Guidelines to apply for NRI Personal Loans
NRI Personal loans are the most common source of finance which helps Indian citizens residing in foreign countries to avail personal loans in India. Almost all the major private and public banks offer NRI personal loans. There are two types of personal loans offered in India-secured loans and unsecured loans. Secured loans are loans wherein it is secured against an asset, be it home, car or any item of high value, whereas unsecured loans are those in which one does not require give in any security or collateral, the lender relies on the borrower's contractual obligation to repay the loan back.
If an NRI has to travel urgently or if any personal emergency situation rises up, then a personal loan can be their aid and it can help them to tide over the contingency in the short period of time. Similarly, if one is looking to buy any consumer durable but is in short of cash, a personal loan can help to finance the purchase. All one got to do is choose the right lender and then apply for a loan amount as required.
An NRI personal loan falls under the category of secured loans in which the borrower pledges his/her property or asset as collateral to the lender. Furthermore, the borrower is also expected to submit relevant documents for the application of the loan. The document requirement differs from person-to-person and it mainly depends on the profession of the prospective borrower.
Documents required for NRI Personal Loan
• A copy of your passport and visa.
• Salary certificate in English, specifying name, date of joining, designation and salary details.
• Both domestic (NRE/NRO/FCNR) and international bank statements for the last six months.
• If the applicant is not available in India when the application form is submitted, then a General Power of Attorney duly attested by the Indian consulate in the NRI's resident country needs to be submitted. If applicant is present in India then the Power of Attorney can be locally notarized.
• A copy of NRI's appointment letter as well as contract.
• In case the applicant is employed in the Middle East, then they need to submit a copy of their labour card/identity card that is translated in English and countersigned by the respective consulate.
• In case the applicant is employed in the merchant
navy, then they need to submit a copy of their CDC as well as their contract slip with Income details.
Few major banks that offer NRI Personal Loans are:
State Bank of India
Kotak Mahindra Bank
Punjab National Bank
Loan Basics: A guide to NRI home loans
NRIs need to meet minimum age and work criteria to take a loan
One of the most sought-after investments for Non-Resident Indians (NRIs) is buying property back home. At a time when the Indian rupee is weakening against the US dollar, taking a home loan in India could be a good option for the NRIs rather than using up all the money earned in the foreign currency. Are NRIs allowed to take a home loan in India? Yes, they have. “NRI Home Loans” are offered both by banks and Non-Banking Financial Companies (NBFCs). Here we take a look at what is required to avail this loan and how it differs from a normal loan taken by a resident Indian.
Eligibility and documents required
An NRI should meet the criteria on minimum age and minimum years of work experience abroad. The criteria vary across institutions. In State Bank of India (SBI) the minimum age limit is 18 years and the number of years a NRI should have worked should be 2 years. But if you intend to take a loan from ICICI bank, then it is enough if you had worked for one year abroad, but your minimum age should be 25 years. If you are a self-employed, then you should have stayed abroad for at least 3 years.
Banks like ICICI Bank and Axis Bank even have a minimum salary per month as one of the eligibility criteria. If you work in any of the Gulf Cooperation Council (GCC) countries then you need to have a minimum monthly income of 5,000 AED (United Arab Emirates Dirham) and for working in US and other countries $3,000 per month is the minimum salary to be earned if you want to take a NRI home loan in Axis Bank.
For the documentation process, a copy of your passport, visa and employment related documents such as your three to six month salary slips, appointment letter, employment contract if any and address proof, are mandatory. These documents can be submitted to the overseas bank branch located the closest to you, in the country where you reside. The documents are then sent to the Indian branch for processing. Note that the overseas branch just acts as an intermediary for colleting and sending the documents to India. The verification process happens only in the Indian branch.
Loan tenor and interest rate
Earlier there were differences in the interest rate charged for a NRI home loan and for the ones offered to resident Indians. But now the rates are the same. “The interest rate and other charges like processing fee for NRI home loans are the same as offered to resident Indian. Also, loans to NRI are of larger average size of ₹40 lakh when compared to an average size of ₹23.5 lakh for a resident Indian home loans. The processing fee is 0.5 per cent of the loan amount but capped at ₹10,000”, says the spokesperson for HDFC. A ceiling on the processing fee gives NRIs more leeway on taking a bigger loan.
When it comes to loan tenor, institutions and banks like HDFC and SBI offer longer periods of 20 to 30 years - the same as offered to a resident Indian. But in some cases the loan tenor is restricted to 10 or 15 years. For example, Bank of Baroda limits the loan tenor for NRIs to 15 years. LIC Housing Finance Ltd offers a 15 year home loan to NRIs with professional qualification, but for others the loan tenor is just 10 year.
The repayment of a NRI loan is due only in Indian rupees and not the foreign currency. Satish Kotian, Chief Operating Officer, Aspire Home Finance Corporation Ltd (A Motilal Oswal Group Company) clarifies that - “Under the RBI regulations, the repayment of the housing loan by NRIs can only be made by remittances from abroad through normal banking channels or through a Non Resident Rupee (NRE) or a Non Resident Ordinary Rupee account (NRO)”.
Prepayment of loan is permitted for NRIs and there is usually no charge for prepayments. But there are some exemptions. For instance ICICI Bank levies a 2 per cent pre-closure charge on the outstanding amount and the amount pre-paid in the last 12 months, if the home loan is prepaid in full.
On a home loan, a resident Indian can avail a tax benefit on repayment of up to ₹1.5 lakh on the principal component and ₹2 lakh on the interest component. Can the NRI who repays the home loan also avail of tax benefits? Most of the NRIs who are currently serving their home loans are not aware of the tax implications on their loan repayment. They just earn their incomes abroad and repay their loan.
Tapati Ghose, Partner, Deloitte Haskins & Sells LLP says, “if the salary earned abroad is the only source of income, a NRI does not have an opportunity to claim tax exemption on home loan repayment, since he is not taxable in India. But, in case if a NRI earns an additional taxable income from India apart from the salary earned abroad, then he is eligible to claim tax exemption for the home loan repayment”.
Features of NRI loans
No difference in interest rate offered to residents and non-residents
Repayments made through NRE/NRO accounts
Spokes on tax sops
Loan repayment is eligible for tax exemption only if an additional taxable income earned from India
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