Kolkata: Personal loans have emerged as a major driver of the credit ecosystem in banks. Personal loan is the most popular category of retail loans in the country and number far more than home loans. These are mostly used as consumption loans such as in buying the latest gadget or smartphone as well as meeting expenditures in emergency situations such as medical bills and higher education expenses. Check the interest rate charged by some of the top banks in the country and the fees associated with processing the documents. Processing fee is charged by all banks for personal loans. Personal loans is the most expensive of all retail loans since it is an unsecured loan ie, a loan that is given without any collateral. Banks compensate for the higher risk with the higher interest rate.
Interest rate on personal loans
HDFC Bank: 9.99% and above
Processing fee: Up to Rs 6,500
Axis Bank: 9.50% and above
Processing fee: Up to 2% of loan amount
ICICI Bank: 9.99% onwards
Processing fee: Up to 2% of loan amount
SBI: 10.00%–15.00%
Processing fee: Up to 1.5% of loan amount
PNB: 11.25%-16.80%
Processing fee: 0.35%-1% of loan amount
Bank of Baroda: 10.15%–18.00%
Processing fee: Up to 2% of loan amount
Canara Bank: 9.70%–15.15%
Processing fee: Rs 0.5% of loan amount
Union Bank: 8.75%–12.55%
Processing fee: Up to 1% of loan amount
Kotak Mahindra Bank: 10.99% onwards
Processing fee: Up to 5% of loan amount
On what factors are personal loans sanctions
Since personal loans are not backed by any collateral asset, banks sanction these loans solely on the basis of credit score, income and loan servicing ability. While credit scores usually range from 600 to 900, anything above 750 is considered good while a score aboce 800 can be labelled as excellent.
While the importance of income level is easy to understand debt servicing ability is perhaps more important. It refers to the ability of a the borrower to repay loan. The point to note here is that it should be not treated as level of income. One can have a higher level of income yet can have lower ability to repay debt. The standing expenses of an individual and the question whether he/she has any loan running now is a very significant factor. If one is already repaying a debt, the ability to service a second one becomes a matter of scrutiny. Therefore, all these factors have to be kept in mind when applying for a loan.