Banks ask borrowers to wrap their personal loans, overdraft services

The banking sector, reeling under a rise in non-performing assets (NPAs) from the corporate sector, is seeking to hedge loans to individual borrowers. Increasingly, borrowers are being asked to buy insurance policies to cover their loans. “Covers with personal loans and overdraft facilities have gained traction in recent times. Both public and private sector banks are aggressively pushing these products to retail customers,” said a senior State Bank of India (SBI) official. According to Reserve Bank of India data, outstanding personal loan, without housing, consumer durables, credit cards, etc, stood at Rs 12,817 crore at the end of December.
Insurance industry players say at present, almost 30 % of personal loan borrowers are buying insurance covers. And, that is increasing at a fast clip. In comparison, the penetration in case of home loans is up to 90 %, mostly for loans between Rs 10 lakh and Rs 1 crore and around 75-80 % for an average education loan of Rs 4 lakh and above.
 Since personal loans are for a period of three-five years, the premium is not very high. Also, if the borrower purchases a group insurance policy, the premium is even cheaper.
“At a small cost, both banks and borrowers are assured of peace of mind,” said a public sector bank head.
The premium for a 35-38-year old is Rs 350-400 per lakh annually, if one takes the group insurance route. A single-premium policy for five years will cost Rs 1,500-2,000.
Says A S Narayanan, chief distribution officer at Bajaj Allianz Life Insurance, “Group mortgage covers are fast gaining ground. A lot of people are buying covers for personal and overdraft to avoid burdening their families in the event of their death.”
Group mortgage covers are mostly single-premium covers, especially for personal loans, as these are short-duration loans as opposed to housing loans. There are various options, such as a single-premium reducing cover, a single-premium level cover, and regular-premium reducing and level covers.
Reducing covers, as the name implies, decrease as the outstanding loan amount (principal borrowed) decreases over the loan tenure.
This results in a lower premium as the loan amount decreases. On the other hand, a level cover stays stagnant even if the loan amount decreases. “Some of these policies also have a money-back proposition where the buyer gets back a certain sum at the end of five years,” said a senior SBI official.
According to bankers, borrowers are being sold the covers under the proposition of ‘no headache to families, in case of an untimely death or even unemployment’.
“Borrowers are showing interest because if there is a default due to death, the family will not be pestered or will not be burdened with a loan,” said the retail head of a private sector bank.
Some banks have even made it mandatory to purchase a cover with a personal loan. In the case of some, the premium is included as part of the loan fee. However, a senior SBI official says since the central bank does not allow linking an insurance product with any loan, banks have to take a consent order from the customer before selling such bundled products.

liberalisation policies for NRIs and residents

In a move that might make life a little easier for Non-Resident Indians (NRIs), the RBI, in September, announced a series of liberalisation policies with respect to foreign exchange transactions. Here are a few such changes that will simplify the process of remittances both in and out of the country.
Convenience of joint holding
Resident Indians were earlier not allowed to hold a joint local savings bank account with their NRI relatives. A savings account holder in India, for instance, was not allowed to have his/her NRI spouse as a joint account holder. This has changed now. A resident individual is now permitted to include close NRI relatives as joint holders on a ‘former' or ‘survivor' basis. This is applicable for Exchange Earners' Foreign currency (EEFC) accounts and Resident Foreign Currency (RFC) accounts of the local resident, as well. However, the former or survivor clause means that the NRI joint account holder cannot operate the account during the lifetime of the local resident. The move, nevertheless, helps secure another person to immediately operate the account in the event of sudden demise of the local account-holder.
Another, more significant, move by the RBI is to allow a local resident to be a joint holder for NRE/FCNR accounts held by NRIs/ Persons of Indian Origin (PIO). For instance, your son living in the US will now be able to include you as a joint account holder, on a ‘former' or survivor' basis for his NRE account. You can continue to operate the account with a power of attorney, even during the lifetime of the NRI. Before this change, NRE accounts could have a local resident power of attorney holder but not a local joint account-holder.
Gift liberally
Are you a savvy investor, wanting to give away wealth-building gifts? You can now do it more liberally. A person resident in India can now transfer securities such as shares/convertible debentures, by way of gift, to any person outside India, up to $50,000 in a financial year. This limit was earlier $25,000 in a calendar year. Note the difference here - the transfer period will be a12-month period from April to March and not January to December.
If you do not care much for shares, fret not, for you can gift in Indian rupees too. A resident Indian can now make a rupee gift to NRI/PIO who is a close relative, provided it is within the overall limit of $200,000 of outward remittance permitted in a financial year under the Liberalised Remittance Scheme of the RBI. The change here is that such gift can be made through a crossed rupee cheque or an electronic transfer to the Non-Resident Ordinary Rupee account (NRO account) of the NRI/PIO. Earlier, such a credit was not possible in rupee terms in to an NRO account.

