Critical Study & Grievances Recovery of

Personal Loan of Bajaj Finance

STUDY CENTER NAME : STUDENT NAME:

B.K BIRLA COLLEGE, KALYAN KRISHNA MARUTI PATIL
 INDEX

No. Name of the Topic

1 Introduction
2 Types of Personal Loan
3 Importance & Significance of Personal Loan
4 Objectives of Personal Loans
5 Research Methodology
6 Literature Review
7 Scope & Purpose of Study
Introduction
A personal loan is an amount of money you can borrow to use for a variety of
purposes. For instance, you may use a personal loan to consolidate debt, pay for
home renovations, or plan a dream wedding. Personal loans can be offered by
banks, credit unions, or online lenders. The money you borrow must be repaid
over time, typically with interest. Some lenders may also charge fees for personal
loans. A personal loan allows you to borrow money to pay for personal expenses
and then repay those funds over time. Personal loans are a type of instalment debt
that allows you to obtain a lump sum of funding. For example, you might use a
personal loan to cover. A personal loan is also different from a personal line of
credit. The latter is not a lump sum amount; instead, it works like a credit card.
You have a credit line that you can spend money against and, as you do so, your
available credit is reduced. You can then free up available credit by making a
payment toward your credit line.3 With a personal loan, there’s typically a fixed
end date by which the loan will be paid off. A personal line of credit, on the other
hand, may remain open and available to you indefinitely as long as your account
remains in good standing with your lender. Types of Personal Loans: Personal
loans may be secured or unsecured. A secured personal loan is one that requires
some type of collateral as a condition of borrowing. For instance, you may secure
a personal loan with cash assets, such as a savings account or certificate of deposit
(CD), or with a physical asset, such as your car or boat. If you default on the loan,
the lender could keep your collateral to satisfy the debt. An unsecured personal
loan requires no collateral to borrow money. Banks, credit unions, and online
lenders can offer both secured and unsecured personal loans to qualified
borrowers. Banks generally consider the latter to be riskier than the former
because there’s no collateral to collect. That can mean paying a higher interest
rate for a personal loan. Secured Personal Loan: Secured debt is debt backed or
secured by collateral to reduce the risk associated with lending. If the borrower
on a loan defaults on repayment, the bank seizes the collateral, sells it, and uses
the proceeds to pay back the debt. Assets backing debt or a debt instrument are
considered as a form of security, which is why unsecured debt is considered a
riskier investment than secured debt. ecured debt is debt that will always be
backed by collateral, which the lender has a lien on. It provides a lender with
added security when lending out money. Secured debt is often associated with
borrowers that have poor creditworthiness. Because the risk of lending to an
individual or company with a low credit rating is high, securing the loan with
collateral significantly reduces that risk. For example, let's say Bank ABC makes
a loan to two individuals with poor credit ratings. The first loan is backed by
collateral whereas the second loan is not. After three months, both borrowers
cannot make payments on their loans and default. With the first loan, backed by
collateral, the bank is legally allowed to seize that collateral. After they do, they
sell it, usually at auction, and use the proceeds to pay back the outstanding portion
of the loan. In the second loan, where there is no collateral backing it, the bank
has no collateral to seize to pay back the outstanding debt. In this case, they will
have to write-off the loan as a loss on their financial statements. Unsecured
Personal Loan: Unsecured loans or lines of credit (LOC) are loans where lending
happens without the backing of equal value collateral. Collateral is property or
other valuable assets which a borrower offers as a way to secure the loan. In an
unsecured loan, the lender will loan funds based on other borrower qualifying
factors. These qualifying factors include the credit history, income, work status,
and other existing debts. Unsecured loans present a high risk to lenders. Because
there is no collateral to take as recourse if the borrower defaults on the loan, the
lender has nothing of value to claim against, and cover their costs. Default
happens when the debtor is unable to meet their legal obligations to pay a debt.
Instead, of demanding the collateral, the lender will need to turn to civil actions.
Such actions include hiring a collection agency and filing a lawsuit to recoup
unpaid balances. Unsecured loans and lines of credit (LOC) often have high-
interest rates. These rates help to insulate lenders against the risks of loss. The
most common forms of unsecured funds are credit cards and personal loans.
Importance and Significance of Personal Loan: A personal loan is and should be
taken to tide over emergencies only. It should not be taken on whims or just
because one feels like splurging. They carry high interest rates or if it is a secured
personal loan then you may lose your collateral. If you are self-employed or
salaried, there may be times when you need instant cash for emergencies of
different kinds, then you could go for a personal loan. Timing and speed are vital
factors while choosing a personal loan across various institutions. Numerous uses
of Personal loans are domestic or foreign travel, medical treatment for self or
family members, education, marriage, business expansion, working capital,
working requirements and meeting margin money for purchase of assets and so
on and so forth.
Types of personal loans: The personal loan is divided into two types; Personal
Loan for Salaries class, Personal Loan for Self Employed class and Personal loan
cross sell (PreApproved Loans). An Overview of the Self-employed and
Employment Scenario in Madhya Pradesh:
1. Salaried class Personal Loan: Some of the general important criteria are: • The
applicant must have a healthy and stable income of a ratio of 1: 4, ex. if personal
income is Rs. 20000 Rs, EMI should not exceed Rs.5000 Rs. • The applicant must
be between 21 and 60 years old. • Some of the institutional finance institutions
lend to their outgoing client and have good records with them. • Stability is also
an important factor. According to the lease phase, six months to one year of
permanent residence is sufficient.. • Original KYC verification must be required
by banks, It is basis requirement all KYC documents such as proof of ID, proof
of address, bank statement etc. must satisfy the concern manager.
2. Self-employed class Personal Loan: Some of the general important criteria are:
• The applicant must be not less than 21 years of age and not more than 65 years
of age at the end of the loan. • Bank transactions must be healthy. • Proof of
business to understand the stability of the business. • Institution Some financial
institutions request a copy of the latest income tax return, profit and loss and
balance to understand the applicant's cash flow.
3. Personal Loan (Cross Sell): Some of the general important criteria are as
follow: • Bajaj Finance Limited plays a major role in this sector throughout India.
• Proof The customer only needs to provide KYC documents such as proof of
address, proof of ID and photo. • Personal Loan (Cross Sell) come basis of
existing relation with bank of NBFC.
Types of personal loans
There is an assortment of personal loan options to choose from, and you’ll get a
variable or fixed interest rate.

