Here you can read and understand the basics of Loans. If you do not find what you are looking for, please 'Contact Us' with details and we will get back to you at the earliest.
A thing that is borrowed, especially a sum of money that is expected to be paid back with interest.
When the monthly loan repayment is made in equal instalments, it is called "Equated Monthly Instalment" (EMI).
The actual amount of Loan taken is known as the Principal amount.
The additional amount paid along with the Principal amount for repaying the Loan is known as the Interest.
If the interest portion of the EMI remains the same from the start till the end of the repayment, then it is known as Flat Interest.
If the interest portion keeps reducing in the EMI, in line with the outstanding Principal amount, is known as Diminishing / Reducing Interest rate.
Most of the Loans are issued against a security, like House or Car. Thus banks can recover the loan amount by taking possession of the security if the customer cannot repay the loan.
Loan is issued to a fraction of the Security Value. That fraction is known as LTV (Loan To Value). That is, if a house is worth Rs. 10 lakh and if the LTV is 80%, the customer would get a maximum loan of Rs. 8 lakhs.
The duration by which the Loan has to be repaid is known as the Term of a Loan.
If a loan is closed by paying the complete outstanding before the tenure of the loan (or Loan Term), it is known as Foreclosure (or Pre-closure) of the Loan.
When customer wishes to repay his Loan before the tenure, he may do so by paying more than the EMI amount each time. These payments, which is more than EMI, is known as Part Payments.
When customer is unable to repay the loan, Banks may give a discount on the outstanding Principal amount. The customer is then allowed the Settle or Close the loan for a lower amount. This is called Settlement of a Loan.
"Credit Information Bureau India Limited" (CIBIL) is India's first credit information bureau and it is a warehouse of information that keeps record of the overall credit history of individual consumer and commercial borrowers. CIBIL furnish this information to its Members in the form of credit information reports.
Each Bank provides loan within a specific region. It is usually within 50 km from the branch on all sides. Anything outside this region is called "Out of Geo Limit" (OGL).
KYC stands for "Know Your Customer". These are essential documents of a customer. They include, Photo, Photo Identify Proof, Date of Birth Proof, Sign Proof & Address Proof.
After collection of KYC documents, Income documents and other relevant documents from a customer, these documents have to be submitted to the Bank / NBFC along with an Application form for Loan. These documents are then checked and if found ok, they are accepted and are fed in to their system. This process is called as Log In.
"Risk Containment Unit" (RCU) is a division in a Bank / NBFC which aims at minimising the Fraud in the system.
Banks / NBFCs perform a check on the customers Residence and Office (sometimes other relevant locations). This is known as Field Verification.
In a Home Loan, the property documents are verified to be proper by the Legal Team. Mostly the Legal team is an external source of Lawyers.
In most secured loans, like Home Loan and Car Loan, the property is physically checked and analysed for it's market value. This process is known as Technical Evaluation.
After the KYC documents are checked and the Income documents are analysed, the Loan Sanction letter is prepared. However, this letter is issued to customer only after the passing of Field Verification or Technical Evaluation.
After a loan is sanctioned, customer has to sign a document, which states all the terms and conditions of the loan. This document is known as the Loan Agreement.
After customer signs the Loan Agreement and all other Loan Verifications are Complete, the Bank Disburses the Loan amount (or pays the Loan amount). The process involved after Sanctioning and Verifications is known as Disbursement.
Loan EMI is collected directly from the customer's bank account. Customer has to sign a "Electronic Clearing System" (ECS) mandate.
If customer has not maintained enough money to pay his loan EMI in his account, the ECS withdrawal will not be possible. This situation is known as ECS Bounce. This is similar to a cheque bounce.
If the customer pays the EMI after the due date (or payment date), it is known as paid after the due date. The number of days in between the due date and the payment date is known as "Days Past Due" (DPD).
During the tenure of the loan, customer can choose to increase the loan amount from the same Bank / NBFC. This is known as Top Up.
During the tenure of the loan, customer can choose to change the balance loan in to another Bank / NBFC. Usually this is done to receive a better interest rate and or other terms. This is known as Balance Transfer.
A Loan that is issued to an individual primarily based on the income and without a security, is known as a Personal Loan.
Salaried or Self Employed with a minimum income (as specified by the Bank / NBFC - usually it is from Rs. 10,000 /- to Rs. 15,000 /-) and with good CIBIL score and with a positive Field Verification / Investigation and without other Obligations, can be eligible for a PL.
Customer should be able to take care of all his expenses, like, rent, food, clothes, conveyance, other Loan EMI and all other expenses. The balance amount can be used as the EMI for the new PL. Thus the Loan that corresponds to that EMI is the amount of PL that can be issued.
Usual duration (or Tenure) for repayment of PL is from 2 to 5 years.
Interest rate of PL is one of the highest in the market as it is an unsecured loan. It is presently between 14% and 49% Diminishing.
Very few Banks or NBFCs (Non Banking Finance Company) are providing PL. We are representing Axis Bank, HDFC Bank and Fullerton (a NBFC).
PL can be sourced by Field Sales Executives, Telecallers, through References, through Lead Providers, etc. Main focus for PL is salaried class.
The "Turn Around Time" (TAT) (the time from Log In to Disbursement) is usually 7 to 15 working days (it is different to different banks)
The average daily balance in a bank account is known as "Average Bank Balance" (ABB). Customer with very low ABB may be eligible for a lower Loan amount.
Customers probable expenses are assessed and deducted from his Net Salary. That allows the Bank to determine the EMI customer can pay every month. This procedure is known as "Cash Flow Analysis" (CFA).
"Fixed Obligation to Income Ratio" (FOIR) is the ratio between the allowable EMI and the Net or Gross Salary. Allowable EMI is the Net Salary minus all expenses and other loan repayments. FOIR is usually between 15% to 60%.
As PL is issued without a Security, Banks / NBFCs look for other parameters to determine the eligibility. They would like to see a customer who has stability in his work or continuity in his work without any break. Usually a work stability of up to 3 years is observed.
Processing Fee is collected by the Bank / NBFCs for all the paper work and other expenses involved while processing a PL, like field investigation. Usually it varies from 0.25% to 3%.
Credit Team calculates the repayment ability of the customer by checking his Salary, Spending Habits and other Loan repayments. It is the credit team that determines whether one should get a loan and what amount of loan.
Query means Question or Doubt. After the file is sent to Bank / NBFC for Log In, it is checked properly. If they find any mistake or if they notice it is incomplete, then they will raise a Query and return the file without processing it. This is known as Log In file Query.
When a Collection Executive or Direct Selling Agent collects documents from customer, the originals have to be cross verified with the photo copies. This is important because the customer may create fake or forged or wrong photocopies and try to cheat the Bank / NBFC. OSV has to be done for all KYC documents.
