Blog #VijayaBankPersonalLoan

Did Covid Affect Really Personal Loans?

During the pandemic - every industry, airline, food and beverage, financial market, business, all had its effect from the covid 19 pandemics. As a result of the pandemic people worldwide started losing their jobs, as a result of this hunger due to lack of money occurred. Banks and the government started new schemes to help the needy.

The covid 19 was initially started on 31/12/2020 by the WHO(world health organization ). Later on 30/1/2021, the world health organization considered covid 19 as a world health emergency issue. on 11/3/2021 the WHO considered it as a pandemic.

In India during the pandemic, the govt and few banks introduced special loan schemes for people in need of emergency money.

1. IND- COVID Emergency Credit Line (IBCECL) for Corporate: this will provide 10% of the working capital and has a limit of 100 crores.

2. SHG-COVID - SAHAYA LOAN for Self Help Groups: these loans were provided for the self-help group (SHG).

3. IND- MSE COVID Emergency Loan— (INDMSE-CEL) for MSME: this will provide 10% of the working capital and has a limit of 50lakh.

4. IND-COVID Emergency Salary Loan for Retail borrowers: the salaried people will be given a loan amount up to 20 times their gross salary per month.

5. IND COVID- Emergency Pension Loan for Pensioners:15 times the pension that he receives and with a max limit of 2 lakh.

During the lockdown, the financial market resulted in an acute financial crisis. For the people who already had loans debts upon their heads, had a hit as they were in no situation of paying the money, as they were on the brink of being unemployed .as entire financial make was impacted by the total shutdown of its operations, due to coronavirus, it took its time to come back with help for the people.

Along with the risk of not being able to pay the repayment EMI. The people who have taken the personal loan had a greater risk of losing the credit score. As a personal loan has a higher risk factor, it reduces one credit score when one doesn’t pay the EMI. Vijaya Bank personal loan also provided financial help during the pandemic season.

Did covid really affect personal loan?

Higher Default Possibility :During the lockdown and the pandemic, people started losing a job and they started becoming unemployed - as the company were unable to keep up with the salary of every employee as most of the company were running on loss due to many factors like lack of customers etc. Due to non-payment of loans - the number of bad loans increased rapidly as a result of covid 19. As a result of the pandemic the economic growth slowed.

Should You Worry About Your Personal Loan Repayment?

In the repercussion of the coronavirus lockout, it all comes down to two things: job protection and revenue. If your source of income is consistent, repaying your personal loan EMI will not be a problem. However, since the existence of the COVID-19 pandemic is unknown, if you decide to pay your EMI late to save money or for other financial reasons, In addition to the interest, you will be charged a late payment fee. On the other hand, those who are uncertain about their job security or who have lost their job due to the coronavirus will find it difficult to repay their personal loans. You may get a new personal loan or a personal loan moratorium in this case.

About Personal Loan Moratorium
As announced by the RBI, the borrowers who already have an existing loan on the 1st of march - who have at least one payment due -can explore an EMI moratorium till august 31 2020. After applying with moratorium no amount will be deducted from the borrowers account for three months also will not affect the borrower’s credit score.

Conclusion
Covid 19 affected the entire profit organizations and non-profit organizations. As a result, the people started losing their jobs and becoming unemployed, this affected the loans as people were unable to pay the EMI of the existing loans.

A perfect personal loan

Personal loans are unsecured loans that are issued against the creditworthiness of the borrower. Individuals apply for personal loans to meet their immediate financial requirements and they can use the said amount for a variety of personal expenses. Borrowers are provided with a lump sum capital which they have to return through equated monthly installments (EMI)

A few important things one must consider before applying for a personal loan

Method of Interest Computation - The interest calculation method influences the rate of interest charged by the bank on the amount loaned. Interest on personal Loans is calculated by two methods - the reducing balance method and the fixed-rate method Generally, the interest paid by the borrower is lower when the interest is calculated by the reducing balance method and when the rate of reducing balance method and fixed-rate method is alike.

Interest Rate - The Personal loan interest rate dictates the amount that one has to pay in addition to the loan principal over the repayment term. The best personal loan from the borrower’s point of view would offer the lowest rate of interest. The best bet, in this case, would be to approach a reputed bank but it is also vital to compare the interest rates offered by various banks as the rate of interest differs in each bank. The rate of interest would also be subjective to the borrower’s income.

Processing fees - Processing fees are charged when the loan is disbursed to the borrower. Processing fees added to the interest rate determines the total loan amount hence lower the processing fees, the better it is for the borrower.

Part prepayment and foreclosure - An optimal personal loan should provide the borrower with the option of part prepayment or foreclosure of the loan before the end decided due date at minimum extra cost. These options allow the borrower to save on the interest amount paid by them, hence saving them money.

Flexible repayment structure - Generally, personal loans have a flexible payment structure that varies from 12 to 60 months. It allows the borrowers to repay through equated monthly installments (EMI), which allows a reduced impact on the budget of the borrower.

Tenure - The borrower needs to consider the duration of the loan. The borrower should opt for a bank that provides flexibility in the tenure. The perfect loan is the one that meets the time requirement of the borrower.

Should be easy to obtain - Personal loans can be obtained through simple documentation and disbursed quickly by banks, hence helping the urgent financial requirements of the borrower. Online facilities provided by banks such as Vijaya Bank Personal Loan it convenient for borrowers to apply for the loan, verify their documents and obtain approval for the loan.

Take a loan only when it is crucial - A personal loan should only be taken after a thorough assessment of the loan requirement and repayment capabilities. It is important to consider not only the short term but also the long term goals, before applying for a loan.

Thorough research - It is important to do thorough research of the banks and other financial institutions, and the various schemes and policies provided by them. Only after complete research, one should finalize from where they would take the loan.

Consideration of such factors would help an individual to get the perfect loan.

Factors that affect personal loan eligibility

Income - The stability of income of the borrower impacts their loan eligibility.

Credit score - The borrower needs to have a high credit score to qualify for a loan. A credit score of 750 and above is recommended.

Housing situation - Having your own house improves the chances of the loan being improved because the repayment capacity increases. While living in a rented house negatively affects the repayment capacity.

Other factors - Factors such as residing location, the company where the borrower is working, existing debts also impact the eligibility criteria.

Documents required to apply for a personal loan -

The borrower should be able to produce -
1.Proof of identity.
2.Proof of residence.
3.Proof of income.
Documents such as an Aadhar card, pan card, passport, driving license, etc. can be used for this purpose. The borrower also has to present lender-specific forms as well as passport-size photographs.