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Presented by Jagdish Chandra Bhatt Arnab Baishya Sandeep Kumar Verma Ashish Bajaj Pravesh Rajpal Shashwat Sharma

a Benjamin Zhimomi

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

Sources of loans
Commercial banks Savings institutions Finance companies Credit unions Some automobile manufacturers Friends Family members

Personal Loan Process


Documentation Loan Contract Loan Repayment Schedule

Maturity Collateral

Loan Application Format

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)

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

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

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

Top of Form

No

Month/year

Payment Due (Rs.) 4992.41 4992.41 4992.41 4992.41 4992.41 4992.41 4992.41 4992.41 4992.41 4992.41 4992.41 4992.41 4992.41 4992.41

Interest (Rs.)

Principal (Rs.)

Balance (Rs.) 100000

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Oct-2012 Nov-2012 Dec-2012 Jan-2013 Feb-2013 Mar-2013 Apr-2013 May-2013 Jun-2013 Jul-2013 Aug-2013 Sep-2013 Oct-2013 Nov-2013

1500.00 1447.61 1394.44 1340.47 1285.69 1230.09 1173.66 1116.38 1058.24 999.22 939.33 878.53 816.82 754.19

3492.41 3544.80 3597.97 3651.94 3706.72 3762.32 3818.75 3876.03 3934.17 3993.19 4053.08 4113.88 4175.59 4238.22

96507.59 92962.79 89364.83 85712.89 82006.17 78243.85 74425.10 70549.07 66614.89 62621.71 58568.62 54454.74 50279.15 46040.93

15
16 17

Dec-2013
Jan-2014 Feb-2014

4992.41
4992.41 4992.41

690.61
626.09 560.59

4301.80
4366.32 4431.82

41739.13
37372.81 32940.99

Maturity
Life or duration of the loan EMI INTEREST

LOW
INTEREST

HIGH
EMI

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

What You Need To Know?


Interest Rate Loan Eligibility Compare between different banks Know your CIBIL Credit Score

Annual Percentage Rate


The interest for the whole year rather then the monthly rate as applied on a personal loan

Sample APR Table


EMI 2300.89 Amount Paid toward Loan 1,175.89 1,189.12 1,202.50 1,216.02 1,229.70 1,243.54 1,257.53 1,271.68 1,285.98 1,300.45 Amount 1,00,000.00

Sl.No Interest
1 2 3 4 5 6 7 8 9 10 13.50% 13.50% 13.50% 13.50% 13.50% 13.50% 13.50% 13.50% 13.50% 13.50%

Amount Paid Amount after EMI Towards Interest 1,125.00 1,111.77 1,098.39 1,084.87 1,071.19 1,057.35 1,043.36 1,029.21 1,014.91 1,000.44 98,824.11 97,634.99 96,432.49 95,216.47 93,986.77 92,743.23 91,485.70 90,214.02 88,928.04 87,627.59

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

How FOIR is Calculated


Income FOIR FOIR Amount 50,000.00 45% 22,500.00 Personal loan for 1 lac EMI as Calculated Earlier Disposable Income 27,500.00 Eligibility Existing Loans Car Loan House Loan Total 3,000.00 10,000.00 13,000.00 6.30 1,00,000.00 2300.89 New Dips Inc 14,500.00

How and What to Compare?


Check all the existing schemes EMIs Interest Rates Processing Charges Prepayment Charges

Bank Name SBI ICICI

Interest 18.25% 13 20 %

Processin Tenure g fees 2- 3.5 % 2- 3.5 % 7 years 3 -5 years

Benefits ROI, EMI less, Top up, can apply for OD and CC , no prepayment charges Existing Bank customers, no prepayment penalty, wealth management service, funding HL or OD Existing Bank customers, no prepayment penalty, ask for Rs. 25 30 k salary slab Existing Bank customers, ask for min.1 Rs.5 k salary slab Easy process, credit card and loan, provide loan on phone, salary slab Rs.25 30 k. Easy processing.

HDFC

13-19 %

2 -3.5 %

35 Years 3-5 Years 3-5 Years 3 Years

AXIS

15-19 %

2 -3.5 % 2-3.5 %

CITI BANK 16 %

HDBFS

16 24%

2.5 3 %

For Salary Between Rs 50,000 - 75,000/Loan Amount Rs 1,00,000/-

(All figures in INR) Total Prepayme Processi Prepayme Amount nt ng Fee nt Charges Paid Amount

BANKS

Loan Processin No of Interest g Fee EMIs

EMI

SBI ICICI

18.25% 16.00%

0.00% 2.25%

48 48

2951 2834

0 2250

141628 138283

0.00% 5.00%

0 5000

HDFC
AXIS CitiBank HDBFS

16.25%
16.00% 15.00% 17.00%

2%
2% 2% 2%

48
48 48 48

2847
2834 2783 2886

2000
2000 2000 2000

138649
138033 135588 140504

4.00%
0.00% 3.00% 4.00%

4000
0 3000 4000

Additional Information's -Predatory Lendings


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

Credit Information Bureau of India Limited (CIBIL)


Credit Information Company: rates all loans taken from banks.
Registration Credit Score from 300 900 www.cibil.com

90% of loans sanctioned are to individuals with a credit score of 700 and higher!

To increase loan eligibility


Clubbing income Increasing tenure Additional income Step- up loan Pre-closure of existing loan Employer- Bank Relationship

Balloon Payment
It is an payment due at the end of a loan, because the entire loan amount is not amortized over the life of the loan, the remaining balance is due as a final repayment to the lender.

It can occur within a fixed-rate or adjustable-rate. Borrower must be aware of refinancing risk or the risk that the loan may reset at a higher interest rate.

Step Up Loan
It is a kind of loan given by the bank/financial

institution to the borrower based on his future/ expected income


EMI is lower in the initial years, but over time the EMI increases. Takes into account the future earning potential of the borrower, like hike in the earnings (income). Enables borrower to take higher loan amount at present in accordance to future income hike. Only for salaried individuals and professionals. Increases the loan eligibility