This pandemic was hard for everyone one of us and we all struggled to oversee discretionary spending due to unanticipated expenditures. Many people also saw a dip in their savings to fulfill the family’s requirements. So to mitigate the increased financial stress some people turned towards personal loans but how do you know if you are eligible for a personal loan or not and what variables affect her personal loan eligibility.
Here’s what you need to learn about the 5 most important factors that may influence your personal loan eligibility.
Before that let me give you the specifics of the personal loan. So, let’s dive right in!
A personal loan is a form of installment loan that provides you with a set chunk of money, typically ranging from $1,000 to $50,000, in one single payment. They are typically unsecured, which means you need not provide assets to protect funds. The repayment period can differ considerably from one year to a decade. They are used for just about anything, though some financiers may limit their use.
Making an application for a personal loan is akin to making an application for a credit card. You will be asked to input your info, financial data, and loan info. The creditor will conduct a solid credit analysis before authorizing you, which may momentarily lessen your credit rating.
If the creditor is satisfied with your fiscal predicament and creditworthiness — typically, a rating in the mid-600s is required — the creditor will ascertain your interest rate, loan balance, and provisions.
However, these days there are platforms like Zest Money that have simplified getting personal loans much easier. With Zest Money you can get a personal loan even if you do not have a credit score. Simply download the Zest app, complete the KYC, and get a credit limit that you can use to shop in over 100,000 offline and 15,000 online stores. The best part is that the Credit Limit is available at 0% interestwhen paid on time. Once you sign up for a Zest Money Credit Limit, you also become eligible for Zest Money Personal Loans that too without uploading any additional documents. Besides, you can choose your EMI plan, and repayment term, and even foreclose the loan without paying any foreclosure charges.
The most vital eligibility criterion when applying is that you are within the bank’s age cohort. Age is an important factor as it tells lending institutions about your capital adequacy and earning power. If you’ve graduated college and are in your 20s, you may lack basic monetary stability. Likewise, if you’re over the age of 60 or are retiring early, your earning power will be reduced during this time.
Candidates between the ages of 25 and 55 are usually considered by banking firms. The age thing varies from bank to bank.
Monthly earnings
Monthly Earnings
Your potential to repay debt is directly proportional to your earnings. Your revenue is a critical component of your fiscal portfolio. The baseline salary requisite, on the other hand, varies by lender. Your lending institution takes into account the city you reside in as well as the corporation you work for when assessing your earnings.
Although the main income stream is taken into account by the lending institution, having extra revenue from passive channels such as subletting out your home or rental estate can be advantageous. Having a supplementary stream of revenue can help lending institutions feel more confident that you will compensate your EMIs on time.
Credit record
Personal loans are types of unsecured debt. They don’t have any assets or security backing them up. As a result, lending institutions use credit metrics to evaluate your ability to repay.
Your credit record reveals your EMI transaction regularities in the past. As a result, you must pay your EMIs on time to avoid falling behind on your loan payments. This will have a massive influence on the elements that influence personal loan acceptance.
Debt to income ratio
Assume you work for a reputable firm and are paid well, but the majority of your earnings are going toward EMI payouts. This factor influences your personal loan qualifications. The lending institution calculates your debt-to-income ratio by splitting your total earnings by the total amount of your current debt.
If your debt-to-income rate has risen, your lending institution may deny your loan request or cost you a higher rate of interest on your personal loan. Generally, it is best to keep the debt-to-income ratio below 50%. A higher proportion of this component increases the danger of nonpayment.
Stable employment
Employment
When approving a personal loan, your lending institution considers your total professional experience as well as your present employment status. If you work for a well-known company and have a consistent stream of revenue, your lending institution deems you a lienholder with stable employment.
If your manager has a background of late compensation or is not economically solvent, the lending institution may deny your request. This is attributed to the reason that these variables influence the potential to reimburse your personal loan.
Pros and Cons of Personal Loans
Pros of Personal Loans:
Personal loans can be used for a variety of purposes. They are used for a bunch of uses, including travel costs, medical bills, buying new accessories, gadgets, and even home/car upgrades.
Personal loans are available very quickly. In certain instances, the loan can be obtained within 24hrs. So, if you need emergency money, personal loans are your safest choice.
When contrasted to a mortgage payment or a car loan, personal loans usually do not necessitate as much paperwork. As a result, the handling time is reduced.
