Personal Loans :

Banks under the category retail finance, are extending two important loans viz., Personal Loans and Consumer Loans. Usually banks give personal loans without any tangible security. Invariably such loans are given to salaried persons based on their regular source of income i.e., salary.

Purpose:

To cover travel, marriage or educational and medical expenses. Some banks extend loans to celebrate functions/ festivals as well.

Eligibility:

Different banks follow different systems, however depending upon the bank’s policy the terms and conditions may vary. Regular and permanent employees of Central, State Governments, employees of reputed corporate companies, industrial establishment both in Private and Public Sector, with a specific minimum number of years of service.

Loan amount:

The loan amount is calculated based on how many times of the gross/net salary.(Banks generally verify the proof of employment and salary certificate, to work out the eligible loan amount) The net take home pay would also be considered while arriving at the loan amount. Some banks insist that a minimum of 35 to 40 percent of the gross salary should be the minimum take home pay after the proposed EMI for the loan.

Security:

While no tangible security like fixed assets is required, some banks require a personal guarantee.

Loan Documents:

(i) Bank’s loan sanction letter (ii) Demand Promissory Note (iii) Loan agreement (as per bank’s standard format) (iv) Proof of employment and salary certificate, some banks obtain bank pass book to verify the salary credits (v) Guarantee agreement, if the loan is guaranteed.

Other terms:

As per bank’s policy the other terms and conditions are decided like, interest rate, tenor of the loan, repayment amount, EMI, pre-payment, processing charges etc.,