Personal Loan for Teachers: Min. Income Rs.5000, Loan Amt. 5 Lakh

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Being a teacher is considered to be the most respectable job. However in India, the salary offered to the teachers is very low especially in towns/villages. Because of this, getting a credit become difficult. For a lender, individual with poor salary is more likely to default as their repayment capacity will be poor.

In order to meet personal needs, many times teachers require personal loan. So in case of any emergency, teachers have to take out money from their own savings to meet the money requirement. There are lenders who offer personal loan for teachers especially and have low salary criteria.

Here’s the list of lenders offering personal loan for teachers, along with the income required and the loan amount:

Name of Bank/LenderMaximum Loan LimitMinimum Monthly Income Required
Indian School Finance Company Private LimitedRs. 1 Lac - Rs. 5 LacRs. 5,000
Canara BankRs. 2 LacsRs. 10,000
Axis BankNARs. 15,000
State Bank of India (Xpress Credit Personal Loan)Rs. 15 LacsRs. 5,000
Allahabad BankRs. 2 LacsNA
Punjab National BankRs. 5 LakhRs. 10,000 to Rs. 15,000
HDFC BankNARs. 15,000
Bank of BarodaRs. 50, 000 - Rs. 5 LakhRs. 6,500
Bangia Gramin Vikash BankRs. 1 Lac - Rs. 3 LacRs. 12, 500 - Rs. 17, 000
Karnataka BankRs. 5 LakhRs. 10,000
Dena BankRs. 1 LakhRs. 15,000
Indian Overseas BankRs. 5 LakhRs. 5,000
UCO BankRs. 10 LakhRs. 10,000
Central Bank of IndiaRs. 5 LakhNA
Oriental Bank of CommerceRs. 3 LakhRs. 6,000

There are multiple eligibility criteria for teachers depending on the lender as follows:

  • Most of these lenders offer loan only to permanent teachers
  • Salary account with the respective bank is must
  • If retired, individual should be drawing pension from the applied bank
  • Employees of only schools, colleges, universities
  • Employees of central, local and state government only

Other cheaper options for teachers to get personal loan:

Against securities: If the teacher has LIC policy, mutual funds, NSC or any other security; then he/she can pledge these securities. Instead of prematurely exiting or selling them, teacher can get personal loan against these. Compared to normal personal loan, such type of credit is worth recommended due to low interest rate and minimum documentation and not a very strict eligibility criteria.

Against fixed deposit: Another option to get loan is against FD. This is offered by most of the banks in India. And the interest rate offered is 2%-3% more than the FD interest rate. Again this type of loan is cheaper than normal personal loan.

Against Gold Jewelry: If any individual has jewelry and is in need of personal loan then they can pledge their ornaments as security with companies like Muthoot Finance, Manappuram Finance, and others. Even banks offer gold loans. In return, these companies will offer loan, which is at a lower interest rate due to the pledged security in the form of physical gold.

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After GST Pricing Impact on 180+ Most Common Products

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Finally, the single biggest tax reform the country has seen after independence i.e. Goods and Services Tax will be rolled out on 01st July 2017. It is also considered to be the most significant and complex economic reform for India.
Under GST, multiple central and state taxes will be combined into a single tax.

Tax on many of the goods will be significantly reduced benefiting Indian consumers. Indian manufactured products will get more exposure in the international markets leading to growth in the economy.

Since the start date is nearing, people are most interested in knowing what is going to be cheap and expensive after GST rolls out. Especially people are keen to know how the price of basic household items will change after GST implementation and how their budget will be impacted.

