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Offering a fake loan approval letter is a common tactic scammers use to entrap innocent people. Using a fake approval letter, lenders extend a lucrative and enticing loan offer, which can lead to huge financial loss if you accept it. Thankfully, identifying such attempts by fraudsters is not difficult if you know what signs to look out for. 

Read on to learn the signs of a fake loan approval letter. 

Missing Details in the Letter

An authentic pre-approval letter generally contains the following details: 

• Name of the lender
• Lender’s contact information
• Date of issuance
• Name of the borrower
• Pre-approved loan amount
• Loan tenure 
• Equated monthly instalment (EMI amount) 

If you find any of this information missing, then you may consider it as a scam attempt. However, if you compare an authentic and fake loan approval letter template, you’ll see that there isn’t a lot of difference, which makes you more vulnerable. So, you need to be very cautious before opening or accepting any offer. 

Too Good to Be True Offers

Scammers may present a very attractive interest rate or large loan sum to solicit more clicks on the fake loan approval letter. They may also propose loans at lower than general interest rates to make you feel special. 

However, banks decide interest rates based on the Reserve Bank of India guidelines. Banks do not have permission to provide loans lower than decided interest rates. So, make sure you don’t succumb to such offers and accept the letter or initiate further inquiry. 

Upfront Fee 

When applying for any loan, lenders charge a processing fee to cover the cost of administrative expenses. This amount is generally a percentage of the loan amount, but some banks may also charge a fixed nominal amount, which is disclosed on their website. 

While lenders deduct this fee from the loan amount only before disbursal and not before, fraudsters may request it before disbursement. After accepting this payment, they may not disburse the loan amount, leading to a loss. So, don’t pay any upfront fee unless you are sure about the lender.

Discrepancy in Lender Information

Another indication of a fake loan approval letter is errors in the lender’s details. They include: 

• Mismatched company logo
• Incorrect office address
• Incorrect or invalid contact number
• Missing or unofficial email address
• Unreliable authorised signature 

You can cross-check the information and contact the lender immediately to verify the legitimacy of the letter. 

Also Read: Fake Loan App and How to Identify Them?

Errors in Details

Financial institutions offer pre-approved loan offers based on the information that they have, based on previous enquiries or communication. So, the chances of them having incorrect details are slim. If you find any error in the details, avoid further communication. 

In addition to the above signs of a fake approval letter, here are some more warning signs of online loan scams that you should remember:

• Guaranteed Approval Without a Credit Check: No financial institutions can guarantee 100% approval without assessing your credit score and other factors
• Lack of Physical Address: Not mentioning any physical address makes it difficult to catch such fraudsters, so this must be the first thing you should look for when applying for loan online
• Creating a False Sense of Urgency: Fake loans usually mention a limited-period offer; this provokes you into clicking without rationalising the offer 
• Unsecured Website: Always look for ‘https’ and a padlock sign in the lending platform URL, as it indicates that the page is secure and your data is safe 
• Out-of-the-blue Communication: Normally, financial institutions only contact you if you have already applied or enquired about a loan offer 

Keeping these points in mind will help you detect a scammer instantly. If you want to apply with a secure lending platform, look no further than Fibe. Our Personal Loan App has a PCI DSS App-based journey, which allows you to get quick and secure credit. 

Further, the ISO/IEC 27001 certification ensures that your data is not at risk. With Fibe, you can also enjoy pocket-friendly interest rates and quick disbursal on an Instant Personal Loan of up to ₹5 lakhs. So, download the app or visit our website to get started! 

FAQs on Fake Loan Approval Letter

How do I report a fake loan?

To report online fraud to the cybercrime department, you can opt for the following option: 

• Report online at https://cybercrime.gov.in/
• Call the cybercrime hotline number 1930 
• Call the area-specific number mentioned under ‘Contact Us’ on the official website

How do you deal with fake loan harassment?

As soon as fake loan harassment starts, you must report the incident to the police. 

How to identify a fake letter for loan approval?

To identify a fake letter for loan approval, check out the following points. 

• Spelling errors
• Official website address
• The reference number on the letter
• Stamp and signature 
• Offer details

When you take a loan, three things decide how much you’ll repay in total — the loan principal amount, the interest rate, and how long you take to repay it. That’s why it’s super important to understand how these factors affect your loan and monthly budget. 

