Bank/NBFC | Organization | Personal Loan | Home Loan | Business Loan |
---|---|---|---|---|
![]() 4.8 stars, based on 421 reviews | Bank | Yes | Yes | Yes |
![]() 4.7 stars, based on 349 reviews | Bank | Yes | Yes | Yes |
Try Applying for a higher Loan Amount as most bank reduce interest rates as loan amount increases
Try Adding the income of a co-applicant like a working spouse
Financebuddha can help you consolidate all your loans into one to increase your eligibility
An act of lending property, money or other material goods to another person in exchange of future repayment of principal amount plus interest or any other type of finance charges is known as loan. It is a contract agreed by two parties and the terms and conditions, rate of interest and other charges along with the principal is informed at the initial stages.
Most loans have a limit for the loan period, loan amount and interest rate. Loans are provided by banks, NBFC, government and corporations. Interest generated from these loans and fee received are the main source of income for those who give money as loan. More about types of loans, interest rate factors, eligibility and documentation is explained below.
The main two types of personal loans available in India are secured loans and unsecured loans.
Secured loan is where there is a need for guarantee or security against the sum borrowed like a fixed or movable asset. In case of default of the loan amount, ownership of the security will be taken over by the bank. Usually car loans and mortgage loans are secured loans. The interest rate of these types of loans will be comparatively less as the risk for the lender is low even though there are many other factors that decide the rate of interest.
Unsecured loan does not require any security, but the lender will charge a high rate of interest on the money borrowed. In case of default, the lender will seek legal assistance for the loss incurred. It is just as higher the risk of the loan, higher will be the rate of interest.
Secured Loans v/s Unsecured Loans
Factors |
Secured Loan |
Unsecured Loan |
Meaning |
The loan which is secured by an asset is known as a Secured Loan. |
Unsecured loan is the loan in which there is no asset mortgaged as security. |
Basis |
Collateral |
Credit-worthiness |
Pledging of Asset |
Yes |
No |
Risk of Loss |
Very less |
High |
Tenure |
Long period |
Short period |
Expensive |
No, due to low interest rates. |
Yes, because the interest rate is high. |
Borrowing Limit |
High |
Comparatively less |
Right of Lender in case Borrower fails to Pay |
Forfeit the asset. |
Can sue him for the money. |
In India almost everyone are making utmost use of the opportunity of loan. This will not just help in short term and long term financial needs but will also generate a lot of tax benefits. There are many types of loans available in India. It is said for almost anything and everything this is used nowadays. Getting a loan is very simple and it can be used for purposes like business, marriage, medical, education, debts, household, two wheeler, car, holiday, for purchase a house, home renovation and others.
Here is the list of popular loans in India and the top three loan provider:
When there is an unusual expense like child's marriage, renovation of your home or furnishing, children’s higher education, family holiday, or any other dream to be turned into reality, make use of the personal loan option. With this, you have the option to repay your borrowed amount gradually through upcoming years, no guarantor or security is required, hassle free documentation process- right officials will come to you to collect necessary documents and if all requirements are met, money can be expected within few days.
Top 3 Banks for Personal Loan:
Housing is one of the most basic needs for humans along with food and clothing. It is a major investment that allows a family to cut down on much other expenditure. All those who are looking for a home loan will be looking for the list of best banks that offer home loan. We have furnished this list to make things easier for you.
Top 3 Banks for Home Loan:
Business loan is one of the great way to increase financing towards various business needs. There are many banks that offer loan up to ₹3 million with and without collateral with pre-approved offers. This amount can be used for expansion of existing business or the start a business from the scratch.
Top 3 Banks for Business Loan:
Whether new or used cars, if you have a desire to own it, India offers car loan. This can be used to purchase a car and has the option to repay the amount through EMIs and monthly interest.
Top 3 Banks for Car Loan:
This is more like taking one bulk loan amount to clear all other outstanding debts – just like debt refinancing. There are lots of banks in India that offer such loans to individuals who are self-employed or salaried.
Top 3 Banks for Debt Consolidation Loan:
Whether you have an eye on simple two-wheeler or costly bike with a 1000cc engine, you can opt for a bike loan to make your dream a reality. By this you can own a bike today and pay the principal plus interest over the time of loan period.
Top 3 Banks for Bike Loan:
It is essential to keep in mind; home loan is different from home renovation loan. Everything from the loan charges, loan amount to rate of interest is different for both. Home renovation loan should be used only for renovation purpose.
Top 3 Banks for Home Renovation Loan:
Apart from the ones listed above there are many other types of loans that can be availed in India. Every individual has equal right in India to avail for these loans at their time of need.
Finance Buddha is not just a loan comparison site, but you can directly apply for a loan at the best bank. This website is available for free to provide all necessary information for those looking out for loan. Applicants can check the loan eligibility according to the type of loan required, post which choose the bank to apply for a loan. Considering the request banks will contact the applicants for further processing.
Choosing best loan is always a tough task for each and every one who is looking to avail loan. It is essential to consider the below factors while choosing best loan.
Here you just have to update your details such as Current Company, take home salary, existing EMI amount, Salary account bank, loan requirement and tenure, and it will auto-calculate the amount that should be paid per bank interest rates, its processing fees, etc. Once this information helps you to decide the bank you wish to avail loan, click on “Apply Now” and share your contact. Bank officials will contact you directly to make your interest executed. Here all types of loans can be applied and bank will get the feed of the same immediately.