So here’s the list of most commonly used goods/commodities and services which are expected to see rise or fall in their prices after GST implementation:

Food related items that will be CHEAPERFood related items that will be EXPENSIVEPersonal care items that will be CHEAPERPersonal care items that will be EXPENSIVEUtility Items/Services that will be CHEAPERUtility Items/Services that will be EXPENSIVEExempt from Tax
Cooking gasAerated DrinksSoapHair DyesSmartphones made in IndiaTelevisionFresh fruits
Mustard OilInstant CoffeeToothpasteAfter Shave LotionsLarge carsMobile phone billsVegetables
NoodlesChewing gumsTooth powderDeodrantsSports Utility Vehicle (SUV)RefrigeratorPulses
Aluminium foilsWhite ChocolateHair oilShampoosElectric vehicles -
2 wheeler and 3 wheeler
Solar PanelBreads
Milk PowderCocoa chocolatesKajalSunscreenTwo wheelersRestaurant bill in AC restaurantsHealth
Butter MilkWafers coated with chocolateBeauty productsTaxi aggregatorsMovie ticketsEducation
Unbranded Natural HoneyCustard powderPerfumesCar batteriesCigarettesMilk
CheeseBranded foodgrainsAyurvedic medicinesPaintsTobaccoPaneer
Dairy SpreadsBranded floursMedicinesFansCommercial VehiclesCurd
SpicesWater heaterLife insurance premiumEggs
WheatAC Train TravelGeneral insurance premiumMeat
RiceClothing below Rs.1000TextileWheat
FlourInsulinBranded JewelryRice
Groundnut OilAgarbattiWifi and DTH servicesAnimal Slaughtering and services
Palm OilCementAir conditionerNon AC train travel in local
Sunflower OilCoalWashing machineNon AC train travel in metro
Coconut OilKerosene PdsEating out in 5 star hotelsMaida
Mustard OilX-Ray Films For Medical Use Sporting eventsBesan
SugarDiagnostic Kits And ReagentsGamblingSalt
Palmyra JaggeryPlastic TarpaulinCasinosPuffed rice
Sugar ConfectionerySchool BagBusiness class air travelOrganic Manure
PastaExercise BooksFinancial transactions and banking chargesAnimal feed
SpaghettiKitesCourier servicesFire wood
MacaroniChildren's PictureGoods transport
FruitsDrawing Or Colouring BooksSmall cars
Vegetable ItemsSilk And Woollen FabricsLuxury Goods
Several Food ProductsHelmetSchool fees
PickleEconomy-Class Flight FareMobile phones made outside India
MurabbaFly Ash Bricks BlocksAntique gold coins
ChutneyGlasses For Corrective SpectaclesMusic systems
SweetmeatsFixed Speed Diesel Engines Of Power Not Exceeding 15HpHome theatres
KetchupTractor Rear Tyres And Tractor Rear Tyre TubesHybrid cars
ToppingsWeighing MachineryGold
Instant Food MixesHotel room booking below Rs. 1000LED Television
Mineral WaterTheme park visitsElectronic iron
IceSporting eventsJuicers
LPG StoveMixers
ForksHotel room booking above Rs. 1000 will have different tax
LadlesLuxury hotels stay
SkimmersBranded Gutkha
Cake ServersSmoking mixtures for pipes & Cigarettes
Fish KnivesPaints
LPG domesticStudents' colours
Kerosene PDSAC train tickets
Ice Creams
Processed food
Food grains

The goods and service tax is currently fixed under four tax slabs: 5%, 12%, 18%, and 28%. There has already been delay in GST implementation. However 01st July 2017 has now been finalized.

So as an Indian we should support one nation – one tax system. And remember big change happens for good. Government has made sure to not burden common man with high inflation.

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2017: Aadhaar Card for Banking, Income Tax – 5 New Rules to Know

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After the successful demonetization activity which was primarily implemented to curb black money, control terrorism activities,  government has now made Aadhaar card mandatory in the following banking & income tax related purposes to further make life of tax offenders miserable.

New account opening: Whether you want to open a savings or current account, providing Aadhaar card number will be mandatory for the new applicants.

Existing bank account holders: Before December 2017, all the existing bank account holders will have to provide their 12 digit Aadhaar card number to the bank. Failure in doing so will make your bank account invalid.

Financial transaction above Rs. 50, 000: Until now for high value transactions above Rs. 50, 000; PAN card was must. However moving forward, Aadhaar number will be required for making any national or international money transfer for the amount above Rs. 50, 000.

