How commercial Banks sanction Personal Loan, Consumer Loan & Vehicle Loan?

Commercial Banks extend varieties of credit facilities to individuals like salaried persons, professionals, businessmen by way of personal loan, vehicle loans and consumer loans. Personal loan  will be granted for any legitimate purposes like  whatsoever (e.g. expenses for domestic or foreign travel, medical treatment of self or a family member, even in medical contingencies, meeting any expenses towards such as marriage of son/daughter, educational expenses of wards, meeting margins for purchase of assets, foreign or domestic travel expenses  etc. Banks also extend vehicle loans to buy four wheeler, two wheeler and consumer loans to buy furniture, Air conditioners, electrical fittings, Computers, TV, Fridge, Washing Machine, Microwave and other electronic gadgets etc.

Eligibility criteria:

 Although it varies from bank to bank, the general criteria include borrower’s age, occupation, income, capacity to repay the loan and place of residence. In case of employed person’s loan will be considered only to confirmed employees.

Maximum loan duration: 12 to 60 months.

Margin: 15 to 25%

Interest rate: As applicable to retails loans

How the bank decides maximum loan amount?

The loan limit would be determined by the banks on applicant’s income and repayment capacity.(Loan is normally considered on the basis of take home salary shall be minimum 40 % /50% of gross salary after meeting the installment for the proposed loan. Same rule is applied to other instead of salary, annual income is considered. Apart from income of applicant, income of spouse is reckoned for satisfying eligibility criteria. In such cases, spouse shall be the joint borrower of the loan.

Key documents required:

1. Prescribed Loan Application with 2 copies of passport size photographs
2. Employer’s no objection certificate/salary certificates/ Form 16
3. In case of self-employed, IT return for past 2-3 years
4. Identity proof/address proof (Passport, PAN card, Aadhar card, etc. for identity proof and Proof of Residence like voter card,/Telephone bill, Electricity Bills, Registered lease deed, Sale agreement etc.
5. In case, the applicant is operating his/her account with other banks, SB pass book /Current account original statement with up to date entries.
6. No due certificate from existing banker.
7. Performa Invoice of the article/vehicle proposed to be purchased.

Repayment of loan:

The borrower’s salary should be credited to the operating account of the applicant at the branch where the loan availed. Alternatively, a mandate should be lodged with the employer to recover loan installment from the salary and directly remitting the same to the lender. Another method is that the loan installments are repaid in the form of post-dated cheques (PDC) drawn in favour of the bank or by releasing a mandate allowing payment through the Electronic Clearing Services (ECS) system.

Loan approval process:

In case of employed persons, loan will be considered only to confirmed employees. Employer’s no objection certificate/salary certificates are other requirements for retail loans. In case of self-employed, IT return for past 2-3 years would be verified to assess the repayment capacity of the applicant. No due certificate from existing banker, CERSAI & Credit information reports (CIBIL report) of the applicant (for a very small loan it is not necessary) will be verified. Proof of Residence like voter card,/Telephone bill, Electricity Bills, Registered lease deed, Sale agreement etc. will be verified before entertaining borrower’s request for facility. In case, the applicant is operating his/her account with other banks, SB pass book and original statement of account is verified. Borrower has to arrange for a suitable co-obligant / guarantor acceptable to the Bank.