No need for security to acquire this loan, and the credit period is much smaller than that of a home loan or a car loan. In comparison to other loans, this carries less peril for the applicant because if you seem unable to pay back, your security is voided. Your assets are secure because personal loans do not require any security. This helps make this type of loan appealing to anyone who does not own any assets such as a car, a home, or stocks.
Cons of Personal Loans:
Lenders consider these to be risky since they do not require any security. These loans have extremely high-interest rates to compensate for their dangers.
Most financiers do not accept loan payments in installments. This implies you will have to repay the lender for the period of the loan. Because your first installments are used to pay interest, it can be very costly.
Because these loans are very risky, most bank requires their borrowers to have a good credit score. As a result, if your credit score is low as a result of past loan defaults, your request will be denied. As a result, the accessibility of this loan is subject to rigorous qualifying criteria based on creditworthiness.
Even banks that provide loans to debtors with poor credit end up providing reduced principal amounts and rising interest rates than those provided to debtors with good credit. These debtors are also subjected to stricter repayments.
Is Personal Loan the Right Choice for You?
If you need money quickly, personal loans are an appealing choice. Here’s how to tell if a personal loan fits one’s scenario:
You require the finances as soon as possible. Many lending institutions, particularly those that function online, can make capital available in a couple of times.
You have an excellent credit rating. Borrowers with stellar credit are eligible for the lowest rate.
You want to get rid of your massive debt. Personal loans are an excellent tool to manage and pay off high-interest credit card debt.
You will put the money toward important purchases. Personal loans can also be used to pay for large costs or to renovate your home.
Personal loans, on the other hand, are not suitable for all. They are, after all, still a debt obligation. Here are a few explanations why it may not always be the safest alternative for you:
You have a bad habit of spending too much money. Paying off your debt with a personal loan may not seem like a sensible approach if you intend to simply start accruing fresh credit card debts.
You are unable to make substantial repayments. Consider a personal loan’s repayment schedule and monthly bills. Use a personal loan calc to discern whether you can finance the monthly payments over the financing tenure.
You don’t need the cash immediately. Saving for a big settlement may make better sense than taking out a personal loan and making interest-only reimbursements for many decades.
These are the variables that portray your creditworthiness when applying for a personal loan. Lending institutions mostly take this into account when determining your qualifications for a personal loan and the rate of interest. As a result, it is advisable to confirm the prerequisites of your ideal lending institution beforehand to obtain a reasonably priced personal loan interest rate. Also, do check the pros and cons before you decide to apply for a personal loan.
FAQs
What are the eligibility criteria for a personal loan?
Sufficient monthly earnings, good credit records, and stable employment are some of the eligibility criteria for a personal loan.
What is the minimum salary required for a personal loan?
Most banks set a minimum salary limit of Rs. 15,000 – Rs. 20,000 per month for a personal loan.
The new year brings fresh and innovative business prospects to your creative minds. Granting start-ups will make those innovations feasible.
Yet it’s not always straightforward to address the issue of how to get funding for a startup. You must know where you are going to look and get ready to do the job you need to make your dream come true.
It is time you took a near dive into your investment opportunities if you really want to get a startup off the ground and see it become a profitable venture.
The first stage anytime you need money to start up a company is to report the initial costs. Take out all needless or unsustainable costs in order to detect the critical criteria of the startup.
The loans are currently provided for value of ₹1 Lakh to ₹1 cr with the rate of interest more than 8%. MSME Business loan in 59 minutes initiative aims at loan appraisal process automation ultimately resulting into getting eligibility letter , in-principal approval in lees than an hour. post the in-principle approval, the loan is expected to be sanction/disbursed in 7-8 working days.
To be eligible for this loan as a borrower you should be GST, IT compliant and must have six months bank statement facility. The business loan eligibility is determined by a company’s, income/ revenue, repayment capacity, existing credit facilities, any other factors as set by lenders (banks)
The Credit Guarantee Scheme (CGS)
Stand Up India Scheme Coir Udyami Yojana National Bank for Agriculture and Rural Development (NABARD) Credit Link Capital Subsidy Scheme National Small Industries Corporation Subsidy Pradhan Mantri Mudra Yojana Sustainable Finance Scheme SIDBI Make In India Soft Loan Fund For MSME
Startup loans for budding entrepreneurs
Startup Loan Initiated by the Government
In order to collect funds to launch your own company or extend your existing business, you can secure a start-up business loan from any bank or financial institution. The interest rate paid to the bank depends on the amount of the loan you earn and the tenure of repayment.