Income Tax Returns: Until now individuals with income below the taxable limit were not required to file IT returns. And whether or not such individuals had PAN and Aadhaar card did not matter. However as per the government rule announced on 15Jun2017; any individual having PAN and Aadhaar card will have to link both these identity cards, whether or not income tax is filed or not by them. If this is not done (before the yet to be announced date), then permanent account number (PAN) card will become invalid. If Aadhaar number is not available then Aadhaar enrollment ID will be required.

Anyone having PAN card as on 01July2017, but eligible to get Aadhar card will have to notify IT department.

This is as per the section 139AA of the Act.

PAN card application: Any individual applying for a PAN card after 01 July 2017, will be required to quote 12 digit Aadhaar card number or Aadhaar enrollment ID.

What do you think about this law by government? Share your thoughts in the comment section below.

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Low Income Personal Loan from Co-operative Banks

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In case of emergency e.g. medical treatment or unexpected money requirement; people normally arrange money from their own saving or ask friends or relatives for financial support. However it’s not always possible to arrange money at the time of need. And during such times, financing from bank is the best recommended solution. There are many lenders offering personal loan for such need.

However getting personal loan is not very easy. Rising interest rate and stricter eligibility criteria makes it difficult to get.

Normally when we think of getting personal loan; commercial banks such as ICICI Bank, SBI, HDFC Bank & others first come to our mind. And individuals first contact such prominent lenders for their need. However these banks have strict terms and conditions and chances of loan application rejection is high. This is because, these banks want to stay away from defaulters.

But there is another category of bank in India – co-operative bank which offers personal loan. Their income eligibility criteria is low. So even a poor income earning individual has a good chance to get personal loan.

Here are three co-operative banks offering personal loan to low income earners. Individuals who are permanent salaried and self- employed or businessman are eligible to get loan.

The table below displays minimum monthly income required and maximum loan amount granted:

Name of Co-operative BankMinimum Monthly Salary Required (in Rs.)Maximum Loan Amount
Abhyudaya Co-operative Bank80005 Lakhs
The Andaman and Nicobar State Co-operative Bank Ltd.50002 Lakhs
The West Bengal State Co-operative Bank Ltd.200010 Lakhs
City Union Bank650050000

Note: City Union is not a co-operative bank. But since their income requirement is low, it has been included in the list.

Poor salaried can easily get personal loan from these co-operative bank provided they meet other eligibility criteria as follows:

Membership: In order to get personal loan; applicant has to become member of the bank. For this, they need to buy shares. And depending on the loan amount, shares has to be bought. For e.g. In case of Abhyudaya bank, the membership fee is Rs. 100 for the loan amount of Rs. 1 Lakh. And for higher amount, the requirement is of Rs. 2000.

In addition to the membership, the required documentation has to be done.

The loan amount can be used for any purpose such as:

  • Buying electronic gadgets or appliances
  • Repairing or renovation of house
  • Medical treatment
  • Marriage related expenses and others.

More details and advantages of loan from co-operative banks:

  • Loan amount is small
  • Low interest rate compared to commercial banks
  • If membership is continued for a longer duration then medical benefits are also offered. This benefit varies for each bank.
  • Flexible terms and conditions. Not very strict.
  • Nil processing fee
  • Nil prepayment fee
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2 Wheeler Loan for Low Income (Rs.4000-15000) Earners: Income Reqd. by 18+ Lenders

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Sales of two wheelers (scooters, motorcycles and mopeds) in India has been rising since last 5 years. Here’s the data from Society of Indian Automobile Manufacturers (SIAM) showing the domestic sales trend of two wheeler:


Despite this meteoric rise in demand for 2 wheelers, many people still cannot afford to buy their own vehicle. Because, for such individuals the cost is a concern. And for such individuals who cannot buy because of money, two wheeler loan is the solution.

There are multiple eligibility criteria before a two wheeler loan application is approved. And the most important being the income. It is the only factor through which lenders evaluate whether the applicant has repayment capacity. Although lenders also consider CIBIL score to judge credit worthiness of the applicant. Income is the very first thing checked.

