Personal loans are the loans given by banks or financial institutions based on the credibility of the borrower to repay the amount and the charges on this type of loans are the highest as it is not given against any collateral. The interest charge on this type of loans may vary from 18 to 36 per cent per annum depending on the sum borrowed. Generally personal loans are given for a period of 4 years and sometimes the amount of the repayment is double the amount taken as loan. The amount of the loan disbursed differs from bank to bank so the interest rate also fluctuates from bank to bank. The private banks charge higher interest compared to the nationalized banks but the time taken by the private banks to disburse the loan may be less. The verification process is cumbersome for both the cases and it is not guaranteed that the loan will be disbursed or not. The disbursement entirely depends on the bank but the borrower may not be sure of getting the loan since the banks may furnish different reasons for not giving the loan. While the need is urgent, the borrower tends to fall prey to private loan lenders who charge high interest and resort to physical force and mental agony if not paid back in time.
Finance management is the most important function in the world today especially salaried individuals who are the most affected by the continuous increase of essential commodities in the market. The ever increasing prices of different essential items become the factors that normally force people to apply for loans from banks or financial institutions or money lenders. Most of the institutions take advantage of the circumstances and charge high rate of interest to the borrower that tends to get paid over years. Loans are of different types given for different durations on specified amounts.
The interest charges on loans also differ based on what type of loan the borrower has availed. The process of getting the loan is a tedious process and for some banks or financial institutions, it takes a long time to process. The process involves submission of lot of documents endorsed by the borrower such as identity card, address proof, couple of passport size photographs, last 3 months pay slip, 6 months bank statement and even endorsement of the company in which the person works. After the same, there is a telephonic verification to the home and also to the office with visit by their representative to the house and the office. If they are convinced, then only the disbursement takes place to the extent that the amount is fixed by the bank.
The private banks who give personal loans charge very high rate of interest and the loan needs to be paid in equated installments monthly and the same needs to be continued for the number of years as mentioned in the letter. If the borrower fails to give any installment they charge a big penalty over and above the installment amount. The borrower also needs to pay the amount before the due date else late fee is charged on the installment which goes on increasing till it becomes unbearable for the borrower to pay back. The moment the borrower fails to pay the installment amount, phone calls, visits to the house and even threatening the customer starts on a regular basis. This pressure continues till the borrower repays back the loan. This practice though banned in the court of law has been utilized by most private banks to recover the amount for which there is a fear in the mind of people in taking loan.