Lend in rupees
You can now also lend to your NRI/PIO relative in rupees within the overall limit of $200,000 an annum. This however, comes with a few strings. One, the loan shall be interest-free and have a repayment schedule of not less than one year. Two, the loan shall be utilised only for the borrower's (an NRI/PIO) personal requirements for his own business purpose in India. Such business shall not include any activities related to chit fund/ Nidhi company, agriculture or plantation activities or trading in transferable development rights. Get Info on Personal Loans Online and apply.
Such loan can be credited to the borrower's NRO account in India and the loan amount shall not be remitted outside India. Repayment can be made through normal banking channels or through the borrower's NRO/NRE/FCNR account. The borrower can also sell shares or securities or any immovable property (against which loan was granted) to repay the loan.

Benefits of online Personal loans or Unsecured loans

Online personal loan is one of the latest options for people who need cash fast and who can’t afford to slow down their lifestyle in order to get it. Applying for this kind of loan is easy because they can be done from home or from work through a simple and secure online application process. Rather than risking financial penalties that could leave a checking account and the negative even after payday, one of these online loans will control costs while helping people pay their bills on time.
Bad credit personal loans are specially designed to provide people with the cash they need without allowing past financial problems to cause roadblocks. These small personal loans are designed with less stringent requirements than most banks and other lenders, so more people can get the cash they need and spite of past problems. These loans are a good alternative to secured personal loans that usually require an applicant to put up a car title to guarantee the repayment of the loan.
To get a personal loan online, Read More Tips

1. Visit the secure online loans site to fill out a confidential application. This can be done from any computer with Internet access, so you don’t have to lose work or personal time driving to a loan store. The application is usually very sure and can be completed within just a few minutes.
2. Find out if you are approved. Ordinarily a personal loan approval decision comes very quickly, in just a few minutes or seconds. Although a lot of people are nervous at this stage because of their credit history, most of the time, past credit issues are not a problem with this kind of loan.
3. After approval, the money from your loan is deposited directly into your bank account through standard automatic processes. In most cases, the money is available the business day following your loan approval. This speedy delivery of funds eliminates the need to make special trips to cash checks and avoids problems that arise when you’re schedule prevents you from going to the bank.
4. Pay back your loan. This type of online loan is personal because it allows you to decide how long you will take to pay back your loan. We understand that sometimes a single payday is not enough to help you recover from a financial emergency. This way you are in the driver seat, meaning that you can take more or less time to repay depending on your situation.
Easy Application Process
These loans can be applied for online from the comfort of your own home or anywhere else there is an internet connection. They can also be applied for at any time of the day. On top of this, the actual application itself (no matter which lender you choose) is very easy to read, understand, fill out and submit.
If you have bad or no credit at all, you will most likely be denied a loan from a bank. However, when dealing with payday and other types of online personal loans, a negative credit history does not affect your approval process. This is because with payday loans, your job is what acts as collateral for the money you are lent.
Fast Approval
Nothing is worse than waiting to be approved for a bank loan. Sometimes, this can take days. However, online, the approval process is almost instantaneous. No more waiting and watching you financial situation grow out of control. You will be notified the instant your application has been reviewed and accepted.
Click to Here For apply Personal Loan Online