By calculating the interest in advance, you can see if the loan fits your needs and even tries to negotiate better terms. This can help you save a good amount over time! 

Let’s break down how to calculate the principal and interest with simple examples — plus some smart tips to lower your total interest. 

What is Principal Amount and Interest in Loan?  

A principal is the sum of money you borrow from your lender. Similarly, interest is the cost of borrowing for extending their services and is a percentage of the principal charged by the lenders. These numbers form the core factors for calculating your interest and EMI amount.  

When you apply for a loan, the lender offers you an interest amount based on your eligibility, which dictates your borrowing costs. You can calculate your monthly loan instalment with the formula: 

EMI = [P X R X (1+R) ^N]/[(1+R) ^N-1] 

Where P = Principal, R = Annual interest rate, N = Total tenure 

While manual calculations can get tough, using an online personal loan EMI calculator is ideal to get accurate results. Note that each EMI payment goes toward clearing the loan principal and interest charged.  

The Formula for Principal and Interest 

The interest is computed based on your outstanding loan amount. The Annual Percentage Rate (APR) implies the annual cost of your loan. It includes various other costs, such as: 

• Processing charges 
• Administrative fees 
• Insurance premiums, etc 

Therefore, you can calculate the interest paid for the first month with the formula: 

Interest Repayment = Principal Loan Amount X Annual Percentage Rate /12 

After calculating the interest, you must subtract this sum from the EMI to calculate the principal amount paid. Thus, the principal amount formula is: 

Principal Repayment = EMI – Interest Repayment 

This Principal Repayment is then subtracted from the opening loan principal. It is done to calculate the outstanding principal: 

Outstanding Principal = Opening Loan Amount – Principal Repayment 

This way, you can calculate next month’s interest repayment amount using this outstanding principal. Following steps until the end of tenure will create an amortisation schedule.  

Interest Amount Formula 

The interest amount can be calculated with the simple formula: 

SI = (P X R X T)/100 

In this formula, P stands for principal amount, R stands for the rate of interest, and T stands for time or tenure.  

Principal Amount Formula 

To find the principal amount within a simple interest investment or loan, the applicable formula is: 

A= P (1+rt) 

In this formula, ‘A’ is the current value known, ‘r’ will be the decimal value of interest rate per time, and ‘t’ will be the time period number.  

Principal and Interest Calculations 

Here’s an example to better understand the process of calculating the principal amount and interest. Say you take a personal loan of ₹25,000 and your interest rate is 16% p.a. for a tenure of 12 months. Then: 

P = ₹25,000, R = 16%/ 12 or 1.3% per month, N = 12 months 

So, EMI = [P X R X (1+R) ^N]/[(1+R) ^N-1] = ₹2,268. EMI = ₹2,268 

Now, the principal amount will attract interest as such: 

• Interest Repayment = Principal Loan Amount X Annual Percentage Rate /12 
• Interest Repayment = ₹333.33 

To calculate the principal paid in the first month: 

• Principal Repayment = EMI – Interest Repayment 
• Principal Repayment = ₹2,268 – ₹333.33 
• Principal Repayment = ₹1,934.67 

To calculate the outstanding balance: 

• Outstanding Principal = Opening Loan Amount – Principal Repayment 
• Outstanding Principal = ₹25,000 – ₹1934.67 
• Outstanding Principal = ₹23,065.33 

Using this outstanding balance, we calculate the interest for the next month and so on.  

How to Reduce Your Interest Burden? 

Since a high interest affects your total repayable amount and your EMI, you must opt for the lowest interest option to save more. Here are a few steps you can follow for doing so: 

• Improve your credit score before applying 
• Choose a longer tenure option to lower interest rate 
• Negotiate with your lender for better loan terms 
• Lower your credit utilisation ratio 
• Opt for prepayment and foreclosure options based on the amortisation schedule 

Note that these terms depend highly on your eligibility and credit behaviour. A high credit score and good repayment history result in lenders offering loans at an attractive interest rate. 

With the Fibe Instant Cash Loan, you can easily get an amount of ₹5 lakhs at a nominal interest rate with quick disbursal. You can also choose from a flexible tenure range of up to 36 months. Download the Personal Loan App on the Google Play Store or App Store or visit our website to apply now!  

FAQs on Principal and Interest Calculation 

How do you find the principal amount?  

