Overview Of Retail Loans
Retail loans are those that customers of banks or other financial organizations get for their own purposes. These loans may be utilized for a variety of things, including paying for school, home renovation, buying a car, etc. Most retail loans are unsecured, which means they don’t call for any kind of security. Since retail loans are thought to be high-risk, their interest rates are often higher than those of other loans.
The majority of those who use retail loans are in the middle class. The expansion of the loan sector in India has been fueled by the rise in demand for retail loans.
Since loans are debt, choosing to use one of these funding sources must be done with care, consideration, and sound financial planning. By allowing them to buy the essential assets without paying in full at once, retail loans considerably help customers.
Types of Retail Loans in India
There are various types of retail loans in India. Some of the popular retail loan products are as follows:
| Personal Loan | Personal loan is an unsecured loan that individuals can avail of to meet their financial needs. A personal loan can be used for various purposes, such as funding a wedding, home improvement, medical treatment, travel, etc. Banks and financial institutions can obtain personal loans without providing any collateral. The interest rate on a personal loan is higher than that on secured loans such as home and car loans. The repayment tenure of a personal loan is shorter than that of secured loans. | Interest 7.90% p.a. and 49% p.a. |
| Home Loan | A home loan is a type of secured loan that individuals can avail of for purchasing a house or flat. Home loans can also be availed for constructing a house or flat or renovating an existing house or flat. Banks and financial institutions can avail of a home loan by providing the property as collateral. The interest rate on a home loan is lower than that on unsecured loans such as personal and credit card loans. The repayment tenure of a home loan is longer than that of unsecured loans. | Interest 7.55% p.a |
| Car Loan | A car loan is a type of secured loan that individuals can avail of for purchasing a car. Banks and financial institutions can avail of a car loan by providing the car as collateral. The interest rate on car loans is lower than that on unsecured loans such as personal and credit card loans. The repayment tenure of a car loan is shorter than that of unsecured loans. | Interest is 4.33% for new cars and 11.00% |
| Education Loan | An education loan is a secured or unsecured loan that individuals can avail of for pursuing higher education in India or abroad. Education loans can be availed from banks and financial institutions by providing the education certificate as collateral. The interest rate on education loans is lower than that on unsecured loans such as personal and credit card loans. The repayment tenure of education loans is longer than that of unsecured loans | Interest 7.95% p.a. onwards |
| Loan Against Property | A loan against property is a type of secured loan that individuals can avail against their property, such as a house, flat, land, etc. Loans against property can be availed from banks and financial institutions by providing the property as collateral. The interest rate on loans against property is lower than that on unsecured loans such as personal and credit card loans. The repayment tenure of a loan against property is longer than that of unsecured loans. | Interest starts from 7.25% p.a |
| Loan against Shares | The interest rate on loans against shares is lower than that on unsecured loans such as personal and credit card loans. The repayment tenure of loans against shares is shorter than that of unsecured loans. | Interest 9.50% to 12.00% p.a. |
| Loan against Fixed Deposit | The interest rate on loans against fixed deposits is lower than that on unsecured loans such as personal and credit card loans. The repayment tenure of loans against fixed deposits is shorter than that of unsecured loans. | Interest 0.5% to 2% pa |
| Credit Card Loan | Credit card loans can be availed from banks and financial institutions without providing collateral. The interest rate on credit card loans is higher than on secured loans such as home and car loans. The repayment tenure of credit card loans is shorter than that of secured loans. | Interest 12% p.a. to 29% p.a. (depending on the user’s profile) |
How To Get Retail Loans In India
The demand for retail loans has been increasing in recent years due to the growing number of aspirational middle-class families in India.Â
- Locate a financial institution that provides consumer loans.
By doing some research online or asking about it, you might locate a bank or other financial organization that provides retail loans.
- Research on the interest rates, terms, and conditions of loans
Before applying for a loan, it’s crucial to understand the terms, conditions, and interest rates. This will aid in your understanding of the loan and help you determine if you can afford it. The interest rate on the loan will be decided by the lender, although it will usually be a few percentage points higher than the prime interest rate. Depending on the lender, the loan’s parameters will change, but it will normally have a fixed interest rate and a five-year period. Depending on the lender, the loan terms will change, but often they call for collateral and a co-signer.
