Home Improvement Loan Application Process

Owning a home is an experience of its own. After years of hard work & sound planning, we invest in a house to secure the future of our loved ones. After all, it's one of the basic necessities in life, isn’t it? Having a home that we can call our own has multiple benefits. It not only provides shelter, but also acts as an investment apparatus.

Home improvement such as renovation, furnishing, repainting are some of the activities which are a part of living in a house. Some aspects of the house need periodic maintenance in order to keep them strong and going. The costs involved in carrying out home improvement services can be a burden on your savings depending on the quantum of work carried out. It has the potential to take a toll on your monthly budget as well. In such situations, it makes perfect sense to rely on a Home Improvement Loan offered by banks and NBFC (Non-Banking Financial Corporations) to get the work done. It works similar to a conventional housing loan.

Let's explore the process of applying for this loan along with per-requisites. Homeowners can apply for this type of housing loan.

In case of co-ownership, all owners are required to jointly apply. Applicants who’re not co-owners can also apply to add monetary weight to the application.
The first set of documentation consists of the application form, identity & address proof of the applicant(s) along with recent photographs and income proof documents such as payslips.
On the property front, documents such as title deeds, an estimate of works provided by an engineer/architect should be provided as second set of documents.

Once the paperwork has been submitted, the processing begins. Depending on the quantum of loan applied for and other determinants such as the creditworthiness of the applicant, a decision on the loan application would be made within the stipulated time. You may be required to provide additional paperwork during the processing phase.

Security 
The property for which the loan has been availed will act as the collateral until full repayment of the loan. Some banks may even require an outside guarantor or additional monetary security other forms depending on multiple factors.

Loan Mechanics
Depending on the bank and other factors, you may be offered anywhere between 80-90% of the project costs as loan. Once approved, the loan amount may be offered as lump sum or released in batches depending on the schedule of work.

Repayment Process
Repayment of the borrowed amount along with applicable interest charges will be on the basis of EMIs (Equated Monthly Installments). Normally, the tenure offered is up to 15 years, depending on the offer.

Before applying for a home improvement loan, it's imperative to compare offers from various lenders and make a wise selection. Aspects such as processing fee, pre-payment penalty and others should be taken into consideration before zeroing down. The easiest way to learn about the products will be to scout for available resources on the internet. You should also use an EMI Calculator to work out the financials.

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Check List – Eligibility criteria for a Personal Loan

Money rules the roost in our world and financial emergencies can arrive at our doorstep at any moment, putting us in a quandary. The extent of these financial requirements can alter the course of our live, throwing our plans out of gear, typically backing us into a corner. Now, like most other problems, financial situations can also be handled, thanks to a number of products offered by banks and NBFCs. Choosing the right tool is critical to combat such issues, with a personal loan being the best bet to suppress immediate financial emergencies.

Growing competition has ensured that banks, NBFCs and private lenders are more than happy to provide financial support, at certain interest rates of course. While private lenders do not typically insist on eligibility criteria to avail financial aid, established players like banks and NBFCs have a number of requirements which need to be fulfilled. The ability of an individual to overcome a financial emergency through the use of a personal loan depends on his/her ability to satisfy certain basic eligibility criteria.

Factors which impact your Personal Loan Application:

Earning money is hard, and making money in a short period of time is even harder, which is why banks, NBFCs and private lenders are willing to provide financial assistance to those in need, subject to them satisfying a few basic personal loan eligibility criteria. 

Income - Gone are the days when people could borrow money and repay the loan without interest, with all lenders typically charging an interest on their “investment”. Repayment of their loan becomes a key factor, which directly hinges on the amount of money a borrower makes. Almost all banks and NBFCs look at the income of an applicant, gauging his/her repayment capacity before sanctioning a loan. The higher the income of an individual, the higher are the chances of him/her availing a loan, with a direct correlation often seen between these two factors.