Secured personal loans

Secured personal loans require you to put up an asset that serves as collateral. For
example, you could take a loan out against your vehicle, which is known as a title
loan.

While this could be an ideal option if you have a lower credit score and an asset
to put up as collateral, there’s a downside. If you fall behind on the loan payments,
the lender could seize your asset and sell it to recoup what they’re owed.

Unsecured personal loans

These loan products do not require collateral to get approved. Plus, you’ll get
fast access to funds without putting your assets at risk.

Unsecured personal loans are best for borrowers with good or excellent credit.
However, you’ll generally pay more interest than a secured personal loan since
the lender assumes more risk.

Debt consolidation loans

Debt consolidation loans are commonly used to pay off outstanding debt balances
faster by saving on interest. Borrowers also get the benefit of streamlining the
repayment process.

The idea is to secure a loan with a lower interest rate than what you’re currently
paying on the debts you plan to consolidate. You’ll use the loan proceeds to
eliminate those balances and make payments on a new loan product for a set
period. Ideally, you’ll save hundreds or even thousands of dollars in interest and
get out of debt faster.

A debt consolidation loan can be risky if you use it to pay off credit card balances
and you don’t refrain from swiping the cards once you’ve axed the balances. You
could end up with more debt than you started with.
Co-signed and joint loans

If you’re unable to qualify for a personal loan on your own, the lender might
approve you with a co-signer. This individual should have a strong credit history
and be willing to assume responsibility for the remaining balance if you default
on the loan payments. However, the co-signer won’t have access to the loan
proceeds.

Some lenders also offer joint loans, which allows both borrowers to access the
funds. Like co-signed loans, both parties will be liable for loan payments. Your
co-borrower will need good or excellent credit to strengthen your chances of
getting approved for a loan.

Fixed-rate loans

Fixed-rate loans come with an interest rate that doesn’t change over the
repayment term. Consequently, the borrower makes the same monthly payment
for the duration of the loan term.

Most personal loans fit into this category. Working the loan payments into your
spending plan is easier since it won’t change over time.

Variable-rate loans

Variable-rate loans come with a fluctuating interest rate. As time passes, your
monthly payment could go up or down if the benchmark rate established by banks
changes.

While it’s challenging to budget for payments on variable-rate loans, rates are
sometimes lower than what you’ll get with a fixed-rate loan. So, you should only
consider this type of personal loan if you only need to borrow funds for a short
period.

Personal line of credit

A personal line of credit operates like a credit, and you’ll get access to a pool of
funds that you can borrow from any time you need funds. Unlike personal loans,
which require you to pay interest on the total loan amount, you’ll only pay interest
on the amount you draw.

This loan product is suitable for borrowers who want a safety net that can be
tapped into on an as-needed basis.
Buy now, pay later loans

Buy now, pay later loans allow consumers to make a purchase without paying the
total purchase price upfront. Instead, the balance is divided and payable in equal
installments, weekly or biweekly.

These loans are typically extended through mobile apps, like Afterpay, Klarna
and Affirm. You could get approved for a buy now, pay later loan with less than
perfect credit if you demonstrate your ability to repay the loan. Most lenders will
review your bank activity and may conduct a soft credit check, which won’t
impact your credit score.

Personal loan types to avoid

Some personal loans could mean bad news for your finances and should only be
used as a last resort. Here are some options to avoid:

• Cash-advance credit card: Some credit card issuers allow cardholders to

take a cash advance from their available credit at an ATM or bank. But this
perk comes at a hefty cost – you’ll likely be assessed a cash advance fee
and a higher interest rate on the amount you borrow.
• Cash advance apps: These apps also let you access fast cash, usually up to
$250, until payday. Most charge a monthly fee to use this service, and
you’ll have to repay what you borrow on your next payday or within a two-
week period.
• Payday loans: These loans are a costly form of debt that cater to borrowers
with poor credit. Payday loans typically come with steep interest rates and
are payable on payday. They often create a dangerous debt cycle if you
can’t repay and extend the loan term.
• Pawnshop loans: If your local pawnshop offers loans, you can hand over
your asset in exchange for cash. You’ll likely pay an exorbitant amount of
interest, and the pawnshop will keep your property if you default on the
loan.

How to choose the best type of personal loan for you

Ultimately, you want a loan product from a reputable lender that offers a
competitive interest rate and monthly payments you can afford. It’s equally
important to consider the most suitable options based on your creditworthiness,
financial situation and intended use.

A personal loan could be a good fit if you need a set amount to make a specific
purchase. But if you want the flexibility to borrow funds when you need them, a
line of credit may be more ideal.
IMPORTANCE & SIGNIFICANCE OF PERSONAL LOAN

1. Debt consolidation

Debt consolidation is one of the most common reasons for taking out a personal
loan. When you apply for a loan and use it to pay off multiple other loans or credit
cards, you’re combining all of those outstanding balances into one monthly
payment. This grouping of debt makes it easier to work out a time frame to pay
off your balances without getting overwhelmed.

One of the best advantages of using a personal loan to pay off your credit cards
is the lower interest rates. With lower rates, you can reduce the amount of interest
you pay and the amount of time it takes to pay off the debt.

Best for: Those with lots of high-interest debt.

Takeaway: Using a personal loan to pay off high-interest debt, like credit card
debt, allows you to consolidate multiple payments into a single payment with a
lower interest rate.

2. Alternative to payday loan

If you need money for an emergency, using a personal loan instead of a payday
loan may save you hundreds of dollars in interest charges. According to the
Federal Reserve Bank of St. Louis, the average APR for a payday loan is 391
percent, while the maximum interest rate on a personal loan is typically 36
percent.