Read about 2 wheeler loan for students.

Listed below is the minimum monthly income required by two wheeler loan providers in India:

Since two wheelers are not very expensive (assuming you are not buying a very high end bike). The income eligibility criteria is not very high compared to car, home and personal loan.

Name of the bankMinimum Monthly Income Required
HDFC BankRs. 7, 000 - Rs. 8, 000
Tata CapitalIncome not mandatory
Mahindra FinanceNo income proof required
IndusInd BankRs. 10, 000
State Bank of IndiaRs. 5, 000 - Rs. 6, 500
Tamilnad Mercantile BankRs. 6, 250
Hero FincorpNo income proof required
United Bank of IndiaRs. 15, 000
Muthoot CapitalRs. 8, 000 (salaried) - Rs. 10, 000 (self employed)
Central Bank of IndiaRs. 10, 000
Karnataka BankRs. 4, 000 - Rs. 5, 500
Punjab National BankRs. 10, 000
Bank of MaharashtraRs. 25, 000
Dena BankRs. 8, 250
Oriental Bank of CommerceRs. 10, 000
Allahabad BankRs. 15, 000
Indian Overseas BankRs. 5, 000
Syndicate BankRs. 4, 500

There are many other prominent lenders (listed below) offering loan for bikes, but their income requirement is not available.:

  1. ICICI Bank
  2. Canara Bank
  3. Bank of Baroda
  4. Bajaj Finserv
  5. IndusInd Bank
  6. Fullerton India
  7. Bajaj Finance
  8. L&T Finance & others

There are some lenders who do not ask for any income or income proof. However these lenders ask for guarantors, employment/business and residential stability, bank statement.

Other features in 2 wheeler loan:

Loan amount: Not all banks offer 100% finance for the two wheeler. Typically 85% – 95% of the invoice price of the vehicle is provided.

Pre-closure: Since the loan amount is small, it is recommended to close the loan as early as possible before the standard tenure. Although financiers will charge a small fee for pre-closure, it is worth doing it. This has two important benefits – credit score will be positive and money is saved as burden of EMI reduces.

Start building credit score: If you are taking loan for the first time for 2 wheeler, then it is an excellent opportunity to start building your credit score. Since loan amount is small, regularly paying-off EMI will put you in good book of lender and credit bureau. Apart from regular EMI payment before last date, you need to follow very simple rules to improve credit score –

  1. Never pay minimum balance and always pay in full
  2. Never show hunger for too much of credit. And do not apply for too many credit applications in a short span of time.
  3. Never do card settlement
  4. Stay away from balance transfer
  5. Do not spend over the credit limit
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9 Ways to Save Money on Car Loan – Down Payment, Low Interest & more

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The cost of four wheeler is very high. And if you are planning to take a loan and include other charges such as interest rate, processing fee, etc. the overall cost further increases. And all these charges are unavoidable. And that’s how lenders earn profit.

So how to save money on car loan?

When considering taking loan for car (new or second hand), you should look for following ways to save money:

Make higher down payment: Make as much down payment possible. So for e.g. if cost of car is Rs. 7, 00,000 (7 Lakhs) and bank is ready to offer 100% loan amount. Then you will have to pay interest on the whole amount i.e. Rs. 7, 00,000. However if you make a down payment of Rs. 2, 00,000; then your monthly EMI burden will straightaway reduce. This is because you will be paying interest on the borrowed amount of Rs. 5, 00,000 only. So try to make as much down payment possible. Utilizing the money received via bonus or salary increment or others should be used to contribute for the down payment.

Make full or partial pre-payment: It is also called as loan foreclosure. Try to make all the loan EMI repayments as early as possible. Even before the standard tenure ends. It definitely saves you money. However check with the lender on the pre-payment penalty and calculate the total saving. The difference should make sense. In either case, early loan closure is always recommended as this is considered as a good credit behavior. It is a positive signal to the credit bureaus giving credit score. Money received through bonus or salary increment should be first used to pay-off the debt. If not 100% prepayment, try to make partial pre-payment.