Tips for get a low rate personal loans

Personal loans are handy when you are in a spot and need some urgent cash. However, personal loan are tricky and you need to know as much as possible about their basics before applying for one.
Before you choose your personal loan:
Calculate the inexpensive loan offer: Personal loans come with very high interest rates ranging from 14% to 24%. Compare personal loan interest rates and get the complete picture by understanding the annualized interest rates for each offer.
Then figure out the total amount of repayment you need to shell out with all the offers before opting for the loan of your choice.
Processing fee et al: You need to keep in mind the processing fee and other fees that will be levied when you apply for your personal loan.
Prepayment penalty check: Ask upfront if there would be any penalty payments for prepayment of the loan at any point in time. More often than not loan consumers tend to pay up their loans earlier than planned to be rid of debt. Hence, its important to know if your personal loan offer allows part prepayments.
If that is the case, then you should be aware from what time frame in the loan period you can start prepaying and understand the cost you incur due to such prepayments in part or full.
EMI and tenure: Evaluate all loan offers. The first condition for loan offer selection is the total money outflow that the loan will cost. The second factor is the EMI. A loan offer with a lower EMI and a longer tenure may seem attractive, as it could be easy on your purse strings, however not all such loans prove to be cost effective in the long run.
Hence, first calculate the total loan cost and then try to opt for a higher EMI, which you can comfortably manage to enable shorter loan tenure.

How to find the Lowest Personal Loan Rates

Two people creation the same income, walk into the same bank, wanting the same amount for personal loans. While they both get the loans they were seeking, one gets a much better interest rate and thus gets a much superior deal.
Why Do Some People Get Better Rates Than Others?
First, there is no law saying how much of an interest rate a bank can charge. This means the bank can decide how much and at what interest rate they are willing to offer a personal loans. In most cases, the better rates and the better terms go to those with the better credit score.
How to Improve Your Credit Score
Since your credit score does more than determine the interest rates on personal loans, it is important to do everything you can to keep that score high. People use your credit score to determine job eligibility, insurance premiums, interest rates, availability of personal loans, and so much more. Here are some things you can do to either raise your score or keep it high.
Pay Hospital Bills – Many people are unaware that as long as you pay part of your bill you are ok. Therefore, every month pay something on all your medical bills.
Only have 1 or 2 Credit Cards – Revolving credit is a tricky thing. On the one hand, you need some revolving credit to get a credit score. However, too many credit cards or too many request for credit cards can lower your score.
Keep Balances Low - Paying off your credit cards each month is ideal. If you must roll over a balance, then pay it off as soon as possible. You need to keep a low debt to income ratio.
Pay off Bad Debt - Many people believe that once a debt goes bad, there is nothing you can do. However, paying off charge offs and slow pays will still be better than nothing.

Negotiate Large Debt – Even after a debt has gone to collections or been written off, you can call and try to negotiate a smaller fee. You may be surprised to find the creditor is willing to settle for pennies on the dollar.
The best thing you can do about your credit score is to watch it. Take advantage of the free yearly credit card report to keep the right information on and faulty credit information off.

Personal loan and loans of personal use

Personal loans are loans supposing by financial institutions without objects or security. Personal loans are unsecured loans for personal needs and can be used for any purpose. In India, personal loans are normally at the level of life are to manage, weddings, business graduation losses and investments in opposite monetary arrangements. These personal loans are really gentle and encounter all your needs. The volume of the personal loan of Rs 50 000 can Vary – R. 20 lacs and the generation of the amends of the loan varies personal 1-5 years.
In India, high-interest in isolation loans since the bank takes a incomparable series of risks, by personal loans without security. In India, personal loans from banks such as SBI, ICICI, HDFC and monetary institutions like Reliance etc. This supposing banks / monetary institutions rest on personal loans for people with seductiveness rates of in between 16-25%.
You can request for loans and might not benefit from these personal loans immediately. It is not required to the unchanging use of borrowed money divulge I. e for the role of borrowing for home loans. The banks are endangered that if the borrower does not pay off the loan with seductiveness before the due date or not, and they reliable by a review of income, practice or business and other factors of the borrower.
The support process is in the personal loan fast cumulative loans in more aged to others. Personal loan and other charges on credit by the lender, the stroke on the overall cost of personal loans and contingency as a more aged with the banks. You can additionally request online to the information accessible on personal loans. The particular websites of assorted banks and finance associated websites for other applicable information to guide the people for a personal loan.

