Personal Loan for Freshers: 3 Options, Rs.5000 Income Reqd.
Readers of AllOnMoney.com have various questions about personal loan for freshers. Their questions are as follows:
- I’m a new joinee in a company but yet to receive first salary. Which financial institutions will offer me loan?
- I’m a recent graduate and have got the job offer but joining date is very near. Can I get personal loan?
- I’ve become entrepreneur after graduation and started my own company. Are there lenders offering personal finance for self employed?
- Since I’m a fresher with no credit history, can I avail personal loan?
- I’m a recent passout and doing internship at a big multi-national company. How can I get personal loan?
- What are the benefits of personal finance for freshers?
- I’m a fresher but with low income. How can I get loan?
- I got a job as a contract worker? Are contractual employees eligible for loan?
For all the the above scenarios, getting a personal loan is very difficult. This is because lenders have no way to evaluate the repayment capacity of the individual.
But still depending on an individual case, fresher can get personal loan through following three ways.
- Unsecured personal loan
- Secured loan i.e. against securities. These are known as secured loan. That is, fresher authorizes lender to get access to his/her security/asset until all the repayment is done. Depending on the value of the asset, loan amount is calculated. This is best for self employed and contractual employees or individuals with poor credit history.
- Loan from employer or salary advance
Let’s get into the detail of each of the above three options:
1) Unsecured Personal Loan
This a traditional way of applying for loan at banks i.e. filling the application online/visit physically, submit all the documents, wait for approval. And if approved, money will be credited to the account. No security asked by the bank.
There are many financial institutions offering loan for low income individuals or recent graduates. Here is the table showing list of lenders and the minimum monthly income required to avail personal loan:
|Sr.No.||Lender (Banks/Others Financial Services Company)||Minimum Net Monthly Income Required||Loan Amount|
|1||The West Bengal State Co-operative Bank Ltd.||Rs. 2,000||Rs. 25,000 to Rs. 1,00,000|
|2||The Andaman and Nicobar State Co-operative Bank Ltd.||Rs. 5,000||Upto Rs. 2,00,000|
|3||The National Co-operative Bank Ltd.||Rs. 5,000||Rs. 25,000|
|4||City Union Bank (Consumer Loan) for Salaried||Rs. 5,000||Rs. 50,000|
|5||City Union Bank (Consumer Loan) for Professionals||Rs. 6,250||Rs. 50,000|
|6||State Bank of India (Xpress Credit Personal Loan)||Rs. 7,500. This loan is only for the employees of state and government, PSUs, select companies.||Rs. 24,000 to Rs. 15,00,000|
|7||Abhyudaya Co-operative Bank||Rs. 8,000||Rs. 5,00,000|
|8||Equitas Small Finance Bank||Rs. 10,000||Minimum Rs. 1,00,000|
|9||The Greater Bombay Co-operative Bank Ltd.||Rs. 10,000||Rs. 2,00,000|
|10||Canara Bank||Rs. 10,000||Rs. 3,00,000|
|11||OptaCredit||Rs. 12,000||Rs. 50,000 to Rs. 5,00,000|
|12||HDFC Bank||Rs. 15,000 (for graduates residing in Mumbai, Delhi, Bangalore, Chennai, Hyderabad, Pune, Calcutta, Ahmedabad, Cochin)||Rs. 15,000|
|13||Tata Capital||Rs.15,000||Rs. 75,000 – Rs. 25,00,000|
|14||ICICI Bank||Rs. 15,000 (for freshers working in Bangalore, Chennai, Hyderabad, Pune, Kolkata)||Rs. 50,000 to Rs. 15,00,000|
|15||Dena Bank||Rs. 15,000||Rs. 1,00,000|
|16||Punjab National Bank||Rs. 15,000||Rs. 4,00,000|
|17||Fullerton India||Rs. 15,000||Rs. 25,00,000|
|18||Axis Bank||Rs. 15,000||Rs. 15,00,000|
|19||Central Bank||40% of Gross Salary||Rs. 5,00,000|
|20||Bank of india||40% of Gross Income||Rs. 2,00,000|
|21||Indian Oversees Bank||50% of Gross Salary||Rs. 15,00,000|
|22||Karur Vysya Bank||25% of Gross Salary||Rs. 10,00,000|
Assuming new employee may not have bank statement or last 3 months salary slip, which is required by the bank. But freshers having job offer letter in hand from a reputed company can apply in any of the above listed banks. For e.g. employees of big companies like TCS, Infosys, Wipro and others can apply for loan and chances of approval are very high.