What To Consider While Requesting A Loan?
The borrowers shall execute the paperwork required and send documentation for the use of these credits. As the government funds the projects, some of the loans are free of collateral. In the following you will notice some points to review before applying for the loan:
1. Personal record: background information is reviewed. Crimes performed or criminal history will disqualify or postpone the loan sanction phase.
2. Based on resume or company background: information of the company and applicant’s skills in developing the business will be asked.
3. Business proposal: the borrower has to bring into the loan document a well-considered business plan.
4. Business and personal tax return: for a period of three years, candidates must submit personal and corporate tax returns.
5. Financial reports: the claimant shall apply the statement of benefit and loss, the bank statement, the balance sheets, and the cash flow forecasting.
6. Legal documents: the requester must ensure that the company works legally.
7. Collateral: collateral strengthens your profile and will assist you to receive a greater amount of loan.
The qualifying conditions for the use of start-up corporate loans can vary from borrower to creditors but are generic and therefore been listen below:
1. The candidate must not be under age 21 or must not be above the legal age of 65 years.
Age Group who can Apply for the Loan
2. The nominee must be an Indian resident.
3. Candidates should include a corporate strategy.
4. The firm will need an incubation letter
5. The organization must deliver a framework and product for innovation purposes.
6. A patron assurance from the Indian Patent and Trademark Office should be secured by the company.
7. It must be a young firm and not more than 5 years old.
Interest Rate For Startup In India
The interest rate and maturity tenure differ between banks. The interest rate, though, varies between 10.99% and 21% a year. The sum lent shall also be subject to a transaction fee. The tenure is up to five years.
A huge number of start-up firms live in India. The number of cottage industries and small units is increasing. However, start-ups and micro-industries need capital to grow, manage, and succeed in the global giant market. Since these units lack access to price raising, the Government has taken the lead to fund these small scale enterprises and facilitate them.
Company Profile is an initiative by StartupTalky to publish verified information on different startups and organizations. The content in this post has been approved by the organization it is based on.
Micro, Small and Medium Enterprise (MSME) Sector has emerged as a very important sector of the Indian Economy, contributing significantly to employment generation, innovation, exports, and inclusive growth of the economy. Micro, Small and Medium Enterprises (MSME) are the backbone of the socio-economic development of our country.
It also accounts for 45% of the total industrial production, 40% of total exports and contributes very significantly to the GDP. Manufacturing segment within the MSME contributes to 7.09% of GDP. MSMEs also contribute to 30.5% of services. The total contribution of MSMEs to the GDP is 37.54.
U GRO has created a range of Sector Specific LoanProducts, using a combination of industry data and advanced analytics to unlock the true potential of business. Using sectoral knowledge from financial and non-financial sources. U GRO deep-dive into the ecosystem various business operates into understand the growth of the business venture.
U GRO Capital has developed a sophisticated and self-sufficient underwriting process, which is capable of approving principal loan to customer in less than 60 minutes. Their constant efforts towards bettering their existing processes have enabled them to launch an end to end digital platform – Sanjeevani, which is built upon a deep digital architecture, towards easing the borrowing experience and quickening the disbursals as the entire process, from filling the application form, sharing documents and getting disbursal of the loan can be completed from customer’s workplace within 3 – 5 business days.
U GRO Capital was the first organisation to adopt a sector specific strategy; the company realised that the cash flows of an electrical equipment manufacturer will be very different than that of an education institution or a pharmacy store – which implies that these entities need to be assessed in very different ways. U GRO deep-dive into the ecosystem various business operates into understand the growth of the business venture. Their statistical predictive models, augmented with external data sources, power assess business and create super-customized sustainable solutions that offer better prospects for long term growth.
They have solved for this using their proprietary solution “GRO Score”, which was implemented from day one of business operations. GRO Score utilizes a wide range of sector-specific parameters to estimate default rates. It has a Gini co-efficient of over 60%, indicating a high degree of stratification, and thus allowed them to remove 70% of ‘bads’ by removing the bottom 20% by GRO score.