Interest rates on loan depend on the type of loan one is availing. There are lots of factors that determine the interest loan for a loan and it is calculated on an individual basis. Thus different people will have different interest rates based on factors mentioned below. There are mainly two types of interest rates calculation. It is Base Lending Rates and MCLR- Marginal Cost of Funds based Lending Rate. It is calculated on marginal cost of the borrowing and return on the net worth for banks.
Base rate Calculated on |
MCLR Calculated on |
Cost of the funds (interest rate given for deposits) |
Marginal cost of funds |
Functional expenses/running cost |
Negative carry on account of CRR |
Cost of CRR |
Functional cost/running cost |
Tenure |
Premium |
Rate of interest is always a worrying factor for every investor. It is up to the borrower to decide whether to choose a fixed or floating rate of interest.
Factors |
Floating Interest |
Fixed Interest |
Flexibility |
Flexible according to market volatility. |
No flexibility. |
Risk of uncertainty |
High |
Low |
Protection against Cash Rate Fluctuations |
No |
Yes |
Cheaper |
Comparatively cheaper |
Not as cheaper as floating interest rate |
Pre-Payment Penalty |
Not applicable |
Applicable |
Option to lower interest rate in future |
Available |
Not available |
Transparency on interest calculation |
High |
Low |
During inflation |
Not beneficial |
Beneficial |
Hedging against market volatility |
Not possible |
Possible |
Suitable for risk averse customers |
No |
Yes |
Stability |
Fluctuating EMI amount and Loan Tenure |
Stable EMI amount and Loan Tenure |
Banks offer loan only if the individual is meeting all eligibility criteria. Among the long list of factors that makes an applicant eligible for loan, few important ones are mentioned below:
There are several reasons because of which a personal application gets rejected. Some may be known to you whereas some remain unknown to you. Personal loans are also rejected due to some solely on the bank discretion despite the applicant meeting major eligibility criteria.
Lenders always verify each and every document you provide in your personal loan online application. So, before you submit it, double check the information you provide before submitting your instant personal loan application. In case the lender finds any inconsistency in your information provided, they will reject your personal loan application.
Some common documentation error which leads to personal loan rejection are:
Every lender has their own defined eligibility criteria to be fulfilled in terms to get qualified for a personal loan. This eligibility criterion contains income factor too. The minimum required income criteria varies from lender to lender and if an applicant is not able to meet this criterion the loan application gets rejected.
Most of the lenders offer personal loans to applicants who have a stable history of employment. Unstable employment history of the applicant increases the risk factor to the lenders for the repayment. So, if you do not have a stable job or have a history of switching jobs multiple times, your personal loan application can be rejected. Lenders want customers with stable employment or business so that they can be regular with income and hence with the EMIs and repayments.
CIBIL is the basic representation of your financial history. It shows all your borrowings and repayments made against your borrowings. A low CIBIL indicates that you were not timely with your EMIs or you have missed some of your EMIs. This increases the risk to the lender and hence to be on a safer side they reject applications with low CIBIL score.
Income to debt ratio is also an important thing which lenders consider while processing a personal loan application. A higher income to debt ratio means the applicant is already into debt which is more than 40% of his/her income. Generally, lenders reject such applications have they are not much sure about their repayment.
Just as everything has dos and don’ts, the same is the case of loans. The below list will help you understand the same.
Here is the list of loans that are taxable and tax free. This list will help you in manage financial requirements by tax benefits. Think wisely and choose the one reap maximum tax benefits and serves your purpose.
17(2) (viii) with Rule 3(7) (i) states:
All of us would have heard about these two terms when it comes to taking a loan and not many still know the actual difference between the same. It is pretty and easy to understanding.
Prepayment is in layman sense being able to repay the complete outstanding loan amount even before the actual tenure of the loan. This is also called as pre-closure. Primarily the principal amount will be repaid along with the pre-payment charges.
The pre-payment charges varies from bank to bank according to their policies, these charges will be intimated at the time of loan approval.
Another important doubt with regard to pre-payment is when can this be done during the tenure of the loan? While some banks will have just 6 months as the locking period, other have up to 12 months. After continuous EMI payment for the set time frame of 6- 12 months the total outstanding loan amount can be pre-paid. Along with this there will be some amount of pre-closure charges and this varies from zero to 5% on the outstanding loan amount from bank to bank.
If you know to play the cards well, you can either choose a bank that has zero pre-payment charges or look out for the offers from reputed banks that give this offer to the customers at certain specific period.
On the flip side part-payment is just closing the outstanding loan amount partly. Say your actual loan amount ₹500,000 and 2 years down the line the balance outstanding is ₹300,000. If you are expecting to receive around ₹150,000 of surplus fund, this can be used to partly repay the loan amount. Thus your outstanding loan amount will drop to ₹150,000 and there will be a proportional change in your EMI and rate of interest on the loan. This is the easiest way to repay the loan amount even before the actual tenure and your exposure to risk also drops. There is option to pay any amount between 2 to 5 times of the actual EMI amount at least once a year as the part payment.
In case of surplus fund the loan with higher rate of interest has to be pre-closed first. The higher the interest rate is; most part of the EMI amount will be flowing towards the interest of the loan instead of the principal. Thus the thumb rule is to pre-close the loan with higher rate of interest. The sooner you pre-close a loan with higher interest rate, higher will be the benefits. Of course, there will be some charges for the same which the borrower will have to incur but this amount is comparatively lesser than the actual interest you would end up paying until the complete tenure of the loan. Also it is said that home loans are generally cheaper, but before taking a decision compare all the outstanding loan interest rates and then make a wise decision.
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