Share

StumbleUpon

Facebook

Twitter

Google+

Linkedin

email

Pinterest

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:

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.

Eligibility

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.

Share

StumbleUpon

Facebook

Twitter

Google+

Linkedin

email

Pinterest

Share

StumbleUpon

Facebook

Twitter

Google+

Linkedin

email

Pinterest

Getting any type of credit (especially personal loan) is like falling into the debt trap which is created by the lender. Because initially when you get loan amount credited into your bank account, the things start looking greener as your wish of taking loan for whatever purpose comes into reality. But irrespective of taking a personal loan, home loan, car loan, etc. the amount you end up paying by the end of the term sky rockets and is not evaluated often by many. This increase is because of high interest rate and various other charges such as processing fee, pre-payment penalty, cheque bounce, etc. that comes along with the loan.

So how to save money when deciding to take personal finance?

7 ways, individuals looking for personal loan can save money

Do you really need a personal loan? 

Even before you start looking for personal loan, ask yourself – do I really need a personal loan? Many people, take personal finance for going on a foreign trip, buying expensive jewelry, consumer items such as high end gadgets, etc. But do you really need to borrow money for such things? And by not having these things, will your life change, will you make losses in the absence of such things? Definitely not, right?

So the first tip is to take a loan only when it is utmost important e.g. medical emergency. You would be surprised to know the amount of money you will save by not taking a personal loan.

Arrange money from your own savings/investments: If you have decided that borrowing money is the only option then the first solution should be utilizing your own savings. Check out all your bank accounts, investments made, any money lent to friend/relative, and others. For e.g. if you have invested in fixed deposit and the term is nearing to its end, then you can make premature withdrawal. Although there would be a penalty but this amount would be negligible compared to the interest and other charges you will end up pay after taking loan. Especially individuals with low monthly salary or self employed with low income should always remember – taking personal loan from a bank should be the last option. And if you are still short of money, then try the following next option.

Borrow money from your friends/relatives: This should be your second preferred option. If your own saving is not sufficient to meet the objective then borrow money from your acquaintances. There is absolutely no harm or hesitation in asking for money. Either they will agree or disagree. But there is always a 50% chance of your friend saying YES. To further increase your chance, in return, you can pay them interest, lower than what banks or other lenders are charging. This way both of you will be on a winning side i.e. lending person (your friend/relative) will get higher amount of money in return and your purpose will be solved. But make sure to make timely repayment as promised, because trust once lost, takes time to develop. However everyone has their own financial objectives in life. So this alternative solution may not always work. If it doesn’t, try the next option.

Loan against Securities: If your friends/relatives or other known person are not able to help much, then your third option should be to take personal loan against securities. Not many people are aware of getting loan against securities is possible. Such type of loan falls under the category of secured loan. Many financial institutions offer such loan against fixed deposit, physical gold, shares, mutual funds, LIC policy, etc. While it may not be possible for individuals from low income group to have assets such as gold, shares, mutual fund, FD, etc. But if you have any of these, then take loan against these. There are many advantages of availing such loan – low interest, no credit history check, interest is charged on the amount utilized and not on the entire loan amount, and so on.

Opt for Cash Loan: If secured loan is also not possible then apply for cash loan. This is offered by financial services companies and not banks. Cash loan is actually a personal loan but offered for short term and small amount and low interest and processed very fast. In India, you can get such quick loan from NBFCs such as – mobile wallet companies, peer to peer lending companies, or credit finance companies. Read details about getting cash loan.

Approach Co-operative Bank: Before approaching commercial bank, apply for loan at co-operative bank. There are many benefits of availing personal loan from co-operative bank such as low interest, not very stringent terms and conditions, zero prepayment and processing charges, and many others. This article on personal loan from co-operative bank provides detailed information. The table below shows few of the commercial banks and their income eligibility criteria:

Loan from Commercial Banks: Finally, if none of the above listed options work, apply for loan from commercial bank. But make sure you bargain on lowering the EMI and ask for flexi repayment option but without extending the term and with no increase in the interest rate. If you have good relationship with the bank and your case is strong, things will be in your favor. Although this would be loss making for the banks but saving money as much as possible should be your ultimate objective.

So bottom line is – If you want a better financial life, try to avoid taking personal loan or any type of loan as much as possible. And if you do so, try to move out of debt as early as possible. And especially for poor income borrowers, personal loan is more expensive and it really affects your finances badly. So for such individuals, saving money should be the prime objective.

Share

StumbleUpon

Facebook

Twitter

Google+

Linkedin

email

Pinterest

Share

StumbleUpon

Facebook

Twitter

Google+

Linkedin

email

Pinterest

Personal loan is the most profit making business for any lender (financial institutions such as commercial banks, co-operative banks) or NBFC’s such as, peer to peer lending companies or financial service providers or private money lenders and others). This is because of the high interest rate charged typically 18% and above and additional fees charged due to cheque bounce, late payment, etc.). But on the other hand, it carries risk as well, because of borrower defaults.