U GRO Capital- Founders
U GRO Capital is founded by Shachindra Nath.
U GRO Capital founder | Shachindra Nath
Mr. Shachindra Nath has over two decades of experience in the Indian Financial Services industry, with a proven track record of building and scaling large financial institutions. He was formerly the Group Chief Executive Officer of Religare, where he successfully led the IPO process and established multiple successful new business lines. He began his entrepreneurial journey with U GRO Capital, where he seeks to build an institution that will provide real value to society and stand the test of time. He is a qualified lawyer and a University Rank holder from the Banaras Hindu University (India).
Abhijit Ghosh – Whole Time Director and CEO, is a passionate and visionary leader who brings more than two decades of experience to the company from his key roles across Banking & Financial Services, Consumer Appliances, Hospitality, Telecom & Healthcare. Prior to coming aboard, Abhijit served as the President and Chief Business Officer at Religare Finvest Limited. He has also worked at ABN Amro, Future Capital and ICICI Bank. He is a Science Graduate from the University of Calcutta and an alumnus of Kellogg Executive Education & XLRI Jamshedpur.
Anuj Pandey – Chief Operating Officer, is a founding team member who leads the Product, Strategy, Marketing, Technology, Analytics and Process functions at U GRO. Anuj brings 20 years of experience across firms such as Barclays Bank, ABN AMRO Bank, GSK Consumer & Religare Finvest. Anuj holds a Bachelor’s degree in Engineering (Mechanical) from Thapar University & PGDM from IIM Lucknow.
J. Sathiayan – Chief Business Officer, is a finance and banking professional who brings over two decades of experience in the domains of SME and Business Finance, Retail Liabilities and Assets, Third Party Products Distribution and other financial services at Religare Finvest and ABN Amro.
Manish Agarwal – Chief Risk Officer, is a member of The Institute of Chartered Accountants India, The Institute of Company Secretaries of India, and the Institute of Cost and Works Accountants of India. He has previously held roles including Chief Credit Officer at YES Bank and Head of Policy for Retail, Agri and SME at ICICI Bank.
The Company currently has nearly 200 employees and a loan portfolio of approximately INR 1,000 crores. U GRO has had a culture of innovation since inception, which has allowed for the many developments made. The organization has a relatively flat hierarchy, and senior management consistently interacts with employees of all levels within the firm.
The trigger behind instituting U GRO Capital could be traced back to the reflection on the state of MSMEs. It is really hard to acknowledge the fact that despite the MSME segment contributing to 30+% of India’s GDP, a vast majority of it lacks access to formal credit. U GRO was hence, instituted to ‘bridge’ this credit gap by utilizing our deep knowledge of the sectors, to build products optimized to the MSME needs, technology driven underwriting process for comprehensive assessment of MSMEs, critical to cater to thin file customers and also to achieve scale and enabling watertight corporate governance to eliminate possibility of egregious breaches in other market players. NBFCs are generally more nimble and able to specialize than banks, making them ideal for lending to the MSME segment, where a degree of specialization is requisite for good underwriting
U GRO was instituted with the buyout of Chokhani Securities Ltd, followed by its capitalization and rebranding with new management and business model to U GRO Capital. The technology architecture started with the building out of internal core processing platforms – LOS and LMS. Post this, the focus has been on developing tech modules for facilitation of each distribution channel viz. GRO Xstream for BFSI, GRO+ for Traditional Branch-led, GRO Chain for Ecosystem and GRO Direct for Direct Digital.
The company’s name was derived from the mission statement. U GRO was founded with the vision of ‘Solving the unsolved: India’s $300B MSME Credit Gap’, and their name speaks to their commitment to their MSME customers – they want to see “U GRO”, or they grow.
U GRO Logo
Shachindra grew up in a small town and in his early experiences in the carpet industry, he noted just how difficult it was to scale businesses as a result of insufficient financing availability. U GRO Capital is the manifestation of his dream of providing adequate financing to all fundamentally strong MSMEs, such that those entrepreneurs can achieve their own dreams.
U GRO caters to specific SME sectors by using their advanced knowledge of 8 sectors to create insightful loan products for each sub-sector. They use a unique combination of intelligence & technology using statistical predictive modelling to understand a prospective customer’s potential for growth. Their sub-sector level knowledge is derived from over 25 financial & non-financial sources to understand the ecosystem which the customer operates in.