personal loan disbursals down to 4.7%

Growth in personal loans was muted in 2009-10, data from by the Reserve Bank of India’s (RBI) macroeconomic report shows. However, education loan and home loans have not as fared as badly as the rest of the personal loan constituents.
Personal loans grew 4.7% annually as on February 26, 2010, as against a 6.6% growth a year ago. Loans to education sector grew by 31.2% (33.8%) annually while housing loans grew by 8.3% (6.4%).
The Macroeconomic and Monetary Developments in 2009-10 report, is a background to the annual monetary policy statement for 2010-11 that will be announced today.
“Low home loan (teaser) rates helped the growth in disbursements,” said Hatim Brochwala, banking analyst, Khandwala Securities. During the recovery from the global economic downturn, the housing loan segment witnessed a tide of teaser home loan schemes from banks which offered low fixed interest rates in the first few years and floating rates thereafter.
Most of these schemes have been discontinued but some have been revised with changes in interest rates and tenure.
“Teaser rates may not stay for more than 2-3 months as interest rates are going up. So the growth in home loans may come down slightly,” said Brochwala.
Growth in educational loans can also be attributed to higher demand. “During the downturn, many people went for further studies for which they had taken bank loans,” said M Narendra, executive director, Bank of India. “Now that the economy is recovering they can effectively use their higher qualifications pursued during the time of recession,” he said.
“The government has been emphasising on education loans, which is reflected in its guidelines stating that an educational loan can only be rejected by the highest authority. So almost all educational loans applied for are sanctioned,” said C S Jain, head (personal banking), IDBI Bank. Moreover, loans of up to Rs 4 lakh do not need a security, according to RBI guidelines.
The personal loans segment also includes advances against fixed deposits, credit cards and consumer durables.
The credit card segment took a hit due to heightened caution on the unsecured loans front by banks post recession. Issuances were restricted to individuals holding salaried accounts or having multiple relations (fixed deposits account, insurance etc.) with the bank in some cases. This segment declined by 28.3% annually.

HSBC to rebuild retail loans book

HSBC Bank Plans to focus on credit cards and home loans this year.
After booking losses on its consumer banking business for three straight years, Hong Kong and Shanghai Banking Corporation (HSBC) looks to rebuild its retail loan book in 2010, aided by an improving credit environment.
The UK-based bank, the third-largest foreign lender in India by assets, plans to focus on credit cards and home loans, where lending was virtually at a standstill till the second half of 2009.
The bank is now disbursing home loans worth Rs 100-150 crore every month. “Our focus for 2010 is to expand our mortgages business profitably,” said Rajneesh Bahl, country head, personal financial services.
In 2009, the lender cut exposure to mortgages in India by 20 per cent to Rs 4,061 crore from Rs 5,115.2 crore at the end of 2008 to keep a lid on losses.
“There is no doubt the economy is looking up again and customer confidence is on the rise. As the market picks up, so does the demand for affordable housing; we believe the overall pie will get only bigger, which could result in an increased market share for all players,” Bahl said.
After months, the bank is expanding its credit card portfolio. And as a sign of growing confidence in the market, HSBC has started sourcing credit cards from the open market this week onwards, according to bank sources. During the consolidation phase, the bank will only service specific requests for credit cards and not solicit customers.
“We never stopped open-market sourcing. For some time now, we have opted to grow selectively. We continue to offer cards to customers with a good profile and track record,” said Bahl.
In a departure from its earlier policy, the bank introduced co-branded credit cards last year. “Earlier, our thinking was that the HSBC credit card brand is strong and we should not dilute its value by co-branding. However, seeing the success of co-branded credit cards, we decided to introduce our own cards,” said a senior executive at the bank.
Among foreign banks, HSBC was one of the hardest hit by the downturn, reporting a loss of $219 million (about Rs 1,007 crore) on its consumer banking portfolio in 2009.
Standard Chartered Bank, the second largest foreign lender in the country by assets, reported an operating profit of Rs 248.4 crore from its consumer banking division in 2009.
Citigroup’s non-banking finance company, Citi Financial, reported a loss of Rs 729 crore for the year ended March 31, 2009.
HSBC saw stress on its consumer banking book even before the onset of the economic downturn in India. It reported a retail banking loss of $70 million in 2007. The loss widened to $155 million and $219 million in 2008 and 2009, respectively.
In 2009, loan impairment charges on consumer banking at the global level rose 9 per cent to $649 million, mainly due to rising delinquencies in unsecured consumer lending businesses in India and Indonesia.
“The delinquencies in India began to moderate in the second half of 2009 as measures implemented by HSBC in the second half of 2008 to mitigate loan losses, including ceasing consumer finance loan origination and tightening lending criteria on other unsecured lending products, began to take effect,” HSBC had said in its 2009 Annual Report.

