“All you need to know about personal loans (rediff.com)” plus 2 more

All you need to know about personal loans (rediff.com)
DSI to probe banks' role in loans to bankrupt firm (The Nation - Thailand's English news)
Freddie Mac to start buying back bad loans (Washington Post)

All you need to know about personal loans (rediff.com)

Posted: 09 Feb 2010 07:40 PM PST

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Now that the festive season is over and you have made purchases to your heart's content or have spent all your savings on weekend getaways to your favourite resorts, you are probably thinking about how to come out of the burden of various debts. Funds are probably limited now, so how do you do that? A personal loan could be the solution. However, before opting for a personal loan you should budget your loan requirement and allocate which expenses will be met from this loan.

Personal loans enable you to take care of your immediate requirements without much of a hassle. For instance you do not have to give any kind of security, collateral or even guarantees to avail this loan. Moreover you can utilise the loan amount for any purpose (except speculative purposes).

The amount of loan will depend on your eligibility based largely on your income or net take-home salary. The loan is repayable in equal monthly installments or EMIs and loan tenure varies from one to five years. Since personal loans do not require any security or hypothecation of assets, the rate of interest charged by banks is higher compared to any other secured loans which are taken against the security of an asset like your home, car, gold or even equities.

Is it easy to get a personal loan? Yes, since there is less paperwork, the bank does not have to verify any asset as it does in the case of home loans. No, as there is stringent income criteria to qualify for a personal loan. But once you make the grade it takes only about three four days for you to get a personal loan -- a lot less time than a home or car loan.

So how can you go about getting a personal loan? Here is a step-by-step process to be followed for the personal loan application process:

Get in touch with a lender after finding out which bank is offering the best rates and best services. You can compare interest rates by visiting any reputed price comparison sites. After short listing a handful of them, you can get in touch with as many lenders as possible and get them to make loan offers to you. Then negotiate with them to get the best interest rate. Also try to know if there are any special offers. After you have got all the banks to make their offers, select your lender based on the information you have in front of you.

After finalising the lender, the lender's direct selling agent will visit you and collect documents supporting proof of income, residence proof and identity. You may be required to produce copies of IT returns, salary slips, bank statements, ration card, passport, driving license and other relevant documents. These requirements vary from lender to lender.

After submitting the documents, a field investigator will visit your home to double check the facts provided in the documents, such as your place of residence, tenure at your workplace and so on. It is essential that you are present during this visit; otherwise the investigator could report that the facts you provided do not actually add up, thus forcing the lender to reject your loan application.

Once the lender is satisfied with the veracity of your documents, the loan is approved. The lender then disburses the amount through cheques or demand drafts (DD).

Now you might think that a credit card might do the trick. So how does cash withdrawal on your credit card fare vis-a-vis personal loan?

Firstly, withdrawing cash using a credit card can turn out to be very costly if you do not repay it quickly. Interest rates on credit card cash withdrawals can range from 20 per cent to 40 per cent on an annual basis depending on the type of card you use.

For most credit cards, the interest rate on cash withdrawals and credit outstanding for purchases made is the same. But here is the kicker -- for the purchases you make through your card you get an interest-free period to pay back. Cash withdrawals on your card have no such benefits; interest is charged from the moment you withdraw the cash. And do not forget the transaction charge -- this is a charge levied on the withdrawal at the ATM.

Still, personal loans have a slightly longer application process whereas cash withdrawals offer easy access during emergency. But, personal loans also have lower interest rate than credit card cash withdrawals. Apart from the higher interest rate, you will also have to pay a one-time transaction charge. Coming to interest rates, the average interest rates charged for personal loan is in the range of 12-22 per cent , whereas the average rate for interest is around 20-40 per cent for withdrawal from credit card.

Therefore, unless you are in a very real emergency where you need instant cash, it is advisable to not withdraw cash on your credit card. Remember you also have to repay it as early as possible to avoid prohibitive interest payments. If you have some time, it is always better to opt for a personal loan. It is the fastest of all retail loan products and the interest rates are a lot lower than those on credit card cash withdrawals.

Illustration: Uttam Ghosh

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DSI to probe banks' role in loans to bankrupt firm (The Nation - Thailand's English news)

Posted: 10 Feb 2010 09:16 AM PST

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The company's bad debts now total over Bt34billion.

"When an individual requests a loan, bank officials conduct extensive probes into his or her financial credentials. So, the banks should now explain why they allowed this company to get such huge loans," DSI director-general Tharit Pengdit said yesterday.

Available evidence suggested President Agri Trading executives had used fake documents. Tharit said some bank executives should be held responsible for approving the loans based on these papers.

Involved in this case are Bangkok Bank, Krung Thai Bank, Kasikorn Bank, Thai Military Bank, HSBC, Siam Commercial Bank, UOB, ACL Bank, Islamic Bank of Thailand, BNP Paribas, Mizuho Bank and CIMB Thai Bank. DSI has invited their executives for talks on how they should co-operate with the ongoing probe.

"We will also find out whether money from the loans has been used for illegal activities or been hidden somewhere," he said.

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Freddie Mac to start buying back bad loans (Washington Post)

Posted: 10 Feb 2010 07:31 AM PST

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The McLean, Va.-based company said Wednesday it would repurchase mortgage loans in which borrowers have missed at least four months of payments. It did not disclose how much it would spend.

Freddie Mac guarantees the mortgage securities it sells. The company said buying the delinquent loans back would cost less than making those guarantee payments.

Freddie Mac and sibling company Fannie Mae have been run under tight government oversight since they almost collapsed in September 2008. They have required $111 billion in federal aid to stay afloat.

Late last year the Obama administration pledged to cover unlimited losses through 2012 for both companies, lifting an earlier cap of $400 billion. That gave Fannie and Freddie more leeway to buy back delinquent loans.

"It is my expectation that any net additions to their retained mortgage portfolios would be related to this activity," the companies' chief regulator, Edward DeMarco, said in a letter sent to Congress last week.

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