Check out minimum income required for car loan.

Choose low interest loan: Opt for lenders offering lowest interest rate. If you are an existing customer with the lender then bargain on interest. If you are in the good books of the lender then chances of low interest are high. Instead of losing a customer because of interest rate, they would be reduce the same and retain you.

Latest – 2017 car loan interest rate on new and used car.

Research and then buy: Never fall into the trap of the car dealer claiming to offer car loan at cheapest rate. Always do your own research and check what other lenders are offering. Factors to compare are interest rate, processing fees, pre-payment charges etc. Remember it’s your money.

Opt for short tenured loan: You should try to reduce the repayment tenure to as short as possible. Longer the tenure, higher would be the interest paid and the total cost of four wheeler will further increase. Objective is that your purchase should not become costly.

Know the hidden charges: Apart from the interest rate, banks also apply processing fees, pre-payment penalty, and many others. First of all, you should be aware of all these charges. And if you are an existing customer with the bank with good credit history; then ask them to reduce or remove all these charges. Even if one of the fee is removed or fee is reduced; reasonable amount of money will be saved.

Loan transfer: Although it is not very easy, but if other bank is offering cheaper rate then you should transfer the loan. You will have to pay a penalty. But if the total saving is higher, then definitely you should opt for car loan transfer.

Read tips on choosing car loan or personal loan for car.

Opt for fixed or floating rate: There are two types of interest rate applied fixed and floating. In case of former, the interest rate is constant throughout the tenure. And in case of latter, it keeps on changing. However if the market trend estimates that loan rates may fall in the coming time, then opt for floating rate as your EMI would be low. However if you do want to take risk, then opt for fixed interest loan. Very few banks offer these two options. Otherwise fixed rate is most commonly applied.

Check your CIBIL score before applying: The most important thing to do is to get credit report from CIBIL or other credit bureaus. And verify whether the details are correct or not. Many a times; credit data reported by member banks to CIBIL are inaccurate. So if you apply for loan and banks see incorrect data, then chances of loan rejection increases. And even if banks are ready to provide loan even if the CIBIL score is poor (although the chances are low), the interest rate will be on a higher side. So if your CIBIL score is poor then first work towards it’s improvement. And then apply for loan.

Remember money is money – whether small or big. Always try to save money wherever possible.

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Car Loan: Minimum Income Required by 21+ Banks/Finance Companies

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You must have come across many advertisements like “Get car loan in 2 minutes”, “Own a car with a click of mouse” and many others. So exciting to read this. However in reality, getting a car loan is not that easy.

Lenders take into consideration various factors before approving loan. And the most important criteria is the income of the applicant. The only way credit lending companies such as banks, finance companies and others evaluate repayment capacity of the applicant is the income. Different lenders have varying minimum income eligibility criteria.

Listed in the below table is the income required by various lenders – public, private, and co-operative banks, financial services companies:

Name of BankMinimum Monthly Salary Required
City Union BankRs.12, 500
Jammu and Kashmir BankRs. 17, 000 - Rs. 33, 333
Abhyudaya Co-operative BankRs. 10, 000
Indian Overseas BankRs. 5, 000
Oriental Bank of CommerceRs. 20, 000
State Bank of IndiaRs. 21, 000
HDFC BankRs. 21, 000
Axis BankRs. 20, 000
Allahabad BankRs. 25, 000
Canara BankRs. 25, 000
Dena BankRs. 21, 000
Punjab National BankRs. 20, 000
Dhanlaxmi BankRs. 10, 000
Ratnakar BankRs.8, 200 - Rs. 62, 000 (Depending on the car type)
Kotak Mahindra BankRs. 15, 000
IndusInd BankRs. 21, 000
Magma FincorpRs. 12, 500
United Bank of IndiaRs. 25, 000
Tamilnad Mercantile BankRs. 10,000
Mahindra FinanceRs. 17, 000 - Rs. 21, 000
Renault FinanceRs. 25, 000
Magma FincorpRs. 12, 500

Apart from the above listed lenders there are many other lenders offering car loan as mentioned below. However their income requirement is not available. You will have to contact the bank directly for knowing this.