The principal amount is the amount of loan applied by an individual or a business entity. You can find it in the loan agreement provided by the lender.  

What is the principal formula in Excel?  

The formula for calculating principal in Excel is: 

=PPMT (rate, period, number_of_periods, present_value) 

In the formula, 

• Rate is the interest rate 
• Period is the total tenure 
• Number_of_periods is the number of months in a year 
• Present_value is monthly EMIs 

What is the principal amount on a loan?  

The principal amount on the loan is the sanctioned value credited to your bank account by the lender. So, if you apply for a ₹5 lakhs loan, this amount is your principal amount.  

Can interest be more than the principal amount?  

No. According to the India Code States Act, a lender cannot charge an interest sum that is greater than the principal or loan amount.

Are you wondering how to close a personal loan early and save money on interest? The preclosure of a personal loan (also called foreclosure of personal loan) lets you repay your entire outstanding loan amount before the end of the tenure. This not only reduces your interest outgo but also helps you become debt-free sooner. 

Before you go ahead, it’s important to calculate whether the savings outweigh the charges and check if your lender allows pre-closure after the mandatory lock-in period.  

This guide covers everything you need to know, the meaning, benefits, charges, documents required and credit score impact, so you can make the right choice. 

What is Personal Loan Pre-closure? 

Personal loan pre-closure means making a lump sum repayment of the outstanding principal and interest before the scheduled tenure ends. Lenders call this a foreclosure of personal loan because your account is closed before its original term. 

You can usually do this only after the lock-in period, which is typically 6–12 months. If you don’t want to close personal loan completely, you can also opt for partial prepayment, where you pay a portion of your loan early to reduce EMIs or tenure. 

Is it Good to Close a Personal Loan Early? 

Yes, but here are the factors you should check before going for preclosure of personal loan: 

• Save on Interest: The earlier you repay, the more you save on total interest. 

• Foreclosure Charges: Lenders may charge 2–5% of the outstanding principal as fees. 

• Financial Readiness: Ensure you have enough funds and won’t affect your other goals. 

• Lock-in Period: Confirm you have completed the required lock-in months. 

• Credit Score Impact: Preclosure has a small temporary effect but improves your score over time. 

• Consider Partial Prepayment: If funds are tight, reduce EMIs through partial prepayment rather than full closure. 

Partial Prepayment vs. Full Pre-closure 

Aspect	Partial Prepayment	Full Pre-closure
Payment Amount	Pay part of your principal	Pay entire principal + interest due
Effect on EMIs	EMI/tenure reduces gradually	Loan closed completely
Charges	Usually lower or NIL	Usually 2–5% of principal
Savings	Moderate savings on interest	Maximum savings on interest

Additional Documents Required for Pre-closure 

To close personal loan successfully, lenders may require the following documents: 

• Loan account statement with outstanding balance 

• PAN card / Aadhaar card (for verification) 

• Cheque/Demand Draft/Netbanking proof of payment 

• Written request for pre-closure 

• Loan agreement copy (if needed) 

Important: After payment, collect a No Objection Certificate (NOC) and closure confirmation to update your credit report. 

Impact of Pre-closure on Credit Score 

Foreclosure of personal loan does not harm your credit score in the long run. Initially, your score may dip slightly due to change in credit mix, but over time, being debt-free improves your credit health and CIBIL score. 

Things to Consider Before and After Pre-closure 

• Verify lender’s pre-closure policy and charges. 

• Maintain enough funds before initiating the process. 

• Avoid liquidating critical investments unless savings are significant. 

• Choose partial prepayment if full payment stresses finances. 

• Update your credit report after closure for accuracy. 

Close Your Loan with Fibe Easily 

With Fibe Instant Cash Loan, you get up to ₹5 Lakhs at affordable interest rates and the option to prepay or foreclose easily. This allows you to repay on your terms and save on interest. 

Download the Fibe App or visit our website today to apply and manage your loan with complete flexibility. 

FAQs on Pre-Closing a Personal Loan 

1. Does early closure of the loan affect CIBIL score? 

 No major negative impact. Your score usually improves over time once the loan is marked ‘closed’. 

2. Can I pay all EMIs at once? 

 Yes, this is called foreclosure of personal loan. Check if any pre-closure charges apply. 