- Apply Loan And Provide the Required Credentials
After locating a bank or other financial organization that provides retail loans, you may apply for the loan by completing an application form and supplying the necessary documentation.
- Approval For Loan
You must wait for the loan to be approved after submitting your application. This might take a few days or weeks, depending on the bank or financial institution.
- Repay the loan as specified in the terms and conditions.
After receiving the loan, you are required to pay it back in accordance with the terms and circumstances. To prevent any fines or fees, make your payments on time.
- Improve Your Credit Score
A retail loan might be a great strategy to raise your credit score. Making prompt repayments on your retail Loan indicates to lenders your financial responsibility, which may enable you to get future loans with better terms.
What is a Retail Loan’s Eligibility Requirement?
It’s crucial to understand the criteria imposed by lenders when thinking about taking out a retail loan. Although requirements may differ amongst lenders, applicants should be aware of some standard standards.
Age: The majority of lenders demand that borrowers be Indian citizens who are at least 18 years old.
Income: Depending on the loan size and the borrower’s credit history, lenders often need borrowers to have a certain minimum level of income. Before requesting a loan, applicants should confirm the income requirements imposed by the lender.
Credit Score: For retail loans, a high credit score is frequently required. A high credit score indicates that the applicant has a track record of sound money management, which might improve the likelihood that the loan will be approved.
Employment: In order to qualify for a retail loan, borrowers may need to be employed, self-employed, or have another reliable source of income.
Other Factors: The borrower’s debt-to-income ratio, existing financial responsibilities, and the duration of their present employment or residency are other variables that may have an impact on eligibility. To ascertain if the application satisfies the lender’s standards, it is important to evaluate these elements in advance.
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What are the Documents Required for a Retail Loan?
To apply for a retail loan, lenders typically require various documents, including:
- Proof of Identity: This may consist of a government-issued photo ID like a passport, driver’s license, or PAN card.
- Proof of Residence: This can be validated with a utility bill, bank statement, or official document displaying the borrower’s current address.
- Proof of Income: This may include salary slips, bank statements, tax returns, or other papers showing the borrower’s earnings.
- Collateral Documentation:Â If the Loan is secured, the borrower may need to provide documentation for the collateral, such as a title or property ownership certificate.
It is crucial to note that the specific documents required may differ based on the lender and the type of retail Loan. Therefore, it is recommended to confirm the full list of documents required with the lender before applying.
Conclusion
In conclusion, retail loans in India may be a terrific strategy to pay for expensive products or combine several debts. However, as interest rates can fluctuate greatly, it is essential to evaluate various offers before deciding on one. You may get a retail loan that satisfies your requirements and enables you to make long-term financial savings by doing some research.
For the most recent information about micro, small, and medium-sized enterprises (MSMEs), business advice, income tax, GST, salaries, and accounting, check out Khatabook.
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FAQs
Q: What are the documents required for availing of a retail loan in India?
Ans: The documents required for availing of a retail loan in India vary from lender to lender. However, most lenders require the borrower to submit documents such as identity proof, address proof, income proof, etc.
Q: Is a consumer loan a retail loan?
Ans: Consumer loans are specifically designed to finance personal expenses like buying household goods and appliances or even personal devices. Therefore, consumer loans are a subset of retail loans.
Q: Are retail loans safe?
Ans: Retail loans are generally safe if taken from reputable lenders and if the borrower can repay the Loan on time.
Q: What is the repayment tenure for retail loans in India?
Ans: The repayment tenure for retail loans in India varies from lender to lender. However, most lenders offer a repayment tenure of 5 to 7 years.
Q: What is the interest rate charged on retail loans in India?
Ans: The interest rate charged on retail loans in India varies from lender to lender. However, the interest rates are generally higher as compared to other types of loans.
Q: What are the eligibility criteria for availing of a retail loan in India?
Ans: The eligibility criteria for availing of a retail loan in India vary from lender to lender. However, most lenders require the borrower to be above the age of 18 years and should have a regular source of income.
Q: What are the different types of retail loans in India?
Ans: There are various types of retail loans in India, which include personal loans, home loans, auto loans, education loans, etc.
Q: What is a retail loan?
Ans: A retail loan is a loan that is provided by a financial institution to an individual for personal, family or household purposes.