Unlike a car or home loan, a personal loan can be used to fund a wide range of expenses.
A personal loan is an unsecured loan. It's money borrowed that's not fixed to an asset used as collateral, such as your home or your car, like a secured loan. While this means that the lender will not seize your assets if you default on your loan payments, any late or missed repayments can negatively impact your credit score.
You can often borrow more money with a personal loan than would be available using a credit card. The maximum loan amount, for example, with an HSBC Personal Loan is INR30 lakhs. Select customers may be eligible for loans up to INR50 lakhs based on the internal credit policy of HSBC. Interest rates for personal loans are usually lower than they would be with a credit card, although they do vary.
The maximum tenure for most personal loans in India is 60 months, or 5 years.
Your payments will be affected by the interest rate and loan tenure, amongst other factors. You'll typically repay your loan through equated monthly installments (EMIs), Electronic Clearing System (ECS), e-NACH (Electronic National Automated Clearing House), or by setting up a standing instruction with your bank.
If you choose a fixed rate loan, the rate of interest you pay will stay the same over the period of the loan. It can be easier to budget if you always know what your payments will be.
With a floating rate loan, both the interest rate and your repayments could fluctuate. You need to be prepared for any changes as your payments could go up as well as down. Please note that HSBC India does not offer personal loans with floating interest rates.
If you're using a personal loan to consolidate existing debts, instead of paying multiple loans, you may be able to put these into one loan at a lower interest rate. It can be more convenient to have only one monthly payment, but by extending your debt you could end up paying more interest.
Each loan is advertised with a representative Annual Percentage Rate (APR), which you can use to quickly compare loans. An APR includes all applicable interest rates, fees and charges, expressed as an annualised rate.
Remember, the representative APR advertised isn't necessarily the final interest rate you'll get. This rate will depend on your personal financial circumstances, including your credit history, as well as the loan amount and tenure.
Other things could be important to you when choosing a personal loan, such as how quickly you receive the money into your account, or the flexibility to make overpayments.
When you apply for a personal loan, you'll need to have a good understanding of the costs you need to meet. For example, if it's a dream holiday it will be helpful if you calculate the costs involved and have a budget for the entire trip.
Once you've figured out how much you need, it's time to look at how much you can afford to pay back each month. Taking the loan out over a longer period may reduce your EMIs, but you may pay more in interest over the full term of the loan. If your loan tenure is too short, your EMIs might be too high and you risk not being able to make your payments on time.
Are you considering a personal loan? Submit your details and an HSBC India representative will contact you with more information.