3. Can I close a personal loan in 1 year? 

 Yes, if your lender allows preclosure after the lock-in period (generally after 12 EMIs). 

When applying for a loan, one common question borrowers have is: ‘Can I still get approval if my credit score is low or my income is insufficient?’ This is where a loan guarantor plays an important role. A guarantor increases your chances of getting loan approval because lenders feel more secure about repayment.  

If your credit history is weak or you’re just starting to build one, involving a guarantor reduces the risk for the lender. As a result, you can access funds more easily, even in the form of an instant loan with guarantor support. 

Loan Guarantor Meaning  

So, what is guarantor in loan? In simple words, a loan guarantor meaning refers to a person who agrees to take responsibility for repaying a borrower’s loan if the borrower fails to do so. This individual acts as a financial safety net for lenders. 

Personal Loan Guarantor Requirements 

A guarantor is generally required to meet specific eligibility conditions such as: 

• A high credit score 

• Stable source of income and employment 

• Strong repayment history 

• Low credit utilisation ratio 

Usually, a guarantor must be 21 years or above and can be a family member, spouse, sibling, or even a close family friend. In any case, the guarantor must have a clean credit record and should be willing to accept this responsibility. 

When is a Loan Guarantor Required? 

Here are a few cases where lenders may ask for a personal loan guarantor: 

• When the applicant has no credit history (first-time borrower) 

• When the borrower has a low credit score 

• When the applicant has recently started a new job 

• When the borrower’s income is not sufficient for the required loan amount 

In such cases, a bank loan guarantor helps bridge the gap and assures the lender of repayment. 

What is the Role of a Guarantor in Loan? 

Here are the main responsibilities: 

• Signing a legally binding agreement with the lender ensuring repayment obligations. 

• Taking over repayment in case the primary borrower defaults. 

• Bearing responsibility for the loan principal, interest, and penalties. 

Importance of a Loan Guarantor 

The presence of a guarantor significantly influences loan approval and repayment security. Here’s why guarantors are important: 

• They provide financial security for lenders. 

• They improve the borrower’s eligibility for a higher loan amount. 

• They help borrowers access an instant loan with guarantor even if their profile has shortcomings. 

• They can help first-time borrowers build creditworthiness. 

Pros and Cons of a Guarantor in Loan 

Pros	Cons
Helps the borrower get a loan even if they don’t meet eligibility.	Guarantor becomes responsible for repayment if the borrower defaults.
Improves chances of securing funds on better terms (lower interest, etc.)	Guarantor’s credit score may be negatively impacted if repayment is delayed.
Enables the borrower to access a higher loan amount.	Guarantor may face difficulty in availing another loan during the tenure.
Offers borrower a chance to improve credit score.	Once given, a guarantee cannot be withdrawn or cancelled.

Types of Guarantors 

There are generally two types of guarantors: 

1. Financial Guarantor – A person responsible for repaying the borrower’s loan if they default. 

 Example: A father acting as a guarantor for his son’s personal loan. 

2. Non-Financial Guarantor – A person who vouches for the borrower’s credibility, residence, or employment. 

 Example: An employer confirming the employee’s stability and background. 

Guarantor vs Co-Signer 

Many people confuse a guarantor with a co-signer, but they’re not the same: 

• Guarantor: Becomes liable only if the borrower defaults. 

• Co-signer: Shares equal responsibility from the beginning and is considered as a joint borrower. 

Example: If you take a personal loan guarantor for approval, they step in only if you fail. But if you add a co-signer, the loan reflects on both credit reports from the start. 

Collateral and Guarantors 

Collateral is an asset pledged by the borrower to secure a loan. While not always linked to guarantors, lenders may ask for either collateral or a guarantor when risk is high. In unsecured loans (like most personal loans), having a guarantor works as a substitute for collateral. 

Key Tips for a Loan Guarantor 

Here are some essential tips that a loan guarantor must keep in mind: 

• Read the loan agreement carefully, including all the clauses, tenure and potential liabilities.  

• Monitor the loan repayment regularly to check if the primary borrower is making timely repayment.  

• Take the help of a co-guarantor to reduce your risk and potential liability.  

• Make sure that the primary borrower for whom you’re serving as a guarantor is trustworthy.  

Consider these points before becoming a guarantor: 

• The reason for which the primary borrower is requesting you to be a guarantor.  

• The reason why they need the loan.  