Job description and status – We live in a world where the type of work we do matters immensely, be it in our social life or in our pursuit for financial aid. Banks and NBFCs typically look for people who are in a steady job, having a good record of being in the same company for a particular period of time. Applicants who work in hazardous industries (armed forces, mining, forestry, etc.) can be viewed as negative by banks, with it possible to have their application rejected. Similarly, those who work for top companies or in government sectors stand a chance of getting their loan application processed faster. This boils down to the judgement of the lender and could vary from case to case.

Personal standing – The relationships we maintain in pour lives can have a deep impact during certain situations, which is true even in the case of loan applications. Most lenders look at the relationship a prospective borrower has with them, with it easier to avail a loan based on this criteria. Individuals who have a good personal standing with a bank or NBFC could see faster approvals and simplified documentation compared to those who have no personal standing with the lender. Additionally, the reputation of a person in society can speak volumes, with lenders keen to ensure that their customers have a clean rep. 

Banking history – It is often said that history provides a glimpse of the current world, with it being especially true in the case of banking. The financial history of a borrower plays a critical role in determining whether or not his/her application is approved or rejected. A history of timely repayments and sensible banking functions is a huge positive, with banks and NBFCs fast-tracking the application of such individuals. Similarly, members who have defaulted on loan repayments in the past or have a dubious record might find it harder to get the loan sanctioned.

Credit score – A credit score is perhaps the most important tool which determines the personal loan eligibility of an applicant. Almost all banks and NBFCs rely on this score to gauge the application of an individual, with the score providing information about past loans, repayment history, other applications, etc. A good credit score is often sufficient to avail a loan, with scores in the range of 600 – 700 considered good in most cases. Individuals can check their credit score before applying for a personal loan, thereby availing an opportunity to improve on it, if required.

Age – The age of an applicant can play a role in the application process, primarily on account of loan repayment. Lenders are typically cautious in the case of young borrowers (those who have just passed out of college, into a first job) and in cases of elderly borrowers (those approaching retirement). This is because most youngsters might not be in a position to repay the loan on account of lifestyle changes and habits, whereas those approaching retirement might be unable to repay the loan on account of diminishing financial income. While not an extremely important factor, age can impact a loan application.

Assets – Individuals who own assets and are willing to provide them as security are likely to get a loan application sanctioned faster than those who don’t have such assets or are unwilling to offer them as security. This is because a collateral ensures that a borrower has repayment on his/her mind and is less likely to default. In addition, the fact that a property/gold/investment is attached to a particular loan provides additional incentive to a borrower to repay the loan on time.

Loan amount – The amount of money one requires can determine whether an application is accepted or rejected. Typically, the loan amount should not exceed a particular benchmark, with this benchmark determined on a case to case basis. Asking for an amount which is over the required limit could make lenders cautious, which could eventually lead to an application being denied. Choosing an amount which offsets the requirement without leaving additional income is perhaps the best way to proceed, with lenders happier to provide loans for smaller requests.

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How to get Personal Loans against Fixed Deposits

Many top banks offer their customers personal loans against fixed deposits. One of the main advantages of acquiring personal loans against fixed deposits is that the interest rates offered are comparatively lower compared to stand alone personal loans as the former is secured against deposits. It is important to note that loan seekers can avail of personal loans to fulfill their financial requirements without liquidating their fixed deposits.
Features of personal loans against fixed deposits

Some of the salient features of personal loans against fixed deposits are listed below:

Eligibility: Personal loans against fixed deposits can be availed by individuals above 21 years, private limited companies, sole proprietorship, private limited companies, partnership firms and stock brokers among others

Rate of interest: Most banks charge around 1 to 2% higher than their fixed deposit interest rates for personal loans against fixed deposits. Consequently, borrowers can save a lot of money which otherwise would have to paid as interest for conventional personal loans which are unsecured

Interest on fixed deposit: Fixed deposit holders can continue to earn interest on their fixed deposits even after they availed personal loans against the former