Payday loans have short repayment terms, usually by your next payday, between
two and four weeks. This quick turnaround time often makes it difficult for
borrowers to repay the loan by the due date. Borrowers are usually forced to
renew the loan instead, causing the accrued interest to be added to the principal.
This increases the total interest owed.

Personal loans have longer term lengths and will generally cost the borrower
much less in total interest.

Best for: Borrowers with bad credit looking to avoid high-interest predatory
loans.

Takeaway: Personal loans are cheaper and safer than payday loans.
3. Home remodeling

Homeowners can use a personal loan to upgrade their home or complete

necessary repairs, like fixing the plumbing or redoing the electrical wiring.

A personal loan is a good fit for people who don’t have equity in their home or
don’t want to get a home equity line of credit or home equity loan. Unlike home
equity products, personal loans often don’t require you to use your home as
collateral since they’re unsecured.

Best for: Those looking to finance a small to mid-sized home improvement

project or upgrade.

Takeaway: A personal loan can help you fund a home improvement project if
you don’t have equity in your home and don’t want to borrow a secured loan.

4. Moving costs

The average cost of a local move is $1,250, while a long-distance move costs
$4,890. If you don’t have that kind of cash on hand, you may need to take out a
personal loan to pay for moving expenses.

Personal loan funds can help you move your household belongings from one
place to another, purchase new furniture, transport your vehicle across the country
and cover any additional expenses. Using a personal loan for moving costs can
also help you stay afloat if you’re moving somewhere without a job. This way
you can avoid raiding your savings or emergency fund.

Best for: A long-distance move or those anticipating thousands of dollars in

expenses.

Takeaway: If you can’t immediately afford all of the expenses associated with a
long-distance move, a personal loan can help you cover those costs.

5. Emergency expenses

If you have a sudden emergency, like paying for a loved one’s funeral, using a
personal loan could be a low-cost option. The median cost of a funeral is $7,640,
which can be difficult for many families to afford.

Surprise medical bills are another common reason to take out a personal loan,
especially if your doctor requires payment in full. After you’ve negotiated with
the hospital, doctor, and insurance company, you might need a personal loan to
cover unexpected medical costs.
Best for: Those in need of unexpected or emergency funds.

Takeaway: Because they can be disbursed so quickly, personal loans are a good
way to cover an emergency or unexpected expense.

6. Large purchases

If you suddenly need to buy a new washer and dryer or replace the transmission
in your vehicle but don’t have the funds on hand, a personal loan can provide
relief.

Personal loans allow you to cover steep auto repairs or purchase major household
appliances and electronics immediately, especially if you need those things for
regular use. Though you’ll have to pay interest and potentially upfront fees, a
personal loan can save you time and money in the long run, since you’ll be able
to avoid using laundromats and other short-term, expensive alternatives.

Best for: Those looking to make a bigger household purchase now to save time
and money in the future.

Takeaway: A personal loan can help you get new appliances as soon as you need
them.

7. Vehicle financing

A personal loan is one way to cover the cost of a car, boat, RV or even private
jet. It’s also one way to pay for a vehicle if you’re not buying it from the company
directly.

For example, if you’re buying a used car from another consumer, a personal loan
will allow you to purchase the car without emptying your savings account.

Best for: People looking to purchase a new vehicle and those who don’t want to
use the vehicle as collateral through an auto loan.

Takeaway: Using a personal loan is better than depleting your savings or

emergency funds when paying for larger expenses.

8. Wedding expenses

The average cost of a wedding in 2021 was $28,000. For couples who don’t have
that kind of cash, a personal loan can allow them to cover the costs now and repay
them later.
A wedding loan can be used for big-ticket items like the venue and bride’s dress,
as well as smaller expenses like flowers, photography, the cake and a wedding
coordinator. If you don’t want to deplete your savings account, consider a
personal loan to help make your engagement and wedding exactly the way you
always dreamed it to be.

Best for: Those looking to finance wedding expenses.

Takeaway: A personal loan can help you finance all of your wedding expenses
upfront, which can help you avoid dipping into your savings or emergency fund.

9. Vacation costs

Your average vacation might not cost enough to necessitate taking out a personal
loan, but what about a honeymoon or a luxury cruise? Whether you’ve just
graduated or you’re celebrating an anniversary, personal loans can help you
finance your dream vacation. Keep in mind you’ll pay interest on that loan long
after your vacation is over.

Best for: Those paying for a lavish or larger vacation.

Takeaway: If you’re comfortable paying off your vacation for a number of years,
a personal loan can help you get to your dream destination.
KEY OBJECTIVES OF PERSONAL LOAN

1. Consolidate debt to pay off bills

Consolidating debt is one major reason to borrow a personal loan. This approach
can make sense if you’re able to secure a low interest rate. If you pay your other
debts with the money from a personal loan, you’ll only have one fixed monthly
payment, and you might be able to save money on interest.
The average APR on a 24-month personal loan is 9.46% as of February 2021 —
the latest data available from the Federal Reserve — while the average interest
rate on all credit card accounts is 14.75%.
A personal loan for debt consolidation could also help you:
• Extend your repayment term
• Lower your monthly payments
• Free up more of your income to cover necessary expenses

2. Cover unplanned emergency expenses

While it’s best to build an emergency fund to cover unexpected expenses, an

emergency personal loan can help if you’re not yet prepared.

A 2019 LendingTree study on emergency savings found that only 48% of

Americans could handle a $1,000 emergency cost using just their savings.
Some reasons for an emergency loan include:

• Job loss or reduced hours

• Auto repairs
• Medical costs
• Help for a friend or family member

3. Make necessary home repairs

While you might have a wish list of home updates, you might only consider a
personal loan for emergency issues impacting your health and safety.

You might have an issue that requires immediate attention, such as:
 • Broken heating or air conditioning system
• Blocked pipe
• Gas leak

In these scenarios, a personal loan can help you pay for the repairs over time.