• Whether you can repay the loan if the primary borrower defaults.  

• If the primary borrower is trustworthy and a responsible individual.  

• If you’re comfortable with repaying the loan on the borrower’s behalf.  

With this information, you can involve a loan guarantor in your application and get funding easily. Remember, choosing a suitable lender is important.  

Fibe is one such lender offering Online Personal Loans of up to ₹5 lakhs at affordable rates. You can repay the loan conveniently over 36 months through EMIs. Download the Personal Loan App or log in to our website to apply.  

FAQs on Loan Guarantor 

What are the risks of being a loan guarantor?  

Here are some risks: 

• The guarantor is liable to repay the due amount if the primary borrower defaults.  

• The guarantor’s credit score will have a negative impact if the primary borrower fails to repay the loan.  

• Availing of another loan at the same time for a different purpose can be difficult.  

• If an individual becomes a guarantor for a loan, they can’t cancel it.  

Can a guarantor be removed from a loan?  

No, once an individual becomes a guarantor, they can’t be removed.  

What is the RBI rule on guarantors?  

The RBI allows financial institutions to set their own guidelines in case any borrower requires a guarantor. The lender gauges the following parameters before approving any applicant as a guarantor: 

• Income 

• Creditworthiness 

• Employment status 

• Residential details 

An instalment loan is the most common type of credit that banks and NBFCs offer. Once you borrow a required sum, you need to repay the amount along with interest in affordable instalments within a specific timeline. 

You can use the borrowed amount for the following purposes:

• To pay educational expenses
• To clear hospital bills
• To finance a vehicle
• To purchase a property

Read on to know more about this financial tool and its benefits. 

Instalment Loan Meaning 

Check out some important points about this form of credit:

• The borrowed sum attracts interest, which you must also pay as the equated monthly instalment or EMI
• You can avoid paying the amount as a lump sum
• Pay the borrowed amount for a predetermined period, called a loan term, which may range from a few months to a year
• The lender will close your loan account once you repay the entire outstanding amount

Types of Instalment Loans

Instalment loans are classified into two types: 

Secured Loans

• You need to pledge your valuable assets as collateral
• In the case of default on repayment, lenders can rightfully sell or auction your pledged assets to recover the loan amount
• Examples of secured loans include gold and home loans

Unsecured Loans

• In this form of credit, there’s no need to pledge collateral
• The borrowing costs may be higher, as there is a risk of default for the lender
• Examples of unsecured loans include personal and student loans

Instalment Loan Example

Some additional examples include:

• Auto Loan: This secured instalment loan allows you to buy a new or used car by pledging the vehicle as collateral, typically for a tenure ranging between 2 and 7 years
• Buy Now, Pay Later Facility: This short-term, unsecured loan makes shopping easy by providing interest-free credit
• Payday Loan: This is a short-term, high-cost, personal loan which helps you meet emergency financial needs 
• Student Loan: This is a type of credit that allows you to finance your education and other related expenses 

Pros and Cons of Instalment Loans

Here are some benefits of these forms of credit: 

• It helps you avoid lump sum payment 
• It allows you to manage a monthly budget with a fixed instalment amount
• It enables you to build a good credit score for future loans 
• You can decide on a suitable tenure as per your repayment capacity 
• Taking an instalment loan online allows you to get instant approval 
• Allows you to cover all your major life expenses

While it is a good option, you must also consider its drawbacks, which are as follows. 

• For a secured type of loan, your asset is at risk for the chosen tenure
• Some lenders may have stringent approval criteria
• There may be additional charges involved, which can increase your borrowing costs

based on these facts, you can decide whether or not you should opt for an instalment loan. Compare interest rates and other terms before selecting a lender. One such NBFC offering affordable loan terms is Fibe. With our Instant Personal Loan, you can borrow up to ₹5 lakhs hassle-free from the convenience of your home. 

You can choose a flexible tenure of up to 36 months and get the loan amount transferred to your account within 10 minutes after approval. This way, you can manage your instalment loan payments effortlessly. Download our Personal Loan App or visit our website to get started!

FAQs on Instalment Loans

How do instalment loans work?

• Say you have applied for instalment loans online and received approval from the lender
• The amount will be credited to your bank account
• You must pay a fixed monthly instalment, including the interest and the principal amount, to the lender across a chosen timeline
• The loan account gets closed once you clear the outstanding 

What are the types of instalment loans?