Convenient: In most cases, banks offer loans against fixed deposits courtesy the overdraft facility against the fixed deposit

Loan amount: In most cases, banks provide a loan against 70 to 90% of a fixed deposit account. However, the actual amount may vary from bank to bank and the fixed deposit amount

Apply for Personal Loan

Repayment: In case an individual does not repay his loan on time, the bank may foreclose his or her fixed deposit account to recover the loan amount. In other words, the duration of a personal loan taken against a fixed deposit account does not exceed the residual tenure of a fixed deposit. Loans against fixed deposits can be paid in the form of EMIs

Accessibility: Personal loans against fixed deposits are easier to obtain than standalone personal loans as the former requires simple documentation such as fixed deposit receipts,  overdraft agreement and lien letter among others

Prepayment penalty: In most cases, banks do not charge any prepayment penalties in terms of repayment of personal loans against fixed deposits

Loan foreclosure: Most banks do not levy any penalties for foreclosure on personal loans against fixed deposits

Processing fees: In most cases, banks do not charge any processing fees for loans against fixed deposits. However, some banks may levy low processing fees for the same

Fixed deposits: It is important to note that fixed deposit account holders cannot break their deposits after availing of loans against them owing to the ‘right to lien’ clause imposed by most banks

Tax benefits: Loan seekers cannot avail of any tax benefits for interest on personal loans against fixed deposits

Facilities: Individuals can avail of various facilities such as cheque book, internet banking and debit card on personal loans taken against fixed deposits

Documentation required: The most common documents required for acquiring personal loans against fixed deposits are listed below:

Signed Loan Agreement

Filled-in Application form

Fixed Deposit receipts

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Loans she can take, for her business

With start-ups mushrooming across the country, women entrepreneurs are not left behind. Today, women have a ray of hope when it comes to financing their dream. In order to promote entrepreneurship among women, many commercial and nationalized banks are willing to provide women entrepreneurs with finance for their businesses. Whether it is setting up a beauty parlour, restaurant, bakery, food catering, tailoring unit, etc., banks are very eager to provide women with finance to turn their aspirations to start a business into a reality.

The kinds of loans available for women entrepreneurs

Many banks are offering attractive lending opportunities for women entrepreneurs, these loans will be advantageous in terms of interest rates and provide them with relaxation with respect to collateral as well. Interest rates for these loans will be based at the bank’s discretion, but the will generally tend to be lesser than regular loans.

●   Bharatiya Mahila Bank (BMB), an all-women’s bank, provides women with collateral free loans, in order to promote their self-sustenance. Women can apply for loans from the BMB f or amounts up to Rs. 1 crore, without the need of collateral.

●    The Stree Shakthi Package for Women Entrepreneurs, provides loans to small businesses which are owned by women, with at least a 50% share. With this scheme women will receive assistance to start a business with a concession on the rate of interest of 0.50%  for a loan amount of at least Rs. 2 lakhs.

●    Cent Kalyani scheme, this is a loan scheme provided to women entrepreneurs, from Central Bank of India. With this loan women can start a new business venture or expand an existing one. It can be availed for retailers, women entrepreneurs in agriculture, village and cottage industry related, etc.

●   Annapurna scheme is applicable for women entrepreneurs who are running a business in the food industry. This can be applied for as individual business or partnership firms. The loan will be a term loan, and will be a maximum amount of Rs. 50,000, which can be repaid in 36 months. The women can use this finance as working capital for purchase of raw materials, small equipment’s like water filters kitchen equipment, utensils, etc. The purchases made with this loan amount will be considered the collateral for this loan.

●  Mahila Udyam Nidhi Scheme will provide women entrepreneur’s financial assistance up to Rs. 10 lakhs. This loan will be available under the Small Industries Development Bank of India. This will help with setting up of new small scale industrial ventures.