However remember that, this type of loan is very expensive. Because the interest rate is very high above 18%. So this should be the last option for the fresher, provided the loan amount required is small. For low cost personal loan, below listed options are highly recommended. Unsecured loan offers high loan amount depending on the borrower’s repayment capacity.
2) Personal loan against securities for recent graduates
This is the guaranteed option for new employees to get personal loan. Loan against securities means keeping your asset in lieu with the lender and get money against this asset. Individuals can get finance against following 3 securities:
- Fixed Deposit
- LIC policy
- Shares or mutual funds
Against Fixed Deposit
Freshers need to open FD account with the bank and against this account they can easily get loan amount which is typically 85%-90% of the loan amount. So if amount in the account is Rs. 1 lakh, then you can get loan of around Rs. 90,000 or Rs. 85,000. This type of loan is also a money saver as the interest rate is very low. Here are the banks offering loan against fixed deposit:
|Financial Institution||Minimum Loan Amount (Rs.)|
|State Bank of India||25,000|
|Kotak Mahindra Bank||25,000|
|Bank of Baroda||1,00,000|
Check out in detail the benefits of personal loan against fixed deposit.
Against LIC Policy
This type of loan is also big time money saver and the loan amount is nearly equal to 90% of the surrender value of the policy. So for e.g. if the surrender value is Rs. 1,00,000 then the loan amount will be Rs. 90, 000. Fresher needs to have active LIC policy on his/her name.
Against Shares or Mutual Fund
Another fastest way for a fresher to raise money during emergency is by pledging shares or mutual fund. These assets have to be kept as collateral with the bank and against the value of the shares/mutual fund and the company, loan is either approved or rejected.
3) Personal Loan for New Joinee from Employer
There are many employers who offer loan to their employees at a very concessional interest rate or at zero interest. This is also called as salary advance. The money is deposited by the employer in the salary account. However the approval criteria is solely dependent on the company’s compliance rules. Also there is no credit history checked.
Benefits of personal loan for freshers
Personal loan is one of the fastest way to get access to money. And it offers various benefits to freshers such as:
- They get you out of trouble at the time of need.
- You can choose the amount of money you want.
- You don’t need to mortgage anything, your credit history is enough to support your application.
- You choose the date on which you want to repay the loan.
- You don’t need a guarantor.
- You can check in advance for additional interest and fees.
Because of the above reasons, personal loan is very high in demand from almost every category of individuals. And this includes freshers or first time job joiners.
Before applying for a loan
Remember, it costs money to borrow money. Personal loan for freshers is similar to normal loan available in the market. Meaning, the conditions for the loan amount, interest rate calculation, fees, etc. all remain the same. But with little money at the beginning of your professional life, fresh graduates should be extra careful when borrowing money:
Before you apply for a loan, determine how much money you can repay (get an estimate):
- What you expect to spend money on
- What will be the EMI
- How much money you will save after the EMI
Be aware of the true cost of your loans by keeping a record of the amount you request in addition to the additional amount you owe in interest and other costs. Also, keep in mind that the longer you take to repay your loans, the more interest you have to pay.
This article has been written by Chandra Mehta.
Chandra is a seasoned banker with 35+ years of experience in banking and financial services industry. He’s a retired banker and has served as Chief Manager and Assistant Vice President in State Bank of India/or its subsidiaries.
He has authored many articles on this site (allonmoney.com).