4. Finance funeral expenses

When someone dies without leaving behind sufficient funds for funeral costs, it
can put a significant financial strain on the surviving family members.

The median cost of a funeral with a viewing and burial in 2019 was $7,640,
according to the National Funeral Directors Association. Many won’t have
enough saved to cover that cost all at once.

A funeral loan could be an idea if you’re struggling to cover the cost of a funeral.
You may even be able to get a funeral loan with bad credit.

5. Help cover moving costs

Another idea on the list of loan purposes: covering moving costs. There are many
scenarios in which moving loans may make sense:

• You don’t feel safe in your current environment

• You’re separating from your spouse
• You need more space for a child on the way

A job offer in another location can be another good reason to move, but you
should consider carefully whether your new income and cost of living will make
it possible to repay your loan.

Moving loans for bad credit are possible, but they’d typically come with high
interest rates. You’ll want to calculate whether your new income will cover the
added moving expenses.
6. Make a large purchase

You can take out a personal loan to finance a large purchase, but that doesn’t
mean you should borrow money to get a new entertainment system, patio set or
car. Some large purchases are necessary, such as suddenly needing a new major
appliance.

While you can use a personal loan to buy a car, auto loans are typically preferable,
since they usually have lower interest rates and easier qualification requirements.
On the other hand, auto loans require collateral, which means you could lose your
car if you fall behind on payments. It’s a good idea to compare rates, especially
if you’re worried about risk.

4 reasons to choose a personal loan over another type of debt

1. You’re looking for a loan that doesn’t require collateral

2. You want a safer alternative to a payday loan
3. High-interest credit cards would dig you deeper into debt
4. Consolidating your debt would make repayment easier

1. You’re looking for a loan that doesn’t require collateral

One of the benefits of obtaining a personal loan is that they are generally
unsecured, which means they aren’t backed by assets like your house or your car.

While secured loans typically come with lower interest rates, there is some risk
involved:

• If you default on a secured loan, you risk losing whatever collateral

you used to back the loan
• If you fall behind on auto loan payments, for example, you might face
repossession of your vehicle
Since financial hardship can strike anytime, you might feel more secure with an
unsecured loan.
2. You want a safer alternative to a payday loan

If you have poor credit, you may have considered borrowing a payday loan to
cover a purchase. However, payday loans are problematic, even if they can be an
easy way to access cash between paychecks.
You could be charged sky-high APRs up to 400%. Plus, more than 80% of all
payday loans are rolled over or extended into another loan within 14 days,
according to the Consumer Financial Protection Bureau.

A lower credit score won’t necessarily disqualify you for a personal loan, but you
may have to look harder at your loan options. There are a number of lenders who
offer personal loans for bad credit and will work with you despite your low score,
including:
• Avant (minimum credit score of 600)
• LendingPoint (minimum credit score of 585)
• Peerform (minimum credit score of 600)

And your search would be worth the trouble — a personal loan will almost always
have lower rates and fees than a payday loan, plus a longer repayment timeline.

3. High-interest credit cards would dig you deeper into debt

A personal loan may give you the chance to secure a lower interest rate and a
more manageable monthly payment than what you owe on your credit cards.

As we noted above, the average interest rate for all credit card accounts is 14.75%,
according to the Federal Reserve. But APRs on some card types — including
travel rewards cards and airline credit cards — can exceed 24%, according to data
from CompareCards. And if you fall behind on your payments, the credit card
issuer may apply a penalty APR on current and future purchases.

If you have the ability to borrow a personal loan at a lower rate, consider it. In
addition to a lower interest rate, you may be able to choose a term and monthly
payment that better fits your current budget needs. That said, if you continue
using your credit cards after taking out a personal loan, you may find yourself
deeper in debt.
4. Consolidating your debt would make repayment easier

If you have debt across several credit cards with crushing interest rates, a personal
loan is one way to consolidate that debt. Debt consolidation, which we discussed
above, is the most common personal loan purpose, according to a February
2020 study on personal loans.
Here’s a recap on how it works:

• Take out a personal loan and use the cash to pay off all your
outstanding credit card bills (and other debts).
• Make only a single monthly payment. Depending on your loan, that
payment may be lower than all your other monthly bills combined.
Another benefit of obtaining a personal loan: Most have fixed interest rates and
payments, so your bills are consistent and predictable, and won’t increase over
the life of your loan.
RESEARCH METHODOLOGY

The main purpose of this study is to understand the impact of marketing as

awareness of technological development is low and people living in those areas
are very close to nature. This research work is a way to explore male- female,
Married-Unmarried and explain their focus, influence and their ad-related
emotions. Low goals Design and develop a process for evaluating customer credit
systems from a customer perspective and side of the profession. Identify the
basics of customer bank lending schemes from a customer perspective and from
a professional perspective Thinking H01. Bank lending schemes from a customer
perspective and there is no significant and positive relationship between the two
sexes on the employee side. H02. There is no significant and positive relationship
between married and single people in bank loan schemes from a customer and
employee perspective.
 Features: Some lenders offer secured loans (which need guarantors or collateral
security) while others don’t have any eligibility criteria.
 Minimal paperwork.
 Some banks provide loans only to salaried people and not to self-employed
individuals.
 Some institutions take few hours to process the loan, others may take 3-4 days
including one day for field investigation.
 Personal loans are available up to Rs 20 lakh depending on the type of
institution or bank.  The Credit Information Report (CIR) play a crucial role in
a lender’s decision to approve a loan application.
Objectives of Personal Loan:
• Debt consolidation.
• Alternative to a payday loan.
• Home remodeling.
• Moving costs.
• Emergency expenses.
• Appliance purchases.
• Vehicle financing.
• Wedding expenses.
• Vacation costs.
The banks and financial institutions should conduct some recovery camps in
order to overcome the problem of the non performing assets as well as to
recover the pending loans from the borrowers. This recovery camps should in
each and every place where there is a problem of the non-performing assets.
This recovery camp should be designed with an efficient plan and should
include the entire aspects related to the banks and financial institutions. The
banks and financial institutions should be able to explain the actual problem of
the non performing asset to the customers.