  1. IDBI Bank
  2. Maruti Finance
  3. Saraswat Bank
  4. Hero FinCorp
  5. Sundaram Finance
  6. Bajaj Finance
  7. Tata Capital
  8. Tata Motors Finance Limited

Other eligibility criteria for car loan are:

  • Years of employment
  • Employment/business stability
  • Age above 18 years and less than 70 years. (This varies for each lender)

If you do not have the required income then chances of denial increases. However there are few other options to get loan for buying car such as:

  1. Loan against fixed deposit
  2. Loan against LIC policy
  3. Personal loan for car

4 things to do before applying for a car loan:

  • Check credit score: Your car loan application can also get rejected because of bad credit. Many people are still not aware of credit score or they do not take it seriously. However for a financial institution; credit score is extremely important to evaluate credit worthiness of the applicant. Credit score is given by credit bureaus. They calculate this score based on the credit history of borrower. And this financial history is provided to the bureaus by the member banks. So before applying for a loan, get your credit score checked. Read more on car loan for bad credit.
  • Loan tenure: Always take shortest loan tenure. Longer the repayment period, higher would be the total cost of the car. Although you will have to shell out higher interest in case of short tenured loan. But sooner you come out of debt, better would be your credit score.
  • Bargain on interest: This is especially for existing customers of the bank. If you have a long relationship with the lender, then bargain for lower interest. Recheck whether loan offered by the dealer is saving you money or not. Dealers normally try to hard sell loan from the banks which they have tie-up with. However it is your duty to do thorough research on best interest rates available in the market.
  • Hidden charges: Every bank applies various other charges apart from the interest rate and late payment. These charges are – part and full prepayment, processing, documentation, cancellation and others. So before signing on the dotter letter, reverify and compare these charges. These charges are actually not hidden as banks do not hide them. It is actually the applicant’s mistake who do not read the fine print.

Saving money should be your ultimate goal while taking car loan. i.e. how much money you can save on car loan – either on interest rate, processing fees, etc.

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Personal Loan Income Required by 27 Banks in India

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Your income is the most important criteria checked by the lender when approving personal loan application. Every lender has minimum income requirement below which loans are straight away rejected.

Here’s the table showing income required for personal loan by over 27 banks/financial services companies in India:

Name of BankMinimum Monthly Salary Required
City Union BankRs. 6,500
Jammu and Kashmir BankRs. 6,500
Abhyudaya Co-operative BankRs. 8,000
The Andaman and Nicobar State Co-operative Bank Ltd.Rs. 5,000
The West Bengal State Co-operative Bank Ltd.Rs. 2,000
Karnataka BankRs. 10,000
Karur Vysya BankRs. 10,000
Indian Overseas BankMore than Rs. 5000
Oriental Bank of CommerceMore than Rs. 6000
State Bank of IndiaRs. 24,000 - Urban
Rs. 10,000 - Rural and semi-urban
HDFC BankRs. 20,000 - Urban
Rs. 15,000 - Rural and semi-urban
Axis BankRs. 15,000
YES BankRs. 25,000
ICICI BankRs. 20,000-25,000 - Urban
Rs. 17,500 - Rural and semi-urban
Allahabad BankRs. 20,000
Canara BankRs. 25,000
Dena BankRs. 15,000
Punjab National BankRs. 30,000
Dhanlaxmi BankRs. 35,000
Federal BankRs. 50,000
Nainital BankRs. 25,000
Ratnakar BankRs. 25,000
South Indian BankRs. 25,000
Kotak Mahindra BankRs. 25,000
IndusInd BankRs. 25,000
Deutsche BankRs. 25,000
Bajaj Finance LimitedRs. 30,000 - Rs. 40,000 (Depending on the city)

Apart from the salary; banks or financial service providers also look for following eligibility criteria:

CIBIL score: This is a score given out of 900 to every borrower depending on the credit history. A good score is typically above 750. Anything below that increases the chances of loan application rejection. In order to get high CIBIL score, few of the solutions are –

  1. You should never keep credit balance
  2. No late or missed payments
  3. Pay EMIs fully. No minimum balance to be paid.
  4. Limited loan/credit card applications
  5. Not spending above the credit limit i.e. credit utilisation should be low.