U GRO Capital’s mission is to ‘Solve the Unsolved’ – the US$ 600Bn Small Business Credit Need. U GRO Capital believes that the problem of small businesses can be solved by building deep expertise around core sectors of MSMEs in India coupled with a data centric, technology-enabled approach.
U GRO Capital- Target Market Size
U GRO Capital is a pureplay MSME lender. The total addressable demand for financing from Indian MSMEs is ~INR 45 trillion, as estimated by IFC. Of this demand, only INR 23.7 trillion is met through formal sources – largely banks, NBFCs and other FIs. This leaves a gap of INR 21.3 trillion, which is estimated to be growing at over 7% per annum. U GRO’s vision is to cater to this gap.
MSMEs can avail capital through U GRO’s operational four-pronged distribution model-
Traditional branch-led channel: Sourcing through GRO-Partners (DSAs) – secured and unsecured business loans
Partnerships & Alliances channel: Sourcing through our fintech, machinery and BFSI partners to provide both secured and unsecured term loans with a range of tenures and rates basis security and collateral type
Ecosystem channel: Vendors, dealers and distributors of our partner Anchor corporates can avail supply chain financing from them with invoice collateral
Direct Digital channel: SMEs can directly apply for financing through their website, or through their fintech partnerships
While they have maintained a keen focus on their initial prime/near-prime target segment, they have also worked towards addressing a broader demographic as per their efforts to solve India’s MSME credit gap. This has seen them already cater to the working capital needs of vendors associated with their ecosystem anchors. Additionally, U GRO has built out a 9th statistical scorecard for microenterprises. Microenterprises behave as a homogenous group by size rather than by sector, making it ideal to build a separate scorecard to address all enterprises of a certain size and below rather than to try and underwrite them using their extant sector scorecards.
The coming months will also see the company launch their direct distribution branches. Until now, U GRO has 9 branches in Tier I metro cities, and these largely cater to the aforementioned prime/near-prime segment through an intermediated mode of distribution. In order to cater to MSMEs in Tier II/III metros and sub-urban locations, they will open branches in such locations and reach out directly to MSMEs. This will also see them foray into a higher yield segment.
U GRO Capital- Business Model and Revenue Model
The core revenue model is raising liability at low rates and disbursing loans at higher rates, thus earning spreads – riskier segments will have larger spreads, but this is counteracted by higher rates of bad loans Additional fee-based income sources come from upstream co-lending and other assignments. Incremental revenue sources include cross-selling, particularly insurance.
MSME loan requirements range from INR 1 lakh to INR 5 crores depending on sector in which they operate and their respective turnovers and business needs, and they step in to cater to the varying requirement, via their corresponding tailored services. In terms of pricing, their average yield on book for secured loans was 11.7% in June 2020, 18.5% for unsecured loans and 13.3% for supply chain financing.
On a blended portfolio level, U GRO’s yield was 14.1%. This is as compared to their weighted average on-book borrowing rate of 10.5% as of June 2020 – a figure that has come down significantly, and thus increased their spreads. The commissions to their U GRO Partners (DSAs) are in line with market norms.
U GRO’s first customers were achieved through a mix of their branch network and the BFSI partners, although largely the former. Their initial investment in branches and human capital infrastructure really increased the ease in building up their customer base, and U GRO reached 100 customers very shortly after commencing lending operations.
U GRO Capital- Marketing Strategy
Analytics and technology have been significant parts of U GRO’s organization structure from day one – it is a core strategic focus area for them, and they have invested in requisite manpower and infrastructure to enable advanced applications. This has resulted in their early success stories – their loan origination platform which connects to 24 external APIs and can produce an in-principle decision within 60 minutes, and their customized business rules engine which hosts all the credit policies and credit scores. U GRO has crossed Rs.1000 crore of disbursal and turned profitable in the first year and 100% of the loans have been processed through the system using their policies and analytical models.
U GRO is a fast maturing analytics practice with vertical competencies on data engineering, portfolio analytics and on-boarding science/ predictive modelling. They are making rapid strides in taking advance data science and ML/AI based applications to the market. They have developed an in-house ML deployment engine and are in final stages of implementing our home-grown alternative data model for credit assessment. Work has progressed to a great extent in their bid to digitize processes that have always been physical – such as location assessment, alternate data-based fraud checks, facial recognition and object identification.
