Financial Daily from THE HINDU group of publications
Sunday, Jul 25, 2004
Financial Daily from THE HINDU group of publications Sunday, Jul 25, 2004 |
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Investment World
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Consumer Finance Money & Banking - Consumer Finance Columns - Banking Products IDBI Bank's personal loan scheme G. Madhan
Offered to the salaried, the self-employed, doctors and professionals, the scheme competes with the personal loan schemes offered by private and public sector banks.
Requirements
To get this loan, you need to be 23 and not older than 58 at loan maturity . If salaried, your monthly minimum net income should be Rs 8,000. However, if you hold a salary account with the bank, the qualifying amount is lower at Rs 6,500. The bank also specifies a minimum work experience of two years (including six months with the current employer) to be eligible for the loan. For the self-employed, the minimum income requirement is Rs 1.2 lakh a year.
Features
The loan can range from Rs 50,000 to Rs 7.5 lakh for the salaried, and Rs 5 lakh for the self-employed. The loan eligibility, however, depends on the income, as the equated monthly instalment (EMI) cannot exceed 40 per cent of the take-home income. You need to repay the loan within four years if you are salaried. For the self-employed, the repayment period is three years.
Add-on facility
An accident insurance cover from ICICI Lombard for a maximum of Rs 50,000 can be tagged on to the loan. If you opt for the cover, you need to pay a premium of Rs 250 a year if the loan amount is below Rs 1 lakh. If the amount is above Rs 1 lakh, the premium is higher at Rs 500 a year. In case you lose your job, the insurance company also pays the EMI for up to three months.
Interest and other charges
The interest charges under the scheme are between 18 per cent and 21 per cent on a monthly diminishing basis. If you work for a company that falls under the bank's preferred category, the loan is offered at lower rates. You can also get the loan at lower rates ( 4-7 percentage points below the normal rate) if you have an established relationship, say, a salary account with the bank. The bank also charges a processing fee of 2 per cent, and 3-6 per cent for prepayment.
Suitability
The interest rate charged is on a par with those offered by private sector banks but higher than that levied by PSU banks (State Bank of India offers personal loans at 12.75 per cent). The only difference between this product and other personal loans schemes is the accident cover option. The product is suitable for those who have an established relationship with the bank, as it ensures lower rates with minimum documentation. If you also want to opt for the insurance cover, check out the fineprint before making a decision. For others, a personal loan with a public sector bank will be a better option.
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