Type of income: Whether you have a regular or irregular income matters a lot. Even if you have a high income but if it is irregular, then chances of personal loan disapproval increases.

Read on getting personal loan from co-operative bank.

Company you work for: The market reputation of the company you work for carries importance.

How many years you have been in the present job? Lenders also look for the applicant’s job stability. And if the applicant is self- employed then years in the business is considered. Although this criteria is considered by very few lenders.

Age: Most lenders do not offer loan to applicants below the age of 21 years. This is because, it is assumed that such individuals will not have repayment capacity due to no income.

Qualification: If the applicant is not a graduate then getting a loan becomes difficult. However if such individuals have a steady income, then banks can consider such applications.

Other options to get personal loan, if you are denied because of low income are:

Against fixed deposit: It’s a big money saver as the rate of interest charged by the bank is low compared to traditional personal loan. Moreover banks typically skip criteria such as monthly salary, CIBIL score etc. as mentioned above.

You can also get personal loan against LIC policy, securities such as mutual funds, shares, gold. Peer to peer lending is another good option to get loan.

So for a low income earning person, there are multiple options to get personal loan. But always remember to pay-off your EMIs before every due date.

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2017 – New & Used Car Loan Interest Rate by 17 Banks in India

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Owning a car – new or second hand gives a sense of pride to the owner of the car. However the efforts required to own a car is not easy. This is because, not everyone has required financial support to buy car. And this is when car loan is helpful.

There are many financial institutions offering car loan for new and used car. The key factor to be taken into consideration when taking any loan is the interest rate and other charges such as processing fee, pre-payment penalty, etc.

Listed in the below table is the interest rate on new car and used car by 17 banks in India:

Name of BankNew Car Loan Interest RateUsed/Second Hand Car Loan Interest Rate
ICICI Bank10.75% - 12.75%15.5%
State Bank of India9.25%10.45%
HDFC Bank9.33%13%
UCO Bank9%10.6%
IDBI Bank9.95%9.95%
Oriental Bank of Commerce10.45%12.7%
Canara Bank8.95%8.95%
Bank of Maharashtra9%9.5%
Indian Overseas Bank9.05%10.05-11.05%
Vijaya Bank9.45%11.65%
Dena Bank9.1%11.1%
Karnataka Bank9.9%13.5%
Karur Vysya Bank10.85%13.1%
Syndicate Bank10.98%NA
Punjab National Bank9.85%NA
Bank of Baroda9.6%NA
Axis Bank11.00% - 12.00%NA

High interest: So as you can see in the above table, the interest component is very high in case of used cars. The reason for having such a high interest rate is the risk associated with the used car. In case of default, even if bank tries to sell-off the used vehicle, its market value would have depreciated further.

Read more on car loan for low salaried individuals.

Factors to consider before selecting loan for car:

Loan amount: In case of new car loan, 100% loan amount equal to the value of the car is granted by most of the banks. But in case of used car, the amount is 70%-80% of the current value of the car.

Interest rate: Higher the rate, higher will the money you’ll end up paying. So select the loan with lowest interest.

Low credit score: If your credit score is low, then also you can get loan. Your income and relationship with the bank will come to the rescue.

However for the second hand car, there are further terms and conditions applied. And based on these factors, car loan for used vehicle is approved or rejected. The factors are:

1) Age of the car: Lenders offer finance to only those cars which are less than 5 years old. Few banks also limit the age to 3 years.
2) Make and model: If you are planning to buy second hand car whose make/model is no longer manufactured or has poor demand, then loan application will get rejected.

Other option to get loan for second hand car: There is only one option that remains for financing your car which is personal loan. And there are reasons to take personal loan for car.