Personal loan as a short-term finance option

In the last few weeks, calls from telemarketers have already gone up asking you to sign up for personal loans. The difference this time is that most banks want to lend to their own customers and in many cases, customers are being offered pre-approved loans to cut down on processing time.
While a personal loan is a short-term finance option, it is often used by many for long-term needs. In the process, a borrower ends up paying up a higher interest amount if he fails to clear the loan on the due date. On the contrary, a personal loan can be a handy option if chosen with care.
How to make better use of a personal loan?
Some tips to help you make better use of a personal loan:
Compare total interest payable
A personal loan with an interest rate of 14-28 percent is a better option than a high cost credit card loan as the latter charges interest in excess of 35 percent.
The same holds good for those who are in the habit of taking hand loans which carry higher rates. For such borrowers, a personal loan would be a cost-effective option and more importantly, it enables the borrower to repay the loan in totality.
Repay the loan in short to medium terms
Often, salaried professionals use a personal loan as a component of property investment. The margin money of the property cost is funded by a personal loan.
The idea is good provided the borrower is in anticipation of some funds coming in a few months later, and is in a position to clear the loan. Or else, the loan amount should not be more than a few lakhs so that it does not pinch the borrower considerably.
For instance, if a property investor is short of funding to the extent of Rs 2-5 lakhs for a property which is valued in excess of Rs 50 lakhs, the implications would not be severe. On the contrary, if the borrower depends on the personal loan to take care of more than 25-30 percent of the property cost, the chances are that he would be unable to repay the loan in the short to medium terms.
EMI a determining factor in personal loan
Keep track of EMI
Unlike other loan products, the EMI is the determining factor in a personal loan.
Since the loan is for a shorter period of time, the EMI is much higher, which is also the reason why some struggle with their cash positions after signing up for a personal loan. Hence, a personal loan should be determined by the EMI component rather than just eligibility.
This will help the borrower to be realistic with the loan repaying capabilities and not get into a default.
Keeping good credit track record
Be a good borrower
Signing up for a personal loan may be the easiest thing to do but make sure to be a good borrower as non-repayment or lack of commitment towards repayment can tarnish the creditworthiness. With banks providing details of all borrowers to the common database under the Credit Information Bureau (India) Ltd (CIBIL), a negative entry relating to payment history can make it tough for all future loans.
Also, borrowers need to make sure to complete the documentation relating to disputed loans as a failure to do so may make it difficult for future borrowing.