And risk is the reason why financial institutions set minimum income criteria before approving personal loan especially when the required loan amount is high (typically greater than Rs. 15,000 or even more)? Based on the income they evaluate the credit worthy applicant and prevent themselves from giving loan to someone with no/poor repayment capacity thereby reduce the non-performing assets. NPA’s are highly loss making for any lender since it is a unsecured loan. Meaning, in return of credit, lender does not ask for any security. For e.g. home loan – where borrower has to mortgage his/her home till the loan is fully paid.

Let’s understand ‘RISK’ with an example: Suppose you lend Rs. 1,00,000 to your very near friend/relative earning a low salary. And he/she assures you payback the money after 3 months but doesn’t pay. And instead he pays the money back after 1 year. Isn’t this a loss for you? Had you received your money fully and on time, you would have put that money in some safe investment product (e.g. fixed deposit) and earned interest money. And so, would you ever risk of lending money to the same person in the future or other? This is the same logic on which banks work on. In order to check the eligibility of the borrower they first want to know their income in addition to verifying the CIBIL record, documentation, etc.

However not every lender sets high income eligibility for personal loan. Because if they do so, they won’t get new customers especially from the low income group, who are actually in need of money than high income earning person.

But where to apply for loan when you have low monthly salary of Rs. 15,000 or less?

There are following five options to get personal loan when your salary is less than Rs. 15,000 or Rs. 12,000/Rs.10,000 or even less.

1. Commercial Banks
2. Co-operative Banks
3. Cash Loan
4. Loan against Securities
5. Private Money Lenders

Commercial Banks

Banks such as City Union Bank, State Bank of India, ICICI Bank, Canara Bank, Axis Bank, Dena Bank, Punjab National Bank. Listed in the below table is the income criteria of the these commercial banks:

Co-operative Banks

Commercial banks such as State Bank of India, ICICI Bank, HDFC Bank and others are ready to provide more money in the form of loan but in return they charge high interest rate and in addition to various other fees. So other bank alternatives to get cost effective personal loan are the co-operative banks.

Here is the table showing list of co-operative banks offering personal loan and salary required (less than Rs. 15,000 net).

So even if your salary is less than Rs. 12,000/Rs. 10,000 then also you can apply for finance at above listed co-operative banks.

The advantage of borrowing money from co-operative bank is – less interest (15% or less with most of the banks). But in return these banks want the borrower to become their member, buy shares, and keep security and add guarantors. They are money saving due to multiple other reasons as well, such as – no processing or prepayment fee, and flexible terms and conditions.

There are many other co-operative banks from where you can get personal loan even if your net salary is Rs. 15,000 or less. Many of these banks offer loan ‘N’ times of gross monthly salary. You should check with these banks for the loan. Definitely the income criteria with such banks is not high compared to commercial banks.

Cash Loan

It is nothing but a personal loan but loan amount and tenure is short. So if you need instant credit and your salary is poor, then cash loan is a very good solution. You can apply for cash loan at:

Peer to Peer Lending Companies: These are online marketplaces for loan where lenders are individuals. You can decide which lender to take loan from and decide on the interest rate as well. Check out this article for more detail. With P2PL, you can apply for higher loan amount as well.

Mobile Wallets: If you have smartphone and use digital payments app such as MobiKwik, Paytm, PayU then you can get personal loan from these apps companies. However such companies offer small amount loan but with low interest and not very high income eligibility criteria. And this is what low income earner wants – save money. So if money required is small, then you can opt for cash loan from such apps. Typically based on the transactions with the app, the loan is pre-offered. But you can still apply exclusively. Important thing to note is – these app companies themselves do not provide loan and instead they partner with financial lenders (NBFCs) and provide loan.

Credit Finance Companies: These are again non-banking financial companies (NBFC) offering instant cash anytime, anywhere. Read more in detail here.

Taking personal loan from these instant loan providers is best, since there is no banking institution in between and the loan process is extremely fast. And most importantly there is no risk involved. Therefore they are considered as emergency cash partners.

Loan Against Securities

Another option to get loan and at the same time save money on EMI is against securities. This is nothing but a secured loan. So if you are a genuine borrower then keep your assets/belonging as a collateral with the bank such as fixed deposit, shares, mutual funds, LIC policy, gold and get a loan against it. Such loans carry low interest and hence are money savers. But remember that, in case of of default, banks have right to get their money from the assets kept with them as a collateral. Most importantly there is no salary criteria. So even if your salary is Rs. 12,000 or Rs. 10,000 or less you can apply and get loan easily.

