Personal loan is the biggest profit making business for a financial institution. This is mainly because of the high interest rate charged in addition to various other fees such as late payment, foreclosure, etc.
And when it comes to borrower, individuals from low income group are mostly in need of personal loan either for medical emergency, short term money need, etc. However this category of individuals are not the main the target audience of the bank despite of the fact that bank need more new customers in order to garner more profit. The biggest reason for this is the high risk associated with poor earners as repayment capacity is considered not to be good, which is practically correct. Failure to make repayment results in rise of non-performing assets which is a loss for any lender.
This is the reason, low salaried individuals in need of personal loan have a belief that financial institutions offer loans only to high income/salaried only. And because of this belief, they approach private money lenders or others giving loan to low income earners in return of high interest and pledging the security. However this is not true.
There are many financial lenders offering personal loan to low salaried individuals and one such lender is State Bank of India, India’s largest public sector bank. And one of their loan product is SBI Xpress Credit Personal Loan is targeted towards low salaried individuals only.
Here is the table showing the important information:
|Minimum Net Monthly Required||Rs. 5,000|
|Minimum Term Loan Available||Rs. 25,000|
|Maximum Term Loan Available||24 times net monthly income or maximum Rs. 15,00,000 (15 Lacs)|
|Repayment Period||5 Years|
|For IT employee with credit bureau score (750 & above)||13.15%|
|For IT employee with credit bureau score (550 - 749)||14.15%|
|For IT employee with credit bureau score (Less than 550 / No Score)||15.15%|
|Government/Central govt. employees||12.65% - 14.75%|
|Co-operatives or unrated companies||13.40% - 15.00%|
|SBI salaried employees with credit bureau score (800 & above)||10.75%|
|SBI salaried employees with credit bureau score (700 - 799)||11.25%|
|SBI salaried employees with credit bureau score (600 - 699)||12.25%|
|SBI salaried employees with credit bureau score (Less than 600)||No loan provided|
|Non-SBI salaried employees with credit bureau score (800 & above)||11.00%|
|Non-SBI salaried employees with credit bureau score (700 - 799)||11.50%|
|Non-SBI salaried employees with credit bureau score (600 - 699)||12.50%|
|Non-SBI salaried employees with credit bureau score (Less than 600)||No loan provided|
So as you can see, if your net monthly salary is Rs. 5,000 (Rs. 60,000) then you have a good chance to get loan provided you meet other eligibility criteria.
Other benefits of this product
- Compared to its other loan products, interest rate charged is very low depending on the category of the applicant, as shown in the above table. The reason for high interest rate is the risk associated in personal loan.
- It is a unsecured loan. Meaning, there is no requirement of providing any type of security.
- Many of loan products available in the market has high processing fee
- Upon successful repayment of the loan, borrowers can apply for second loan as well. However the eligibility criteria is overall EMI/NMI ratio of 50%.
- If there is any overdue amount, then additional interest of 2% per annum will be charged.
Additional reading – list of other banks offering loan to poor income earners.
In addition to the net monthly income, the applicants must be working in following institutions:
- Central and state government
- Central PSU
- Educational institutions
- Selected companies having business relations with SBI
Things low income earners should keep in mind
1) Never approach multiple banks when applying for the loan as it affects your credit score negatively
2) Always try to complete the loan repayment before the standard loan tenure without foreclosure or any other charges.
Check out tips on how to earn extra income
3) Take successful loan closure letter from the bank once all the money is fully paid-off. This helps for any future dispute with the bank.
4) After closing the loan, check with the bank whether they have updated CIBIL record or not. If not, ask them to do this on priority. This is highly important because you may not get any type of credit in the future if record in CIBIL database is not updated. So when you apply for any loan in the future, the bank will check CIBIL record. And if they found that your previous loan is still active, they may reject your loan application. And at the same time, this rejection will be updated in CIBIL record.
5) In addition to interest rate, personal loan comes with many other charges which are mentioned in the documents. However individuals tend to ignore reading these charges and only when they are levied such charges, they realize such charges exist.
6) Always negotiate with the bank on lowering the interest rate without any hesitation. Especially when your credit score is good, banks may reduce the charges. Negotiating is an extremely good strategy when it comes to any financing.
7) Always compare rates of multiple lenders. The main objective of low salaried individuals seeking personal loan should be to save money wherever possible.
Visit this SBI link for more details about Xpress Credit Personal Loan.