Thursday, October 2, 2008

FAQ - FESTIVAL LOANS

Q. What are my loan limits?
A. Your festival loan limit would be determined by your income and repayment capacity. The minimum amount of Loan is Rs.5000/- and maximum amount of the loan is 4 times your Net Monthly Income, with a ceiling of Rs.50,000/-.

Q. Can my spouse's income be included for calculating the loan amount?
A. Yes, your spouse's income can be included provided he/she guarantees the loan or the loan is taken jointly.

Q. What are the important documents that I need to provide?
A. You will need to furnish only the following documents if you are an existing customer of the Bank:
- Passport size photograph
- Proof of official address for self employed individuals and professionals. This can include shop and establishment certificate/Lease deed/Telephone Bill
- Latest Salary clip and Form 16, in the case of salaried persons
- IT returns for the last two financial years, in the case of self employed individuals and professionals.
If you are not an existing bank customer you would also need to establish your identity and give proof of residence.

Q. Do I have to pledge some form of security?
A. No primary or collateral security is required if check-off facility is available from your employers. Otherwise, personal guarantee of the spouse or any other person of adequate worth will be required.

Q. What is the repayment schedule like?
A. The loan is repayable in up to 12 equated monthly installments (EMIs). The minimum amount that you are expected to pay every month is the EMI. You are allowed to pay more than the EMI if you wish to, and we do not charge any prepayment penalty.

Q. What is EMI?
A. EMI stands for Equated Monthly Installments. This installment comprises both principal and interest components. Use EMI calculator to find out your monthly payments based on the loan amount, the rate of interest and the repayment period. Choose the combination that best meets your financial resources and requirements.

Q. Can I prepay the loan? Are there any penalties?
A. Yes, you can prepay the loan partly or fully, at any stage, without any prepayment penalty.

Q. What is the processing fee? Are there any other charges?
A. A very nominal processing fee of Rs.100 per application is required to be paid.

Q. How does SBI Festival loan compare with schemes of other banks?
A. Other banks, generally, do not grant festival loans. The scheme closest to this scheme is Personal Loan offered by other banks. Our Festival Loan scheme is better than Personal Loan scheme offered by other banks as under;
- There is total transparency with regard to the rate of interest and the fees charged by SBI.
- SBI offers lowest rates of interest
- Festival Loan scheme allows you to prepay your loan without any prepayment penalty. This helps you reduce interest burden on the account.
- SBI levies interest based on daily/monthly reducing balance, unlike the annual reducing balance method used by several other banks.

Q. How do I benefit if the interest is calculated on a daily/monthly reducing balance?
A. On an annual reducing balance method, you will continue to pay interest on amounts you repay during the coming one year as the interest for the year is determined on the basis of the balance outstanding at the beginning of the year.
In the case of the daily/monthly reducing balance, which is the methodology SBI employs, your interest is calculated only on the outstanding loan amount, which reduces every time you pay off your EMIs or make any prepayments. This in essence lowers your effective rate of interest significantly.

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