Personal loans are for all seasons

Personal loans are for all seasons, if not for all reasons. But the big question of course is the rate of interest. Personal loans are among the most expensive products offered by banks.


Print Edition: December 14, 2006

If the PSU banks are falling over their own feet in their haste to unroll specialised lCover Storyoans, the private banks have gone the personal loan way, big guns blazing.

 This one product covers the entire spectrum of needs from financing a wedding to buying a designer dress to renovating a home. Just a decade ago, it would have been a challenge to get a bank to sanction a loan without a security, without a guarantor and no questions asked. No longer. With competition heating up, this has become the bloodiest battlefield in the consumer finance domain.

The good news is that all you need by way of documentation before you can get your hands on that money is essentially some proof of identity, proof of residence, bank statement for the last six months, last salary slip showing all deductions or a current salary certificate with the last Form 16.  For some banks, even one of the above will do.

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The procedure may be short and easy but being eligible for such loans is definitely not. Since the USP of this loan is that it does not require any security, banks are actually betting blindly on you. Hence, expect stringent eligibility criteria. For starters, most banks will scrutinise th  company you work for. If they haven’t heard of it or it sounds remotely suspicious, their “loans at the sole discretion of the bank” clause comes into play.

 Once you pss this first hurdle, you have to meet the criterion of a minimum number of years of employment (at least a year for salaried professionals and three years for the self employed). Some banks decree you need to have occupied your current residence for at least six months, others settle for you having a banking relationship with a bank— preferably the one you have approached for the loan—for a minimum of six months. Then comes the salary. Most banks, especially the private ones, insist on a take home salary of Rs 7,000-8,000 just to qualify.  Do you have what it takes?

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