Q1. How is my loan eligibility decided?
Ans. When you apply for loan, the banks want to see how financially
sound you are. Some of the main considerations on which loan eligibility is decided
include your repayment capacity, age, income, source of income, credit score, educational
qualification and the relevant documents that you submit in support of your loan
Q2. How can I increase my loan eligibility?
Ans. You can increase your loan eligibility by applying jointly
with your spouse or other family members. The income of the co-applicant will also
be considered for calculating the loan eligibility, enabling you to get a larger
Q3. What are the types of loans available?
Ans. Many types of loans are available: home loan, home improvement
loan, Car Loan, loan for two wheeler, Educational Loan, wedding loan, business loan,
loan against security, personal loan and NRI loan.
Q4. How is the interest rate calculated on a loan?
Ans. Interest can be calculated on a daily, monthly, quarterly
or annual basis. The outstanding principal loan at the end of each of these terms
is taken into account for calculating the interest rate.
Q5. Can I pay my loan before the term expires?
Ans. Yes, you can always do that. However, depending on your loan
agreement with the lender, you may be subject to prepayment charges.
Q6. On what basis are the loans classified?
Ans. Loans can be classified as secured or unsecured. Further,
they can be based on fixed rate of interest or floating rate of interest.
Q7. How do secured loans differ from unsecured loans?
Ans. In case of secured loans, you are required to pledge your
home or any other valuable security. In case of unsecured loans, there is no such
requirement. Unsecured loans are for your short-term monetary requirements whereas
secured loans can be taken for longer periods. The amount of loan that is available
under unsecured category is limited, whereas, in case of secured loans, the loan
amount can reach very high proportions depending upon the value of your home.
Q8. Can I avail a secured loan even if I'm not a homeowner?
Ans. Yes. You can take loans against securities or any other valuable
assets that the bank is willing to accept.
Q9. Is interest rate always fixed on a loan?
Ans. No, it depends on loan agreement. Interest rate can be Fixed
or Floating/Variable depending upon which option you availed at the time of taking
Loans with Fixed Rate of Interest - Once agreed upon, the interest rate remains
same throughout the period of the loan.
Loans with Floating/Variable rate of interest - Some loans are based on floating
interest rates. In such cases, the interest rate payable is linked to the market
rate of interest like the bank’s prime lending rate. Any change in the official
interest rate by the RBI may affect the rate applicable on your loan.
Q10. What is credit score and how it affects my loan prospects?
Ans. Some banks have provision for internally rating the borrower
on different parameters. A rating or score is assigned to each borrower, and accordingly,
the terms and conditions are decided by the bank. Higher credit score means higher
Q11. What is EMI?
Ans. EMI stands for “Equated Monthly Installments”. When you take
a loan, the amount to be repaid every month is calculated in such a way that all
your outstanding dues are cleared at the end of the loan period. This monthly payment
that includes interest as well as the principal amount is called an EMI.
Q12. In what manner a loan is repaid?
Ans. Loan repayment is generally made with the help of Post Dated
Cheques or through Electronic Clearance System that is directly linked to your bank
account. In case of Electronic Clearance System, repayment is deducted automatically
from your bank account on an agreed date.
Q13. What is the maximum duration of loan?
Ans. Loans are available in the Indian market for a period starting
from 6 months to 25 years. The exact duration depends upon which loan plan you have
chosen, and it generally varies from bank to bank.