Private Money Lenders

Never ever approach such lenders for your finance needs. They charge a very high interest rate which is even more than commercial bank and the risks involved. In case of default they use unethical ways to recover money. Although there are genuine lenders as well, but you should stay away from them because of high interest rate.

So as you can see, there are multiple options to get personal loan when your salary is under Rs. 15,000 per month.

Share

StumbleUpon

Facebook

Twitter

Google+

Linkedin

email

Pinterest

Share

StumbleUpon

Facebook

Twitter

Google+

Linkedin

email

Pinterest

The need for money typically arises when the month end nears or in the mid of the month. But imagine unexpected crisis arise all of a sudden (e.g. a medical emergency, money gets stolen before marriage, etc.) requiring good amount of money to meet the demand. And at that time you don’t have enough money in your bank account to meet the purpose.

Ideally in such cases, you will approach your friends or relatives for money, which is the best recommended option because it saves time and is extremely cost effective but works on trust. If they are able to help you at the time of need, then nothing better than that. But what if every option fails including your personal savings not able to fulfil your money requirement and you need money only for a very short term. This is typically a scenario when you have small amount of money in your bank or wallet.

Cash Loan – Your Emergency Cash Partner

In such scenario, cash loan is the solution to your problem which acts as a rescuer and act as your emergency cash partners. For certain category of individuals, e.g. low income earners, cash loan is the perfect solution.

Cash loan is nothing but a personal loan or advance loan but typically offered for a very short tenure and small amount. Unlike personal loan, where the tenure is long and fixed and loan amount is high, cash loan repayment can be done anytime and loan account can be closed before the tenure and extended as well, on need basis.

Who offers cash loan in India?

There are few lending companies in India offering such type of financing. Most importantly financial institutions do not offer cash loans in India. But there are lenders who offer loan for a short period (minimum 3 months – 24 months) with amount ranging from Rs. 5,000 to Rs. 5 Lacs.

These are broadly categorized as:

1. Peer to Peer Lending Companies
2. Mobile Phone Based Payment Apps
3. Credit finance companies

Let’s get into details of these companies.

Peer to Peer Lending (P2PL) – Online Lending Marketplaces

Peer to peer lenders are basically non-banking financial corporations but under control by Reserve Bank of India. Since there is no involvement of bank, the loan processing is fast. Few of the prominent P2PL in India are – Faircent, i2ifunding, lendbox.in, and others.

In case of peer to peer lenders, the company themselves do not offer loan. Instead, money is lent by pool of investors (i.e. individuals). P2PL basically create a platform to connect borrowers with lenders. And in return, such companies make money through various fees associated such as joining fee, etc.

Mobile Wallets or Digital Financial Services Platforms

These are the new age fintech companies who make use of latest technologies to make the complete process digital. However financing is one of the service provided by these wallets. Their main business/service is digital payment. Advantages of taking loan from mobile wallets are – Very minimal paperwork, speedy processing, quick disbursement, and so on.

Few of the prominent mobile wallet players in India offering quick credit are:

Paytm: If you are a Paytm user (website or mobile app) then you are likely to get pre-approved loan depending on the transaction history with them.

MobiKwik: Another mobile wallet in India which offers instant loan of upto Rs. 60,000

PayU: In partnership with Reliance Money, PayU offers the smallest loan amount of Rs. 100 extending upto Rs. 1 Lac with a smallest tenure of just 15 days to 2 years. This is an excellent opportunity of getting personal loan for low income earners.

Like P2PL, mobile wallet companies themselves do not offer quick cash loan. Rather they have a tie-up with third party creditors, who actually lend money. Wallets are basically middlemen. For e.g. Paytm has partnership with Home Credit India Finance Private Limited (HCIN) which offers loan instantly.

Credit Finance Companies

These are again non-banking financial organisations offering instant cash anytime, anywhere. The process is 100% online and paperless. Few of these companies are:

Home Credit India Finance Private Limited (HCIN): Offering quick loan of upto Rs. 50,000. So you can even apply when the money required is Rs. 10,000.

OptaCredit Fintech Private Limited: This NBFC also makes use of highly advanced technologies and offers short term loan ranging from Rs. 20,000 to Rs. 5,00,000.

Payme India: Another company offering short term loan starting from minimum Rs. 5000.

However one very important eligibility factor taken into consideration by all the above listed digital loan providers is the credit worthiness of the applicant. So even if you are a high income earner, there is a chance of loan application getting rejected because of poor credit score. However for a first time credit applicant, getting instant money through these lenders is highly recommended.

If you are a poor income earners and wish to take personal loan from bank, then here is the list of banks and minimum income required.

