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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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What is a personal loan?
A Personal loan means borrowing money from the bank for your personal needs, without giving any security. The advantage of a personal loan is that it requires minimum documentation and you can get the loan quickly.
What is it used for?
There is no restriction — you can use your personal loan for any requirement. From cars or shares, to even buying a new sofa set or a giant LCD TV, personal loans are at your disposal to spend as you please.
Why are they called all-purpose loans?
They are referred to as ‘all-purpose’ loans because there are no restrictions on the purpose for which you borrow the money. What you use it for is not of any concern to the institution you took the loan from.
Who gives these loans?
A personal loan is given out by national banks, co-operative banks, private or a foreign bank. There are some financial institutions which give personal loans to their customers too.
What is the maximum tenure of the loan?
As the loan is provided without any security, the bank will usually offer it on a short-term basis, possibly between three to five years, but this can vary from bank to bank.
What determines your loan eligibility?
A person with a consistent/regular source of income is eligible for a personal loan. What matters the most is your ability to repay the loan.
What is the interest rate charged on your loan?
It depends on the bank that you opt for as well as on your history with the bank and your repayment record and the policies you choose for the loan and is usually determined by your salary or income levels.
When is the money received?
The whole process, from its sanction to securing the money, can take seven working days. Sometimes, the process can be faster hence it is best to be ready with your documents so that there is no delay.
What are the fees and charges applicable?
The bank or the financial institution that you borrow the money from will generally charge a processing fee which you have to pay while applying for the loan. The institution will also charge for preclosing the loan. You can bargain with the financier, depending on your relationship with him/her.
Can I co-apply for the loan with someone?
You can apply for a joint loan with your spouse or your parents. In that case, you can ask for a bigger amount as the chances for repayment increase.
How do I repay the loan?
Usually by issuing post-dated cheques for the complete term. The monthly repayment amount is either deducted from your salary automatically or you may have to sign the ECS or the Electronic Clearing System form for a debit from your account.
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