The banks should explain the procedure and steps before and after getting the
loans. They should make the customers to clearly understand the problem of the
non performing assets in such a way that if they do not pay the loan amount in
time, it will affect the economical status of the bank and they cannot even grant
the loans to the other customers who are in need and they should understand
that if others doesn’t pay the loan amount in time they would have not get the
loan amount.

The special type of awareness should be created to the customers so that they
should be able to understand the total problem of the non-performing assets. In
this camp the banks and the other financial institutions should even specify the
acts related to the banks such as the securitization and reconstruction of the
financial assets as well as the enforcement of the security interest act 2002. And
should mention the principles of the legal actions which are been taken on the
customers after getting the alert notice from the banks and the financial
institutions. They should even clearly explain the recovery process of their
banks and the financial institutions and should mention the actions and activities
of the recovery agents which are taken on the customers.

Totally the recovery camps should be capable of creating the efficient

awareness to the customers about loan procedure within the banks and financial
institutions.

1. Debt consolidation Debt consolidation is one of the most common reasons for
taking out a personal loan. When you apply for a loan and use it to pay off
multiple other loans or credit cards, you’re combining all of those outstanding
balances into one monthly payment. This grouping of debt makes it easier to work
out a time frame to pay off your balances without getting overwhelmed. One of
the best advantages of using a personal loan to pay off your credit cards is the
lower interest rates. With lower rates, you can reduce the amount of interest you
pay and the amount of time it takes to pay off the debt. Consolidation allows you
to pay off credit cards in finite terms with a clear end date in sight. Who this
benefits most: Those with multiple sources of high-interest debt. Takeaway:
Using a personal loan to pay off high-interest debt, like credit card debt, allows
you to consolidate multiple payments into a single payment with a lower interest
rate.
2. Alternative to payday loan If you need money for an emergency, using a
personal loan instead of a payday loan may save you hundreds in interest charges.
According to the Federal Reserve Bank of St. Louis, the average APR for a
payday loan is 391 percent, while the maximum interest rate on a personal loan
is typically 36 percent. Payday loans have short repayment terms, usually
between two and four weeks. This quick turnaround time often makes it difficult
for borrowers to repay the loan by the due date. Borrowers are usually forced to
renew the loan instead, causing the accrued interest to be added to the principal.
This increases the total interest owed. Personal loans have longer term lengths
and will generally cost the borrower much less in total interest. Who this benefits
most: Borrowers with less-than-stellar credit. Takeaway: Personal loans are
cheaper and safer than payday loans.
3. Home remodeling Homeowners can use a personal loan to upgrade their home
or complete necessary repairs, like fixing the plumbing or redoing the electrical
wiring. A personal loan is a good fit for people who don’t have equity in their
home or don’t want to get a home equity line of credit or home equity loan. Unlike
home equity products, personal loans often don’t require you to use your home
as collateral. In that way, they are less risky. Who this benefits most: Those
looking to finance a small to mid-sized home improvement project or upgrade.
Takeaway: A personal loan can help you fund a home improvement project if you
don’t have equity in your home and don’t want to borrow a secured loan.
4. Moving costs According to Moving.com, the average cost of a local move is
$1,250, while a longdistance move costs $4,890. If you don’t have that kind of
cash on hand, you may need to take out a personal loan to pay for moving
expenses. Personal loan funds can help you move your household belongings
from one place to another, purchase new furniture for your new residence,
transport your vehicle across the country and cover any additional expenses.
Using a personal loan for moving costs can also help you stay afloat if you’re
moving somewhere without a job. This way you can avoid raiding your savings
or emergency fund. Who this benefits most: Those embarking on a long-distance
move and anticipating thousands of dollars in expenses. Takeaway: If you can’t
immediately afford all of the expenses associated with a longdistance move, a
personal loan can help you cover those costs.
5. Emergency expenses If you have a sudden emergency, like paying for a loved
one’s funeral, using a personal loan could be a low-cost option. The median cost
of a funeral is $7,640, which can be difficult for many families to afford. Surprise
medical bills are another common reason to take out a personal loan, especially
if your doctor requires payment in full. Common medical treatments that may
require the use of a personal loan include dental work, cosmetic surgery, fertility
treatments and other procedures that can cost $5,000 or more. Ancillary expenses
like medical travel, parking, medications, service animals and aftercare also can
be effectively financed by a personal loan. Who this benefits most: Those in need
of unexpected or emergency funds. Takeaway: Because they can be disbursed so
quickly, personal loans are a good way to cover an emergency or unexpected
expense.
6. Appliance purchases Household disasters can strike unexpectedly. If you
suddenly need to buy a new washer and dryer but don’t have the funds on hand,
a personal loan can provide relief. Other large purchases, such as an entertainment
center or gaming computers, can also end up costing more than what you have in
your checking or savings account. Personal loans allow you to purchase major
household appliances and electronics immediately, rather than having to wait
months to save up for them. Though you’ll have to pay interest and potentially
upfront fees, a personal loan can save you time and money in the long run, since
you’ll be able to avoid using laundromats and other short-term but expensive
alternatives. Who this benefits most: Those looking to make a bigger household
purchase now to save time and money in the future. Takeaway: A personal loan
can help you get new appliances as soon as you need them.
7. Vehicle financing A personal loan is one way to cover the cost of a car, boat,
RV or even private jet. It’s also one way to pay for a vehicle if you’re not buying
it from the company directly. For example, if you’re buying a used car from
another consumer, a personal loan will allow you to purchase the car without
emptying your savings account. Who this benefits most: People looking to
purchase a new vehicle. Takeaway: Using a personal loan is better than depleting
your savings or emergency funds when paying for larger expenses.
8. Wedding expenses According to The Knot, the average cost of a wedding in
2019 was $28,000. For couples who don’t have that kind of cash, a personal loan
can allow them to cover the costs now and repay them later. A wedding loan can
be used for big-ticket items like the venue and bride’s dress, as well as smaller
expenses like flowers, photography, the cake and a wedding coordinator. You can
also consider paying for the engagement ring with a personal loan. Depending on
