like a lower interest rate, you transfer your existing personal loan account with an existing lender to a new lender. This option generally allows you to save your personal loan interest. For instance: If you transfer your existing Rs. 10 lakh@16 percent personal loan 48 months after 12 months to another bank offering a lower interest rate @14 percent p.a. You will then save Rs. 28,421 * for the remaining tenure of 36 months.
The transfer rate of the personal loan balance depends on the internal criteria of the bank as well as the profile of the applicant. For example, HDFC bank, ICICI bank and Axis bank’s personal credit balance transfers begin at 11.39%, 11.29% and 12% respectively. Keep in mind that personal loan balance transfer offers usually involve additional fees / charges like processing fees, advance payments for the original loan, etc.
Formula of interest and calculation
The following formulas are used to measure interest rates using the flat rate method and the balancing method:
Flat Rate Method: The total loan borrowed is charged for the interest. The formula for the calculation of EMI according to this method is:
EMI Flat Rate Method = (main + total interest payable) / monthly loan tenure
Total interest payable = Key x Interest Rate x Tenure/100 Loan Tenure
Reducing the balance method: In this case, the interest is charged on the outstanding amount for subsequent months. The formula for calculating EMI according to this method is as follows:
EMI with the method for reducing equilibrium = [P x R x (1+R)^N]/[(1+R)^(N-1)]
P = Main amount of the loan
R = Monthly rate of interest
N = tenure for repayment of loans in months