There are many more schemes, offered by various banks such as State Bank of India, Canara Bank, they have special cells to help women entrepreneurs get the required finance. If you plan to start a venture of your own or know any women who may need the assistance, go ahead and let them know of this option offered by almost any bank in the country.

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Top Indian Banks for Availing Business Loans within the Country

Business loans are basically personal loans availed to meet expenses related to the operations of a business. Be it for ensuring smooth functioning of enterprises or raising capital for expansion, business loans are the best options for entrepreneurs. However, when you make an application for a business loan, the lender / bank will carry out a check of your documents to ascertain whether or not you are eligible for credit. The documents that will require verification include your credit report, your cash flow statements and other accounts that carry information regarding the gross profit recorded by your business.

Business loans are usually granted without any need for the borrower to pledge a collateral security or mortgage. Since business loans are generally unsecured loans, there is no need for guarantee from group members either. In essence, business loans are considered as personal loans only for individual businesses as they are mainly granted to meet small business expenses. The business / concern’s status does not determine the eligibility of an individual for a business loan, but what counts is the status of financial attributes and the tenure and capacity of repayment.

The main aim of a business loan is to facilitate the development of a business concern. To avail one, you will have to ensure that there are no risks associated with your enterprise as banks and lenders are usually sceptical when it comes to lending to individuals who have a rather high element of risk. It is also important to maintain a complete documentation of all the loan you have previously availed from other institutions. The manner in which your personal financial values are managed will determine whether or not you qualify for a business loan. Even your business plan must be documented and presented to the lender when required as it plays a crucial role in helping the bank / lender determine your eligibility for credit.

The best financial institution to approach when seeking a business loan is the one that previously helped finance your business. The main reason for returning to your primary lender is that it is already aware of your past records and reputation with regards to handling credit. The lender will also possess a summary of your financial accounts, thus making the application process less tedious for the borrower as your business behavior is already acknowledged and the bank will be more confident in you so far as repayment is concerned.

The best banks to approach for business loans

Entrepreneurs of small businesses have several options when it comes to availing business loans. Most banks and lenders that have business loan facilities offer them at similar rates of interest, making it difficult for individuals to ascertain which bank best suits their requirements.

ICICI Bank offers term loans worth Rs.15 lacs and does not request any collateral security from the borrower. All that is expected of the borrower is that he / she submit all the necessary documents for verification, like their income tax returns for the past three years and personal ID documents as requested by the lender.

Oriental Bank of Commerce deals with the public sector and operates in somewhat similar fashion to ICICI Bank but offers loans without any securities at a slightly lower rate of interest. The Oriental Bank of Commerce is ideal for entrepreneurs seeking to expand their businesses. 

Citibank provides personalized business loans so that a large number of small businesses can gain access to funds without providing any past financial records or collateral. Individuals who borrow from Citibank will not even have to deal with distribution or processing costs, making it considerably cheaper for the borrower to avail the facility.

HSBC Bank has grown into one of the most popular banks among Indian borrowers seeking business loans. Having updated its factoring services and overdraft to help small businesses develop and excel in its operations, it is no surprise that HSBC is one of the most-preferred lending institutions in the country.   

All of the aforementioned banks offer special schemes to individuals seeking business loans, making them great options for entrepreneurs who wish to expand their businesses or meet working capital requirements.

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MUDRA Bank Loan

MUDRA or Micro Units Development and Refinance Agency Ltd. is a financial institution set up by the Indian government with the goal of fulfilling the corporate small businesses’ funding needs. MUDRA prepares and launches the policy guidelines and regulates the Micro Finance Institutions. The MUDRA Loan will benefit the shopkeepers, beauty parlour owners, fruit and vegetable sellers, hawkers, truck operators, artisans, etc.