• Secured loans when you pledge your collateral
• Unsecured loans when there’s no need to pledge your assets 

What is an example of an instalment loan?

All loans for which you pay EMIs across a fixed timeline are instalment loans. They include: 

• Personal loans
• Car loans
• Home loans
• Gold loans
• Education loans 
• Payday loans

Wondering, ‘Can I get a personal loan without ITR? Yes. Most lenders require self-employed applicants to submit their income tax returns to review their income and repayment capacity. However, some use alternative methods for this assessment, making loans accessible even when you don’t have your tax filing records. 

Read on to learn how to get a loan without ITR.

Tips to Get a Personal Loan Without ITR

Here are some ways to get the funds without submitting your income tax documents:

Provide Other Income Proof Documents

Since lenders require tax returns to gauge your income, you can provide other documents as income proof. These include:

• Your bank statements
• Your rental income
• Your income from investments

Search for Suitable Lenders

As mentioned, several lenders, like Fibe, offer a loan without ITR documents. They use alternate methods to assess the borrower’s income and repayment ability. This information is generally available on their websites. So, do your research and apply accordingly.

Pay Your Dues on Time

Having a solid repayment record also helps you get a loan without submitting ITR documents. It shows a stable income and good repayment behaviour, so lenders easily approve your loan. You can try the following strategies to ensure timely payments: 

• Keep reminders
• Set up autopay
• Opt for reminders and alerts from lenders 
• Check statements and due dates regularly

Get a Secured Loan

While ITR is required for a personal loan, which is unsecured, it may not be necessary when you apply for collateral-backed funding. This is because they can liquidate your assets to recover the outstanding amount if you default. Various types of collateral that you can offer include:

• Gold
• Real estate
• Investments
• Antiques

Negotiate with the Lender

You can also talk to various lenders and communicate the non-availability of your tax return documents. This will help you figure out alternate ways that can get you the required funding. 

Improve Your Creditworthiness 

Having a high credit score helps increase the chances of approval since it represents:

• Good repayment history
• Experience with credit
• Stable source of income

Lenders consider you a safe borrower this way and approve your application even if you don’t provide your ITR documents. You can maintain a good credit score by following these tips:

• Clear your credit card and loan EMIs on time
• Keep your credit utilisation ratio low
• Maintain a healthy credit mix
• Check your credit report regularly for errors
• Avoid applying for multiple loans simultaneously

Eligibility Criteria for a Personal Loan

Here are the general requirements you need to meet:

• Proof of Indian citizenship or residency
• A stable source of income
• A minimum credit score of 650
• Self-employed individuals must be between 21 and 60 years
• A minimum work experience of 2 years in the industry

Document Requirements for a Personal Loan

Here is a general overview of the paperwork you need to submit: 

• Identity Proof: Passport, Aadhaar Card, Voter ID card or Driving licence
• Address Proof: Passport, Aadhaar Card, Voter ID card or Driving licence
• Income proof: Bank statement of the last 3 months or Salary slips of the last 3 months 

With this information, you can manage your personal loan application and increase your chances of getting a loan without ITR. You can get an Instant Personal Loan from Fibe easily since we ask self-employed individuals to submit alternate documents for eligibility checks. 

At Fibe, you can get funds with a simple online application and minimal documentation at affordable interest rates. Download the Personal Loan App or log in to our website today and meet your financial needs with ease.

FAQs on Personal Loan Without ITR

Can we apply for a personal loan without ITR?

Yes, you can get funds even if you don’t have your tax returns. Here are some tips:

• Apply for a secured loan
• Offer other income proof documents
• Clear your dues on time
• Apply with a suitable lender
• Increase your credit score
• Negotiate with the lender

Can I get a loan if I don’t pay income tax?

Yes, you can get a personal loan without ITR documents. However, note that paying tax, if applicable, is mandatory and failure to do that can lead to penalties, imprisonment or both.

Which loan is tax free?

In India, you can claim tax benefits and deductions on the following types of loans:

• Personal loans 
• Education loans
• Home loans
• Car loans

RBI guidelines are in place to ensure loan recovery is handled fairly and with respect. Lenders and recovery agents are not allowed to threaten, pressure or harass you while following up on unpaid loans.