Documents Required

For getting quick credit, low income earners (or anyone) should furnish correct & valid documents for faster processing and quick approvals. Typically the documents required by salaried individuals are:

• Last 3 months salary slip
• ID proof
• Current and permanent residential address proof
• If the applicant is staying on rent, then he/she needs to produce utility bill in the name of the landlord in addition to home rent agreement, voter ID, driving license, etc. as asked by the lending institution

For self-employed or businessmen, the documents will vary.

Either the applicant has to upload documents on the website/app of the lender or executives from these companies will visit you for collecting the documents. This varies for each company.

How is the money paid by the cash loan providers?

Although the word “cash” sounds confusing but the money is never offered in cash. Once approved, the borrower gets money in his/her bank account via National Electronic Fund Transfer (NEFT) or any other payment transfer method.

How to apply for instant cash loan?

There are three ways to apply for fast credit when going through above listed lenders:

• On website of the lender
• On mobile app of the lender
• Personally visit their branches. However with advanced technology, most of digital finance lenders do not even requires the applicant to visit their office for loan application or any other related work.

Digital fintech companies have made the complete lending process – loan application, verification, approval, disbursement, repayment, closure – speedy and hassle free. This saves money and time of both the parties i.e. loaner and loanee. And most importantly money can be used for online purchases, wedding, medical emergency, vacation, and others.

Share

StumbleUpon

Facebook

Twitter

Google+

Linkedin

email

Pinterest

Share

StumbleUpon

Facebook

Twitter

Google+

Linkedin

email

Pinterest

If you search your E-mail inbox or SMS inbox or think of how many call communications have happened for personal loan then it won’t be surprising that the count would be high. Definitely each one of us must have done numerous such communications either from lender or agencies who work on behalf of such lenders, forcing you to get personal loan at a lower interest rate and guaranteeing you with 100% approvals or pre-approved loan offers.

However what they don’t disclose is the eligibility criteria during the initial interaction. It is after submitting the application, you come to know that personal loan application is rejected.

One of the biggest factor for personal loan approval is the income (gross or net monthly) of the applicant in addition to documentation, employer, city, etc. In addition to this, there is one factor checked by the lender in the background without your consent is the credit score check done through credit rating agencies such as CIBIL, Experian, ICRA and few others which are prominent in India. However amongst all these factors, gross salary (or net salary) is the most important. This is because, repayment capacity of the applicant is judged on the basis of his/her income.

Here’s the table showing the gross or net monthly income required (less than Rs. 15,000 per month) for personal loan by various lenders in India, mainly the banks.

As you can see, State Bank of India offers personal loan for low income earning individuals with monthly net income of just Rs. 5,000. So gross income requirement in this case should be around Rs. 6,000.

Benefits of Personal Loan

• Is the best solution for meeting emergency money requirement
• It is easy and quick to get. Especially for working professionals it becomes easier due to regular monthly income, which lenders check while evaluating credit worthiness.
• Tenure can be reduced.
• It can be prepaid but with extra charges, in some cases.
• Money can be used for any purpose.
• These are unsecured meaning applicant does not have to keep any collateral with the lender. Although there are ways to get personal loan against securities.

How can low income earners stop themselves from falling into the personal loan trap:

Bank is at the profit: Remember that, personal loan is the most profitable business for the lender. This is because of the high interest rate charged in addition to the other charges. Although it carries highest risk for the lending financial institutions but that risk is balanced through high interest rate. And also banks have rights to recover money from the borrower through various means.

Should be the last option: Personal loan should be the last option for your money requirement because the EMI can hurt your budget badly. Before seeking the loan, try to ask for money from your friends/relatives and in return pay them interest which is small compared to the high rates charged by the banks over the money granted. This way both the parties at the advantage.

Never agree on paying less EMI in return of long tenure: This looks enticing initially but is very costly when you calculate the total money you have to shell out of your pocket at the end of the tenure. It is always recommended to end any credit line in a short time frame. Longer the tenure, higher the money you will end up paying.

Be aware of extra charges which are hidden in the loan documents: In addition to the EMI, there are many other fees charged by the banks. Although these fees are not hidden but are actually never disclosed at the time of application or are not paid attention by the applicant. Such fees further increases the cost of the loan. The charges include – processing fees, late payment, pre-payment, cheque bounce, etc.

Try other alternatives for personal loan: Apart from commercial bank, poor income earner can also approach co-operative banks for personal loan. Interest rate and income eligibility criteria is low compared to large banks. Peer to peer lenders is another solution for the loan.

Finally signing on dotted line means you are caught in the trap: Because after signing, it becomes extremely difficult to go and win the legal battle against big financial institutions. Chances of winning the legal case are actually very low. And in addition, you will have to pay money to the lawyer, etc.

Share

StumbleUpon

Facebook

Twitter

Google+

Linkedin

email

Pinterest