Personal loan for car offers following advantages over car loan:

  • You can use the money for any purpose – car modification, repair works etc.
  • There is no down payment required
  • You can get personal loan against fixed deposit, LIC policy, securities such as shares, mutual fund.
  • You can buy used car irrespective of the age
  • Car remains on your name
  • No need to change hypothecation at RTO and insurance document.
  • When you take car loan, the owner of the car becomes your lender. And untill you pay-off everything, the vehicle remains in the custody of the lender. But even after repayment of all EMIs; two most important formalities need to be carried out i.e. hypothecation at Regional transport office (RTO) and name change in the insurance policy document.
  • You can sell the car even when your loan is active. This is not possible in case of car loan until all the repayments are fully paid.

Few cons of personal loan over car loan are:

Higher interest rate: Since it is a non-collateral loan, the risk is high for the lender. This is the reason why interest rate is high for personal loan.

Poor credit score: You may not get personal loan, if the credit score is poor. But there are higher chances of getting car loan, as the vehicle is under the control of the lender. Even if you manage to get personal loan, the interest rate would be high due to poor credit history.

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Personal Loan of Rs. 50000 – EMI of 4418 @10.99% Interest Rate

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Ramesh from small town recently got an excellent job from a leading IT company in India’s IT hub – Bengaluru. The salary too was above Rs. 10, 00,000 per annum. He was supposed to receive his first salary in 15 days. However emergency arise and he badly needed Rs. 50000 for medical treatment for one of his family member within 7 days. Being from a poor family and no one to support in such short span of time, he was largely worried.

In this situation, he contacted the company HR and requested the bank in which salary account was opened to offer personal loan. But since the account was with the foreign bank, the loan was denied due to no credit history. However he was advised by the HR to research and apply at other banks. Since his salary met the income eligibility criteria, chances of approval were high.

Read more on personal loan for individuals with no CIBIL score.

Here’s the table showing monthly EMI and the total amount Ramesh will end up paying along with the interest for tenure of 1 year. Current rates (as on May 2017) from different banks in India are listed. The loan amount was Rs. 50, 000. EMI is calculated using lower range of interest rate.

Name of BankInterest RateMonthly EMITotal amount to be paid
ICICI Bank11.70 – 18.85%443553225
Axis Bank15.50 - 24%452554297
State Bank of India11.95 - 16.55%444153295
HDFC Bank15.75% to 20%453154368
Bank of Baroda11.60%  to 16.60%443353197
UCO Bank15.35%452154254
Syndicate Bank14.2%449453929
Punjab National Bank11.55 – 14.55%443253183
IndusInd Bank12.99 - 20.00%446553587
Union Bank of India14.40%449953985
Oriental Bank of Commerce10.85% to 11.85%441652987
Bajaj Finserv11.99% onwards444053281
Standard Chartered10.99 - 14.49%441853026
Kotak Mahindra11.50 - 19.65%443052169

To Ramesh’s luck, he selected bank offering cheapest interest rate and got money into the bank account in less than 3 days.

Ramesh also had other options to get loan by asking someone to become guarantor and providing advance cheques. However the conditions were not favorable at that point of time for him.

Other cheaper options to arrange money for unforeseen events for individuals like Ramesh wanting small loan amount are:

  • Peer to peer lending: These are nothing but lending marketplaces where lenders are typically individuals. There is no financial institution in the middle and loans are approved within shortest period of time. Borrower can directly deal with multiple lenders and bargain on interest rates. Since the loan amount is fifty thousand only, low interest rate can be offered. Prominent peer to peer lending platforms in India are,,,
  • Co-operative banks: Compared to commercial banks, taking loan from co-operative bank is much simpler. And most importantly, the interest rate is on a lower side. And for the loan amount of Rs. 50, 000; such banks are highly recommended.
  • Friends/relatives: This ideally should be the first option to be tried. Since the personal loan amount of Rs. 50000 is small, you can ask your acquaintances to pay this money and in return you can repay along with the interest. This way, both the parties would be at the advantage.
  • Against securities: You can also get personal loan against fixed deposit, shares, mutual funds, and LIC policy. Benefit of going through this route is that the interest rate would be low, which will help in saving money.
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