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Introduction

A personal loan is a type of unsecured loan that can be used for various purposes, such as consolidating debt, covering unexpected expenses, home improvements, or funding major life events like medical expenses, weddings, or vacations. Unlike secured loans, like auto loans or home loans, personal loans do not require collateral.

Common features of Personal Loan

Loan available for all Nepali citizens
No collateral required.
Competitive premium rate.
Flexible Repayment Schedule: Monthly (EMI) or quarterly (EQI) basis or quarterly interest payment.

Personal Loan Eligibility Criteria

Nepalese Citizen above 18 years.
Salaried Individuals in permanent service with any credible organization.
Individuals with their own business/ self-employed persons/professionals like doctors, chartered accountants, etc.
Sustainable and sufficient source of income.
EMI /EQI– 50% of gross income.
EMI /EQI– 80% of uncommitted (disposable) income.
Purchasing of loan is subject to satisfactory debt servicing to other Banks/FIs.

Documents Required for Personal Loan

2 Passport size photos of applicants.
Copy of citizenship certificate
National ID(NID) Number
PAN card of applicant
Salary certificate/Contract paper/Payslip
Rental agreement copy
Bank account statement
Corporate guarantee/ recommendation letter (if applicable)
Self declaration of property

Personal Loan Common Fees & Charges

Processing Fee: Banks charge a processing fee for processing the loan application. This fee is usually a percentage of the total loan amount.
Late Payment Fee: If you fail to make a payment on time, the bank may charge a late payment fee. It's crucial to adhere to the payment schedule to avoid these charges.
Prepayment Penalty: Some loans have a prepayment penalty if you pay off the loan before the agreed-upon term. Check the loan terms to see if this fee applies.
Annual Fee: Some banks charge an annual fee for maintaining the personal loan. This fee is not as common as others but may still be present.

Common Use of Personal Loans in Nepal

Medical Expenses: Personal loans are often used to cover unexpected medical expenses, surgeries, or hospital bills. They provide a quick financial solution for individuals facing health emergencies.
Emergency Expenses: Personal loans can be a lifeline during emergencies, such as sudden repairs to a home or vehicle. They provide quick access to funds when needed.
Wedding Expenses: Weddings can be expensive affairs, and personal loans are often used to cover wedding-related expenses, including venue costs, catering, and other arrangements.
Consumer Goods Purchases: Some individuals use personal loans to buy high-value consumer goods, such as electronics or appliances, especially when special financing offers are available.

Personal Loan Do's and Don't table

Do	Don't
Do Research Loan Options: Compare different banks and loan products to find the most favorable terms and interest rates.	Do not Ignore the Fine Print: Carefully read the terms and conditions of the loan agreement, including interest rates, repayment terms, and any associated fees.
Do Evaluate Your Debt Load: Assess your existing debts and create a plan to manage and reduce them over time.	Do not apply for Too Much: Applying for an excessively large loan amount will cost you more and ultimately put a financial burden in future. Consider a more reasonable loan amount.
Do Strengthen Employment Stability: A stable employment history can positively influence loan approval. Job stability may be a concern, work towards strengthening your employment history.	Don't Provide Incomplete Information: Ensure that all required documentation and information are provided in your loan application. Incomplete applications may lead to rejection.