These rules also protect borrower privacy. Recovery agents cannot discuss loan details with family members, friends, neighbours or colleagues. They must carry proper identification and can contact borrowers only during permitted hours, usually between 7 AM and 7 PM. If a meeting is required, the borrower has the right to decide the place. Lenders are also required to share clear account details, explain outstanding dues and offer options such as settlement or grievance redressal wherever applicable.

To know more about this concept, read on. 

When is a Loan Categorised as NPA (Non-performing Asset)?

A non-performing asset simply means a debt, the principal and interest of which has not been paid in the last 90 days. The government has devised the following loan recovery techniques for NPAs:

• Debarred the banks from providing additional facilities to wilful defaulters
• Increased the jurisdiction of Debt Recovery Tribunals (DBTs) to help them focus on high-value cases
• Fundamentally changed the borrower and lender relationship with the Insolvency and Bankruptcy Code (IBC)
• Infusion of capital in PSBs (Public Sector Banks) to raise the coverage ratio, allowing them to make decisions on constrained accounts without affecting their profitability

Loan Recovery Process

The loan recovery process usually starts when you miss a few EMIs. The lender first contacts you to inform you about the delay and give you time to pay. If the payment is still not made, you may receive a formal notice along with options like rescheduling or settlement. If the delay continues for longer, authorised recovery agents or legal steps may be used. But all actions must follow RBI guidelines.

RBI Guidelines on Loan Recovery

The RBI has set clear rules to ensure loan recovery is handled in a fair and respectful manner for both secured and unsecured loans.

• Notice of default: If you miss repayments, the lender must first issue a formal notice. This notice clearly explains the overdue amount and the next steps before recovery begins.
• Fair practices code: Lenders must follow the Fair Practices Code at all times. This ensures transparency, clear communication and fair treatment during the recovery process.
• No harassment: Lenders and recovery agents are not allowed to use threats, pressure or abusive behaviour. Recovery must be done respectfully and without intimidation.
• Regulated recovery agents: Lenders can appoint recovery agents, but these agents must follow RBI’s Code of Conduct. They must carry valid identification and act within approved guidelines.
• Clear settlement process: Lenders should have a structured settlement or repayment resolution process. You must be informed about the available options to resolve your dues.
• Right to take action: If you feel your rights have been violated, you can raise a complaint or take legal action. RBI guidelines support borrowers in seeking redressal.

What are the RBI guidelines for loan recovery agents?

The following are some of the norms notified by the Central Bank for the loan recovery agents:

• The lenders need to publish details of all debt recovery agents on their official website
• The loan recovery agents can’t resort to any intimidation in their efforts to claim the unpaid amount of the loan from borrowers
• These agents can’t call the borrowers beyond 8 AM to 7 PM

Before applying for any form of credit, check if a lender adheres to the RBI guidelines for loan recovery. An RBI-registered bank or NBFC generally follows these norms. Hence, you can get an Instant Personal Loan of up to ₹10 lakhs on Fibe, which is an RBI-registered financial institution with an ISO 27001 certification. 

Our 100% digital process ensures quick loan disbursal within 10 minutes. Download the Fibe Personal Loan App to enjoy quick funding with a simple application process and minimal paperwork.

FAQs on the Loan Recovery Process

Can a loan recovery agent come to the home?

Yes, a debt recovery agent can visit a borrower’s home, provided that they follow these RBI guidelines for loan recovery:

• If a recovery agent wants to meet, the borrower must decide the place of meeting
• They can only contact the borrower between 7 AM and 7 PM and must respect their privacy 
• They can’t come to a borrower’s home unannounced and they must carry an authorisation letter for the meeting 

How do I stop harassment from loan recovery agents?

If the debt recovery agents harass or trouble the borrowers, they can visit a local police station and file a complaint.

How do I take legal action against a recovery agent?

You can take the following legal actions if a recovery agency uses illegal or aggressive tactics to claim the unpaid amount:

• You can file a complaint at the local police station against the agent
• If you do not get relief, you can also approach a civil court and seek legal assistance

Source:

RBI – What is a Non-performing asset 

RBI Guidelines – Rules for Recovery Agents 

RBI Guidelines – Guidelines on the overall loan recovery process

‘Can I buy a car in cash?’ This is one of the most common questions that pops up when you decide to purchase a vehicle. On second thought, if you are wondering whether you should opt for a personal loan for cars rather than paying it entirely by cash, there are several things you need to consider.