Loan Against Property- An easy way to fulfill your Financial Needs

Loan against property is cheaper than personal loans.
Banks have aggressively beefed up their loan against property portfolio, in the last one year. but in October 2008 the credit crunch, bankers looked for products that were secured and Loan against property (Lap) was a clear choice.
Loan against property was basically a domain of multi-national and private banks. They offered the product to fund their self-employed customers’ business-related needs. Lately, all banks are offering this product including the public sector banks.
This has come as a boon for borrowers who need large sum of money to fund their urgent situation financial needs. Bankers said that mostly salaried customers take Lap when they need money for marriage or foreign education of kids, when they are buying a new property and are renovating their house. Self-employed seek this loan to fund their business needs and to pay off debt.
In Lap, customers can avail up to 50 % loan of the existing property value. The interest rate in Lap is around 200-300 basis point higher than bank home loan. This is a floating rate loan. “Lenders see more risk in this product and so price it higher,” said a banker. The current rate can range between 12-14 %.
The minimum loan that banks disburse in this product is around Rs 2 lac – example -HDFC Bank. Foreign banks, have higher limits, some look for minimum loan size of Rs 20 lac.
"The amount of loan disbursed depends on the end use. For instance, if the property is Rs 2 crore, obviously we will not sanction a loan of Rs 1 crore for renovation of the house," said head of retail assets with a foreign bank. Before taking the loan, the borrower needs to sign a declaration stating the end-use of fund.
If the property is currently not under any mortgage, the process to avail a Lap is simpler as compared to a mortgaged one. In the former, the process is similar to taking a housing loan. The customer needs to give evidence for being able to pay the instalments. For this, the borrower needs to submit a salary proof and income tax certificates. The bank, then, comes down to evaluate the property. A no-objection certificate, is also required, from the society.
In case of a mortgaged property, the person can go for a top-up loan with the bank he has an ongoing loan with. In this case, the bank will fund the difference between the outstanding and the original loan taken. For example: A person has taken a Rs 30 lac loan for the property that was worth Rs 40 lac at the time of purchase. He has an outstanding is Rs 20 lac. The same bank will give him a top-up loan equal to the difference between the outstanding and the original loan, even if the property cost has risen. Here, it would be Rs 10 lac.
On the other hand, if fund requirement is higher the borrower can approach another bank and opt for a product called 'balance transfer plus top-up'. This is part of Loan against property. The other bank will take fresh look at the property value, take over the loan and lend up to 50 % of the existing value. In the above example, if the house price is now Rs 70 lac, the bank will take over the Rs 20 lac outstanding. The customer can avail funds up to Rs 15 lac (50 per cent of the property value, which is Rs 35 lac, minus the existing loan of Rs 20 lac).

ICICI Bank cuts down unsecured loan offtake

The country’s largest private sector bank ICICI Bank said that it is pruning its portfolio of unsecured retail loans, including personal loans, small-ticket loans and credit cards.
“As far as credit growth is concerned, for the past three quarters, ICICI bank constantly letting unsecured retail portfolio to go down. ICICI are growing corporate finance book both on project finance and trade finance. ICICI bank are growing 20 per cent in the auto and housing sectors. It’s the other products such as personal loans, small-ticket loans and credit cards, which are coming down,” Chanda Kochhar, managing director and chief executive officer of ICICI Bank, said
Kochhar said there has been a pickup in credit during recent times. “A lot of investment activities have started to take place. Lots of projects have seen financial closure. They have started initial investment. Demand for credit will pick up in a big way in the next financial year. Deposits are picking up substantially, if you see quarter-on-quarter our CASA (current account savings account) deposits have show reasonable growth, both in terms of absolute volumes and in value,” she added.
In the recent past, the Indian banking system has witnessed a very low credit growth. As the economy recovers and investment activities coming back to normalcy, credit offtake is also like to witness gradual growth.
K V Kamath, chairman, ICICI Bank, concurred with Kochhar and said that RBI’s move will not impact interest rates during the coming nine months. “For the first nine months, I don’t think there is a real pressure on interest rates. There is still enough liquidity in the system. I think liquidity needs to come down to push up interest rates,” Kamath said.
Kochhar said there would not be any immediate impact on interest rates if the cash reserve ratio (CRR) is hiked by the Reserve Bank of India (RBI). "Interest rates are driven not just by policy announcements, but more by demand and supply of credit and liquidity,” she said.

Personal loan rates and deals by Bank.

Banks are currently not as aggressive on their personal loan as they were before the start of the financial crisis. This despite the surplus liquidity in the system as well as lower credit off take. No wonder, things like ‘pre-approved’ personal loans and loans on the customer’s ‘track record’ seem to have almost become a thing of the past. Even personal loan rate don’t seem to be as attractive as they were just a year before.

Still personal loans have their own charm. Particularly because they always come handy in times of need and crisis. This, however, doesn’t mean that you should be willing to pay more interest on them. It is, in fact, your responsibility to check out the latest interest rates being offered by various banks and go for the best or at least a good deal.
Click here for get more on personal loan.