the kind of ring you’re getting, engagement rings can easily cost several months’
worth of your salary. If you don’t want to deplete your savings account, consider
a personal loan to help make your engagement and wedding exactly the way you
always dreamed it to be. Who this benefits most: Those looking to finance their
wedding expenses. Takeaway: A personal loan can help you finance all of your
wedding expenses upfront, which can help you avoid dipping into your savings
or emergency fund.
9. Vacation costs Your average vacation might not cost enough to necessitate
taking out a personal loan, but what about a honeymoon or a luxury cruise?
Whether you’ve just graduated and want to go on a trip or you’re celebrating an
anniversary, personal loans can help you finance your dream vacation. Who this
benefits most: Those paying for a lavish or larger vacation. Takeaway: If you’re
comfortable paying off your vacation for a number of years, a personal loan can
help you get to your dream destination. Hypothesis of the Study: The hypothesis
says that the customer will give payment in given time. When company launches
a new marketing campaign it will result in increase in sale. Research
Methodology: 1) Primary Banking: is defined as the business activity of accepting
and safeguarding money owned by other individuals and entities, and then
lending out this money in order to conduct economic activities such as making
profit or simply covering operating expenses. A bank is a financial institution
licensed to receive deposits and make loans. Two of the most common types of
banks are commercial/retail and investment banks. Depending on type, a bank
may also provide various financial services ranging from providing safe deposit
boxes and currency exchange to retirement and wealth management. In the
United States of America banks are regulated by the U.S. Federal Reserve Bank
which is one of the world's major central banks. Above all, central banks are
responsible for currency stability. They control inflation, dictate monetary
policies, and oversee money demand and supply in the market. Commercial or
retail banks offer various services including, but not limited to, managing money
deposits and withdrawals, providing basic checking and saving accounts,
certificates of deposit, issuing debit and credit cards to qualified customers,
supplying short-and longterm loans such as car loans, home mortgages or equity
line of credits. Investment banks gear their services toward corporate clients.
They provide services such as merger and acquisition activity and underwriting
among other investment services. in 2017, the Federal Deposit Insurance
Corporation (FDIC) conducted a U.S national survey to estimate the number of
unbanked and underbanked American households. Survey executive summary
revealed that approximately 8.4 million U.S. household or 20.5 million
individuals were unbanked, which means no one in that household had a saving
or a checking account. Survey also indicated that approximately 24.2 million U.S.
households or 64.3 million individuals were underbanked, which means the
household had an account at an insured institution but also obtained financial
products or services outside of the banking system. But why is this important?
Because those who are unbanked or underbanked are hindering their financial
lives from enjoying services that lead to financial well-being. Many must resort
to services outside the banking system to cash checks or borrow loans and incur
higher transaction fees and interest unnecessarily.
Here are some of the reasons why banking tops the list of pillars required in
financial literacy. • Safeguard your cash
• Manage your finances – record keeping and budgeting
• Receive your paycheck quickly using direct deposit
• Facilitate financial transactions
• Insure your liquid assets
• Use debit and credit card services
• Earn interest
• Borrow loans
• Invest your money
• Establish a credit history to generate a FICO credit score instrumental in
borrowing funds and building wealth Non-Banking: A non-bank financial
institution (NBFI) is a financial institution that does not have a full banking
license and cannot accept deposits from the public. However, NBFIs do facilitate
alternative financial services, such as investment (both collective and individual),
risk pooling, financial consulting, brokering, money transmission, and check
cashing. NBFIs are a source of consumer credit (along with licensed banks).
Examples of nonbank financial institutions include insurance firms, venture
capitalists, currency exchanges, some microloan organizations, and pawn shops.
These non-bank financial institutions provide services that are not necessarily
suited to banks, serve as competition to banks, and specialize in sectors or groups.
Risk pooling institutions Insurance companies underwrite economic risks
associated with death, illness, damage to or loss of property, and other risk of
loss. They provide a contingent promise of economic protection in the case of
loss. There are two main types of insurance companies: life insurance and general
insurance. General insurance tends to be short-term, while life insurance is a
longer contract, ending at the death of the insured. Both types of insurance, life
and property, are available to all sectors of the community. Because of the nature
of the insurance industry (companies must access a plethora of information to
assess the risk in each individual case), insurance companies enjoy a high level
of information efficiency. Life insurance companies insure against economic loss
of the insured’s premature death. The insured will pay a fixed sum as an insurance
premium every term. Because the probability of death increases with age while
premiums remain constant, the insured overpays in the earlier stages and
underpays in the later years. The overpayment in the early years of the agreement
is the cash value of the insurance policy. General insurance is further divided into
two categories: market and social insurance. Social insurance is against the risk
of loss of income due to sudden unemployment, disability, illness, and natural
disasters. Because of the unpredictability of these risks, the ease at which the
insured can hide pertinent information from the insurer, and the presence of moral
hazard, private insurance companies frequently do not provide social insurance,
a gap in the insurance industry which government usually fills. Social insurance
is more prevalent in industrialized Western societies where family networks and
other organic social support groups are not as prevalent. Market insurance is
privatized insurance for damage or loss of property. General insurance companies
take a single premium payment. In return, the companies will make a specified
payment contingent on the event that it is being insured against. Examples include
theft, fire, damage, natural disaster, etc. Contractual savings institutions
Contractual savings institutions (also called institutional investors) provide the
opportunity for individuals to invest in collective investment vehicles in a
fiduciary rather than a principle role. Collective investment vehicles invest the
pooled resources of the individuals and firms into numerous equity, debt, and
derivatives promises. The individual, however, holds equity in the CIV itself
rather what the CIV invests in specifically. The two most popular examples of
contractual savings institutions are mutual funds and private pension plans. The
two main types of mutual funds are open-end and closed-end funds. Open-end
funds generate new investments by allowing the public buy new shares at any