They have also forged key partnerships across a number of channels, which are critical to their forward strategy as they allow for low opex methods of scaling up their book. The company has over 35 partners in their partnerships and alliances channel, ranging from partner BFSIs to fintechs to machinery partners. They also have 26 ecosystem anchors, through whom they lend to vendors. Notably, they have 5 marquee upstream co-lending partners – including SBI, Bank of Baroda and ICICI Bank.
For India’s largest public and private sector banks to be willing to co-lend with them at such an early stage is a huge indication of their trust in our abilities, especially as it pertains to being able to source and underwrite high quality MSME loans. Co-lending represents a highly value accretive channel as it comes with a combination of income on interest spread and also fee income.
It goes beyond saying that the COVID-19 was the most devastating thing happening to not only our economy but the entire world. It also posed as the biggest challenge to U GRO, too.
The pandemic induced lockdown was responsible for short term impact of non-disbursals from March to May 2020. The asset side goals being pushed back, they shifted their focus towards strategic improvements in order to make up for the lost time. They were to a great degree able to increase its capabilities on technological and governance fronts, towards their long-term goal of achieving an entirely digitalized underwriting process.
This included the integration of video KYC and digitalization of the personal discussion process and customer loyalty framework, and the development of an in-house rule engine. With a highly self-sufficient underwriting process and their strong liquidity base, they were able to resume our potential operations pretty strongly as their July disbursals bounced back to a staggering 80% of pre-Covid levels. As of September, they have fully re-achieved pre-Covid levels of disbursements despite the many limitations still in place as a result of social distancing. U GRO fully expect to be able to build on this and further scale their asset engine in the coming months and years.
U GRO Capital- Funding
Date
Stage
Amount
Investors Name
Dec 2017
NA, demerger of lending business of Asia Pragati
175 Cr.
PAG and Others
Dec 2017
Preferential Allotment
435 Cr.
ADV Partners, NewQuest, Indgrowth, Samena
May 2018
Preferential Allotment
192 Cr.
Large family offices and high net worth individuals
August 2018
QIP
112 Cr.
PNB, Samena
U GRO Capital- Advisors
One of the key advisors to U GRO is:
Global Value Creation Partners – led by Sanjeev Goel, ex-Head of Equity Investments FIG for EMENA and Asia at IFC.
U GRO Capital- Acquisitions and Mergers
U GRO Capital was formed through the acquisition of Chokhani Securities Ltd, there have been no further acquisitions till date.
U GRO Capital- Recognitions and Achievements
World BFSI Congress Awards by ET NOW in the categories – Financial Services, FinTech & Loan
‘Finnoviti Award 2020’ by Banking Frontiers, partnered by Deloitte in the category ‘Business Model – Innovation’
India NBFC Summit 2019 Awards by Perfios: ‘Rising Star of the Year’
Companies & Education Awards 2019: ‘The Most Trusted Company Emerging NBFC’
U GRO Capital- Future Plans
U GRO operates through their nine branches: Mumbai (Head Office), Delhi, Kolkata, Bangalore, Chennai, Hyderabad, Ahmedabad, Jaipur and Pune. The Company’s total income stands at Rs. 30.79 crores for Q1 FY21 with a PAT of Rs. 3.73 crores and CRAR of 99.42%. The net worth of the Company stands at Rs. 926.1 crores as of June 30, 2020 with book value per share being INR 131.31.
The Company’s AUM at the end of June 30, 2020 stood at INR 847.4 crores across 7,343 customers. Of the total loan book, 69% is secured. Sectors including Education, Light Engineering and Electrical Equipment & Components constitute 54% of the total loan book whereas geographical concentration at a state-level is at a maximum of 21%. Notable partnerships include co-lending partnerships with SBI, Bank of Baroda, ICICI Bank
While it is not possible to predict the trajectory of the pandemic and the subjectivity of the future, assuming a gradual remission, the company can positively expect to be normalized by the end of FY21.
For lending in post-Covid times, they have created an evolved loan program Sanjeevani which aims to boost the capital starved MSME sector. Already a pivoting platform, we continuously strive towards enhancing its self-sufficiency, as they commit to reach out to 500,000 MSME clients.
Shruti Kasera
