Personal Loan is a kind of unsecured loan which can be taken without giving any asset as security for any purpose such as Home Renovation or improvement, wedding, Education, Vacation, or Medical Emergency etc.

Interest rate varies among client and among banks on basis of their repayment capacity, credit score. However, Personal Loan is one of the most interest bearing Loan as compared to Home Loan, Gold Loan or Education Loan because of its being unsecured in nature.

Bank cannot do anything apart from taking legal actions against any person who default in repaying the Loan and borrower credit score also gets affected on default.

Loan Amount of Rupees 50 Thousand to a maximum of 25 Lacs may be sanctioned after taking following points into consideration:

Credit score (Credit score above 750 out of 900 is highly recommended)

Occupation (Salaried Employee/ Self Employed / Business – to check earning stability)

Yearly Income

Age Group

Marital Status and Spouse Occupation

Depended Child and Parents  

Other running Loans

Documents Required:

Duly filled Application Form with all Necessary fields

Identity and Residence Proof

Last 6 Month Bank Statement

Latest Income-Tax Return

Salary slips (For Salaried Employed)

Business Profile and Last 3 Years Balance sheet (For Businessman and Self-Employed)

Education Certificate and work experience (For professionals)

The Tenure for Personal Loan can be set from 1 Year to 5 years. Some of the Banks also impose Lock-in period. This is a period where a borrower cannot foreclose or prepay the Loan.

Banks generally takes EMI Payment through Electronic Clearance System (ECS) and also takes Post Dated Cheques so that they can take legal actions in case of default.

Other charges:

Other charges may vary among Banks

Loan Processing Charges – 1-2%

Penalty on payment failure

Pre-payment/ Foreclosure charges after completion of Lock-In (Some of the Banks do not charge this, it is better to negotiate this before applying)

Gold Loan is a safe option to avoid taking up high Interest Personal Loan

Gold Loan is a Secured Loan where you have to deposit your Physical Gold or Sovereign Gold Bonds until the full repayment of Loan. Gold Loan can also be taken for any purpose just as mentioned in personal loan.

In case borrower default in paying EMIs, Bank or NBFC can auction Gold deposited with them, after giving prior and final notice to the borrower.

Loan Amount:

To ascertain maximum Loan amount which can be given, Gold Value is calculated:

Gold of 18 to 24 carats will only be accepted

Jewellery making charges and any stone affixed would be deducted.

From the value of Gold decided margin of safety is deducted which is called Loan to value.

Borrower can maximum get Loan upto the amount of Loan to value.

Margin of Safety for NBFCs is 25% and for Banks it is just 10%. RBI in a recent notification allowed Banks to give 90% Loan as against Gold value.

So a Bank can give you Loan upto 90% of the Gold Value and NBFC can only give 75% (Loan to Value Ratio)

Suppose, you have jewellery amounting to Rupees 7.5 Lacs, which includes Making charges and Stones of 1.5 Lacs

So the Raw Gold value would be only 6 Lacs. Margin of Safety required to be maintained by a Bank is Just 60,000, while it is 1.5 Lac for NBFC.

A Bank can give you a Loan upto 5.4 Lac and an NBFC can give you 4.5 Lac only

Apart from that, Banks’ Interest Rates are lower than NBFCs’ and Gold safety is also better.

Documents Required:

Duly filled Application Form with all Necessary fields

Identity and Residence Proof

Latest Income-Tax Return

Loan Repayment:

Loan can be repaid in 2 Options

Option 1: paying only interest amount on monthly basis and full principal repayment at the end of Tenure

Option 2: Easy Monthly Instalments containing both Principal and Interest  

The Tenure for Gold Loan can be set from 6 Month to 3 years.

Other charges:

Other charges may vary among Banks

Loan Processing Charges – 0.5 to 1%

Penalty on payment failure