For instance, paying in cash would mean dipping into savings, whereas choosing a loan would mean paying in instalments with interest. By understanding such advantages and disadvantages of both options, you can make an informed decision that suits your needs.

Read on to know the pros and cons of buying a car in cash or with a loan and more.

Pros of Purchasing a Car with Cash

Here are some benefits of using your savings for a four-wheeler purchase:

• Simple Process 

There’s not much waiting time involved, as you don’t need to get approval from anyone. All you have to do is choose your preferred brand and model and make a one-time payment.

• No Interest Costs 

Since no credit is involved and you are paying the cost in lumpsum, there are no interest charges. 

• Instant Ownership 

With no third party or financier involved, the car is instantly available under your name. You don’t have to wait a few years or months for it like you would in the case of a loan. 

Cons of Purchasing a Car with Cash

Some limitations of buying a car with your savings include:

• Large Payment 

The cost of a four-wheeler is high, going into tens of lakhs. If you pay for it through cash, you would have to accumulate a significant amount. This can take time and mean that you deplete your savings entirely. 

• Restricted Options

When you pay in cash, you may have to stick to a certain budget. This may limit your options and you may have to make compromises in the make and model of your car. 

Pros of Purchasing a Car with a Personal Loan

Here are some advantages of getting a personal loan for cars:

• Pay in Instalments

With a loan, you pay in monthly instalments and not as a lump sum payment. As such, you don’t have to wait to accumulate the sum or be constrained by your budget. You can adjust the terms and find an option that best fits your finances.

• Wide Range of Options 

In a loan, the amount you get depends on your credit profile. So, you can choose whichever vehicle you like without any compromises. Make sure you get the financing from the right lender. 

• Helps Build a Credit History 

Taking a loan and repaying it on time helps you build a good credit history. This can also help you in future borrowing because lenders offer affordable deals to individuals with good creditworthiness. 

Cons of Purchasing a Car with a Personal Loan

Here are some disadvantages of buying a car with a loan:

• Expensive Option 

Financial institutions levy a certain interest rate on the amount you borrow. So, when you use a loan to buy a four-wheeler, you have to pay interest and other charges. This increases the overall cost and you end up paying more. 

• Risk of Default and Debt Trap 

When the repayment planning isn’t done well, you may be unable to pay the loan on time or in full. This can lead to default or debt trap, which are bad for your finances and creditworthiness. 

Example for Comparison

Here’s a hypothetical example with the following criteria:

• Cost of a car = ₹10 lakhs
• Loan interest rate = 10%
• Repayment tenure = 5 years

Here is how it will affect your finances:

Cost Breakup	Cash	Loan
Cost of the car	₹10 lakhs	₹10 lakhs
Down payment	–	₹2 lakhs
Loan amount	–	₹8 lakhs
Interest amount	–	₹2,19,858
EMI amount	–	₹16,998
Loan and interest amount	–	₹10,19,858
Total cost of the car	₹10 lakhs	₹12,19,858

Which is Better: A Car on Cash or a Loan?

To choose between the two options, you need to consider various factors concerning your finances. These include:

• Your financial situation
• Your future goals
• Your savings
• The car’s cost
• Current interest rates

If you have accumulated enough savings, making your car payment through cash is the best bet, as there’s no debt burden. However, if you don’t have a lump sum payment to purchase your favourite car, getting a personal loan for a car is better. 

If you prefer financing your car purchase through credit, you can opt for an Instant Personal Loan from Fibe. You can enjoy interest rates starting at 2% per month, zero foreclosure charges, and more. Download the Personal Loan App or access our website to get funds easily.

FAQs on Buying a Car with Loan or Cash

Should I buy a car in cash or a loan?

Whether you should buy a car on EMI or cash depends on various factors. Before finalising an option, you must assess the following:

• Your savings
• Your future goals
• The car you plan on purchasing
• Interest rates on the loan

Can I take a personal loan to buy a car?

Yes, a personal loan for cars can offer several benefits, such as:

• No restriction on end-use
• A wider range of options
• Convenient repayment through EMIs
• Opportunity to improve credit score

How can I get a personal loan to buy a car?

You can choose from various lenders and apply online. Fibe is one such lender that offers instant personal loans at affordable interest rates and other benefits.