time. Shareholders can liquidate their shares by selling them back to the open-
end fund at the net asset value. Closed-end funds issue a fixed number of shares
in an IPO. The shareholders capitalize on the value of their assets by selling their
shares in a stock exchange. Mutual funds can be delineated along the nature of
their investments. For example, some funds make high-risk, high return
investments, while others focus on tax-exempt securities. Still others specialize
in speculative trading (i.e. hedge funds), a specific sector, or cross-border
investments. Pension funds are mutual funds that limit the investor’s ability to
access their investment until after a certain date. In return, pension funds are
granted large tax breaks in order to incentivize the working public to set aside a
percentage of their current income for a later date when they are no longer
amongst the labor force (retirement income). Other nonbank financial institutions
Market makers are broker-dealer institutions that quote both a buy and sell price
for an asset held in inventory. Such assets include equities, government and
corporate debt, derivatives, and foreign currencies. Once an order is received, the
market maker immediately sells from its inventory or makes a purchase to offset
the loss in inventory. The difference in the buying and selling quotes, or the bid-
offer spread, is how the market-maker makes profit. Market makers improve the
liquidity of any asset in their inventory. Specialized sectorial financiers provide
a limited range of financial services to a targeted sector. For example, leasing
companies provide financing for equipment, while real estate financiers channel
capital to prospective homeowners. Leasing companies generally have two
unique advantages over other specialized sectorial financiers. They are somewhat
insulated against the risk of default because they own the leased equipment as
part of their collateral agreement. Additionally, leasing companies enjoy the
preferential tax treatment on equipment investment. Other financial service
providers include brokers (both securities and mortgage), management
consultants, and financial advisors. They operate on a fee-for-service basis. For
the most part, financial service providers improve informational efficiency for the
investor. However, in the case of brokers, they do offer a transactions service by
which an investor can liquidate existing assets. Role in financial system NBFIs
supplement banks in providing financial services to individuals and firms. They
can provide competition for banks in the provision of these services. While banks
may offer a set of financial services as a package deal, NBFIs unbundle these
services, tailoring their services to particular groups. Additionally, individual
NBFIs may specialize in a particular sector, gaining an informational advantage.
By this unbundling, targeting, and specializing, NBFIs promote competition
within the financial services industry. Having a multi-faceted financial system,
which includes non-bank financial institutions, can protect economies from
financial shocks and recover from those shocks. NBFIs provide multiple
alternatives to transform an economy's savings into capital investment, which act
as backup facilities should the primary form of intermediation fail. However, in
countries that lack effective regulations, non-bank financial institutions can
exacerbate the fragility of the financial system. While not all NBFIs are lightly
regulated, the NBFIs that comprise the shadow banking system are. In the run up
to the recent global financial crisis, institutions such as hedge funds and structured
investment vehicles, were largely overlooked by regulators, who focused NBFI
supervision on pension funds and insurance companies. If a large share of the
financial system is in NBFIs that operate largely unsupervised by government
regulators and anybody else, it can put the stability of the entire system at risk.
Weaknesses in NBFI regulation can fuel a credit bubble and asset overpricing,
followed by asset price collapse and loan defaults. Bank/non-bank integration and
supervisory integration The banking, securities, and insurance markets have
become increasingly integrated, with linkages across the markets rapidly
increasing. In response, one of the most notable developments in financial sector
regulation in the past 20 years has been a shift from the traditional sector-by-
sector approach to supervision (with separate supervisors for banks, securities
markets, and insurance companies) toward a greater cross-sector integration of
financial supervision (Čihák and Podpiera 2008). This had an important impact
on the practice of supervision and regulation around the globe. Three broad
models are being used around the world: a three-pillar or “sectoral” model
(banking, insurance, and securities); a two-pillar or “twin peak” model
(prudential and business conduct); and an integrated model (all types of
supervision under one roof). One of the arguably most remarkable developments
of the past 10 years, confirmed by the World Bank’s Bank Regulation and
Supervision Survey, has been a trend from the three-pillar model toward either
the two-pillar model or the integrated model (with the twin peak model gaining
traction in the early 2000s). In a recent study, Melecky and Podpiera (2012)
examined the drivers of supervisory structures for prudential and business
conduct supervision over the past decade in 98 countries, finding among other
things that countries advancing to a higher stage of economic development tend
to integrate their supervisory structures, small open economies tend to opt for
more integrated supervisory structures, financial deepening makes countries
integrate supervision progressively more, and the lobbying power of the
concentrated and highly profitable banking sector acts as a negative force against
business conduct integration. (The related data on the structure of supervision are
available on this website) How do these various institutional structures compare
in terms of crisis frequency and the limiting of the crisis impact? Cross-country
regressions using data for a wide set of developing and developed economies
provide some evidence in favor of the twin peak model and against the sectoral
model (ˇCihák and Podpiera 2008). Indeed, during the global financial crisis,
some of the twin peak jurisdictions (particularly Australia and Canada) have been
relatively unaffected, while the United States, a jurisdiction with a fractionalized
sectoral approach to supervision, has been at the crisis epicenter. However, the
crisis experience is far from black and white, with the Netherlands, one of the
examples of the twin peaks model, being involved in the Fortis failure, one of the
major European bank failures. It is still early to make a firm overall conclusion,
and isolating the effects of supervisory architecture from other effects is
notoriously hard. 2) Secondary Lending (also known as "financing") occurs when
someone allows another person to borrow something. Money, property, or
another asset is given by the lender to the borrower, with the expectation that the
borrower will either return the asset or repay the lender. In other words, the lender
gives a loan, which creates a debt that the borrower must settle. Review examples
of the types of lending, how businesses are treated differently than individuals by
lenders, and what to consider before seeking a business loan. What Is Lending?
Simply put, lending allows someone else to borrow something. In terms of
business and finance, lending often occurs in the context of taking out a loan. A
lender gives a loan to an entity, which is then expected to repay their debt.