MUDRA Loan Schemes

MUDRA has created 3 categories of schemes to fund during the growth stage, the development stage and the funding stage. The schemes are:

-      Shishu category:

This category is for the start-ups whose businesses have not yet started and are looking for loan. Loan of up to Rs.50,000 will be given to the micro units that fall under this category. Collateral is not required to avail this loan. There is no processing fee being charged either. The rate of interest offered is 1% per month. The repayment term extends to 5 years. Working capital loan will be given via MUDRA Cards.

MUDRA Cards are issued by the banks directly or in association with the Micro Finance Institutions. It is issued as RuPay Debit Card and can be used to withdraw cash from ATM or can make payment online or at POS machines.

-      Kishor category:

The business which are running but are yet to be established will fall under this category and the loan offered ranges from Rs.50,000 to Rs.5 lakh.

-      Tarun category:

The small businesses that have been set up and have established themselves fall under this category. The loans are offered to either expand or to utilise the money for the betterment of the business. Businesses falling under this category will get loan up to Rs.10 lakh. 

Eligibility criteria of Mudra Loan

The eligibility criteria for participating banks are as follows:

-      The scheduled commercial banks in the public or the private sector who have had 3 years of continuous profit record and whose NPAs are not exceeding 3% and whose minimum net worth is Rs.100 crore and CRAR not less than 9% are eligible to lend loan.

-      The restructured regional rural banks whose net NPA is within 3% and have a profitable operation and not carrying over any accumulated losses and whose CRAR is more than 9% are eligible to lend MUDRA loans.

-      Micro Finance Institution and the small business companies can also lend MUDRA loans if they fulfil the requirements. 

Apply for MUDRA Loan

The following are the steps you must follow to apply for the MUDRA loan:

-      Prepare a business idea and present the idea along with the application form.

-      Visit the nearest bank either the scheduled bank, regional rural bank, scheduled urban co-operative bank of a Micro Finance Institution that offers MUDRA Loan.

-      Present the Idea along with the other required form to the bank.

-      Provide address and identity proof along with passport sized photographs.

-      Borrower must fulfil all the formalities that the bank requires.

Loan will be sanctioned and then it will be made available at the earliest.

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Guidelines to Pay EMI’s on Time during a Financial Crisis

One may take up a loan based on his/her needs and this may be due to an emergency or if the time is opportune to fulfill a goal such as purchasing a car. Whatever the reason may be, most of us at a given point of time in our lives will end up availing a loan. While the value they serve is of utmost importance in fulfilling our needs, loans bring with them a huge responsibility and financial commitment. The borrower will have to curtail expenses to make equated monthly installments(EMIs) and there will always be a worry of paying off the next installment.

These equated monthly installments or EMIs are structured around the tenure of the loan and the amount borrowed. Unless there is an intention of fraud, most borrowers have every intention of repaying the loan amount. But in life, emergencies come unannounced and there are certain scenarios that come up which prevent the borrower from making these payments. This could be the loss of employment, medical emergencies or unforeseen expenditures that may arise and prevents an individual from making the monthly payments and if one or more payments are missed, it could lead to serious consequences.

The main impact of missing payments are that it adversely affects the borrower’s credit score. This will make availing future loans very bothersome. The easiest thing to ensure payments of EMI’s and protect the credit score is to borrow the required amount from friends and family members to tie over the next few payments.

If there is a continued difficulty in meeting monthly payments, one should intimate the financial institution the amount was borrowed from. Most banks will try and figure out an alternative solution as they would not want borrowers to default on their loans. They may not alter the total amount but would be willing to lower the installment amount by lengthening the tenure.

During times of a financial crunch, cutting out expenses wherever possible and only making the necessary payments may help tide things over for a while. The small concessions made will add up over time and bring much needed relief.

If there are any other investments made, they should be broken wherever possible if the penalties applied on missed payments far outweigh the returns from that investment.

Difficult situations are very hard to predict but when such situations do occur, one should be calm and collected and follow these steps to ensure they don’t go further into debt. Worry and inaction will only lead to further trouble.

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