If you are looking at personal loans, it would be a good idea to look at loans from State Bank of India, which is the nation's largest lender.
The interest rates are lower, when compared to most private banks, especially the larger private banks. Also, many banks charge a higher processing fee on personal loans, whereas the processing fee charged by State Bank of India is rather low at 1.50 per cent.
For example, HDFC Bank charges up to 2.5 per cent of the loan amount as processing fee, which is a good 100 basis points or 1 per cent more than State Bank of India. The interest rates being charged on personal loans also varies, however, here again State Bank of India offers lower interest rates.
Pre-payment charges in the case of State Bank of India can be a maximum of 3 per cent, however, in the case of private sector banks, they can go as high as 4 per cent.
The processing of the application and final approval of the same can take time, and maybe maybe a little longer in the case of State Bank of India. However, if you are taking a big loan amount than a slight difference in processing fees and interest rates can save you a lot.
So, it is worth the trouble to get your personal loan processed from SBI, as your save on pre-payment charges, processing charges and interest rates as well.
Why not to take a personal loan?
It's important to remember that personal loans are the second most expensive loans around, in terms of interest rates, just after credit cards interest rates. It is therefore not advisable to take personal loans. In fact, the interest rates can go to as high as 22 per cent and hence it is better if individuals consider other forms of loans like gold loans.
The interest for example on gold loans can be as low as 7 per cent.
Since gold has been mortgaged against a loan, banks and institutions tend to charge lower on these set of loans. It is therefore advisable to go for loans where some assets are pledged. For example, you can consider loan against shares, mutual funds, gold etc.
These are much cheaper in terms of interest rates, as well as processing charges and pre payment charges as well. Also, these loans can be returned anytime and there are no pre-payment charges, which is another advantage.
About the author
Sunil Fernandes has spent 26 years covering business and finance in India and abroad. Sunil has worked with daily newspapers including Hindustan Times, Deccan Herald and Gulf Times. He has also worked with investment magazines like Dalal Street Investment Journal and Oman Economic Review. His forte remains stocks, commodities, mutual funds and tax planning.