Lending can also involve property or another asset, which is eventually returned
or paid for in its entirety. How Lending Works Lending occurs whenever a lender
gives something to a borrower on credit. It's a broad term that encapsulates many
different kinds of transactions. Common lenders include financial institutions,
such as banks and credit unions that build a business model around lending
money. The borrower pays a price for taking out the loan in the form of interest.
If the lender feels there's a higher risk of not being paid back by a borrower, like
with a new startup business, they will charge that borrower a higher interest rate.
Lower-risk borrowers pay lower interest rates. Lenders do not participate in your
business in the same way as shareholders, owners, or partners. In other words, a
lender has no ownership in your business. Types of Lending Lending can be
broadly broken down into two categories: personal (or "consumer") lending and
business lending. Some types of loans are available in both personal and business
lending, though they are handled differently. For example, an individual can get
a personal credit card to buy groceries and other basics, and a business can get a
business credit card to buy equipment and other business expenses. Differences
between Consumer Lending and Business Lending From a borrower's
perspective, there are some legal protections with personal loans that aren't
extended to borrowers with business loans. The Equal Credit Opportunity Act
and the Fair Housing Act protects U.S. borrowers from discrimination. The
general protections from discrimination extend to all forms of credit, whether it's
a personal loan or a business loan. However, the specific regulations of the Equal
Credit Opportunity Act become more relaxed for business loans—the bigger the
business entity, the fewer restrictions on their loans.The restrictions that get
relaxed have less to do with discrimination and more to do with what kind of
notifications the lender must give the borrower, and how long the lender must
retain certain records on the borrower. The Fair Housing Act, on the other hand,
doesn't explicitly distinguish between consumer loans and business loans.
Types of Loans Business lending can help all different kinds of businesses. Some
common uses for business loans include:
• Loans to even out cash flow ("working capital loans")
• Commercial and industrial loans (which require collateral) for short-term needs
• Asset financing for equipment and machinery or business vehicles
• Mortgages
• Credit card financing
• Vendor financing (through trade credit) from suppliers Other types of loans are
for special purposes, like loans to finance disaster recovery or loans for business
startup. As you shop around for a business loan, consider these factors:
• The amount of money you want to borrow, which will influence the type of
lender that you need
• Any business assets you can pledge as collateral for the loan, which will help
improve the terms of the loan
• What you want to do with the loan, which could affect the type of loan you
seek (such as a mortgage for land or buildings)
• Whether you need a startup loan to start a business or an expansion loan to help
grow an existing business
• How long you need the money, which will affect the type of loan and lender
that best fits your needs Types of Lenders The most common lenders are
banks,credit unions, and other traditional financial institutions. However, there
are many other types of lenders, including:
• Peer-to-peer (P2P) lenders
• Crowd funding contributors • Family and friends
• Yourself P2P lenders can operate through online organizations, like Lending
Club. These sites connect lenders with borrowers. P2P interest rates may be lower
than borrowers would find with a traditional bank, but higher than a lender could
receive from a certificate of deposit. Crowd funding sites like Kickstarter are
similar to P2P lending sites, in that they digitally connect the people who need
money with the people who have money. Unlike P2P lending, the people who
contribute to crowd funding efforts may not receive their money back dollarfor-
dollar. Instead, they may receive perks from the person or project being funded.
For example, someone may donate to a movie project's Kickstarter, and in return,
they'll receive a copy of the movie once it's completed. Family and friends can
become lenders, and these transactions are sometimes called "private party
loans." It's important to consider the impact a loan might have on your personal
relationship with these people. A loan agreement may help ensure everyone is on
the same page. If you have the means, you can loan your own money to your
business, as an alternative to investing in it. If you choose to loan yourself money,
write a contract that specifically spells out your role as a lender, the payment
schedule, and the consequences for defaulting on payments.
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Scope and Purpose of the Study
Some form of credit investigation is essential to any loan transaction, whether
large or small, personal or business. When making an investigation, a lender does
not attempt to predict the applicant's repayment record precisely, hut he does
undertake to distinguish the applicants who are likely to repay from those who
are not. In this attempt, he obtains pertinent information on such matters as
borrower's character and reputation, borrower's financial condition, intended use
of the funds, and type and value of any collateral that may be offered as security.
From an analysis of this information, the lender evaluates the proposed
transaction; in doing this, he relies on his experience and intuition, and in addition
he may weigh the available facts according to some mechanical routine. In the
present study, we are presenting a statistical approach to the analysis of certain
pertinent risk elements in consumer instalment financing. The purpose of the
study is twofold: first, to analyze the significance of some credit factors generally
considered important by credit men, to discern which of these factors have been
associated in the past with bad loans, and to determine whether or not this
information can be used to predict the course of future transactions; second, to
experiment with the use of statistical methods that may be applied to the problem
of credit risk selection. Statistical methods, particularly small sample techniques.
Have not heretofore been used to any great extent in credit analysis, and their
value in such analysis is not well known. This is regrettable, for the orderly
recording of experience, which 9 low RISK IN INSTALMENT FINANCING is
the esseiace of the statistical niched, and should tilt considerably in solving risk
problems. The statistical method evolved in this study has been designed to
permit analysis of loan experience without undue expenditure of labor, and its
application is simple enougI, we believe, to be of practical value to credit
executes' in solving some of their own particular problems. But the method has
its shortcomings as well as its advantages. Al. though it may be effectively used
for testing various general hypotheses and for discovering unsuspected relations
be. Tween credit information and risk experience, it is an inferior method for
determining what type of credit policy will pro. Due lowest costs and highest
profits. Conclusion: When customers delay the fulfilment of instalments, a proper
amount of chances are given to fulfil their instalments with a reduced interest rate.

Sign of Candidate Sign of Research Supervisor

Krishna Patil Mr. Dharmadhikari