Personal Loan for NRI 2024

Most people in the country consider relocating abroad for higher education, better economic opportunities, or the desire to start a new life. Adapting to an entirely new living environment in a new country has its own challenges and obtaining financial aid when in an unknown country can give you hard times.

Indian Banks offer tailor-made financing solutions to NRIs. NRIs can obtain personal loans from Indian financial institutions to aid their financial necessities. However, NRI individuals must meet specific eligibility requirements imposed by banks to avail of such a loan.

If you are an NRI residing in a foreign nation, this blog is specially curated for you. We have tried our best to provide you with all the information regarding the personal loans for NRIs, eligibility criteria, the documentation process, and the RBI guidelines imposed on such loans.

Best Personal Loan for NRI 2024

Personal Loan for NRIs

In the financial world, a personal loan is one of the most popular financial instruments. The zero-collateral loan acts as a safety net and helps you manage expenses without draining your savings.

The top Indian banks, such as HDFCBank, State Bank of India, Punjab National Bank, Tata Capital, Citibank, ICICI Bank, etc, offer personal loans to NRIs at attractive interest rates from 10.05% per annum. Further, these loan products come with transparent processing, minimal documentation, and quick disbursements, which make them the perfect tool for NRIs.

Financial institutions in the country provide secured as well as unsecured personal loans to NRIs. In contrast to other loans, this is a short-term loan with a maximum repayment term of five years. Following disbursement of the loan, the borrower may opt for equated monthly installments, or he may prepay the loan as a lump sum amount.

Types of Personal Loan for NRI

Personal loans for NRIs can broadly be classified into secured and unsecured loans. Most banks do not insist on collateral for loans to NRIs, however, some do.

Secured Personal Loan

Secured personal loans require the borrower to pledge collateral security against the loan. NRE/NRO term deposits, FCNR deposits, assets, shares, or any property owned by the borrower is accepted as collateral. Personal loans can also be obtained from a family member, guarantor, or co-applicant. Banks and lenders usually ask for collateral for a personal loan in case of high loan amounts, or if the applicant’s credit profile is not upto the mark

Unsecured Personal Loans

An unsecured personal loan is a zero-collateral loan where the borrower can obtain funds without pledging any collateral. The banks analyze the NRI repayment capacity before offering him an unsecured loan. The interest rates are usually high as there is a risk involved in an unsecured personal loan for NRIs.

Features of Personal Loan for NRI

Interest Rates

Interest rates are primarily determined by the applicant’s credit history and repayment capacity. The ideal applicant can obtain an NRI personal loan at minimal interest rates. The exact interest rate varies from person to person based on certain external and internal factors. Some of the main factors that affect the NRI personal loan interest rates are the loan tenure and amount.

Collateral

Financial institutions usually offer zero-collateral personal loans. But in the case of NRIs, if the lending institution is not satisfied with the borrower’s financial standing, they may demand collateral security against the loan. This is because the lender may view it as a credit risk, and will require some sort of guarantee against their investment.

Repayment Tenure

The repayment tenure is the time period offered by the lending institution to the borrower to repay the loan in equated monthly installments along with interest payable. Financial institutions provide flexible repayment tenure for personal loans depending on the borrower’s creditworthiness. Usually, the term for NRI personal loans goes up to 5 years.

Preference of Currency

Financial institutions allow the borrower to choose the transaction currency during the application process. The loan will be disbursed to the borrower’s NRE/NRO bank account. This way the borrower can avoid the hassle of having to convert the amount into the currency of the country they reside in.

Co-applicant

A co-applicant is an individual who participates in the loan approval and underwriting process with the borrower. Their status may be viewed as secondary to that of a principal applicant. Banks usually prefer to have a co-applicant residing in India for NRI personal loans. Further, applying with a co-applicant can also improve your chances for loan approval.

Documents Required For NRI Personal Loans

Given below are the set of documents that an applicant will have to submit for a personal loan for NRIs:

Note:

• The documents mentioned above have to be submitted both by the applicant and co-applicant
• A power of attorney must be attested or notarized locally if the NRI applicant is in India.
• Consider a scenario in which the borrower is abroad when the loan application is submitted. An Indian Consulate of the NRI’s resident country must attest to the Power of Attorney in such cases.

Personal Loan for NRI Eligibility Criteria

An applicant will have to meet the below-given eligibility criteria to obtain a personal loan for NRI in India:

Eligibility Criteria Interest Rates

The creditworthiness and repayment ability determine the interest rate on NRI personal loans. Interest rates on NRI personal loans start at 10.00% per annum and are highly competitive.

How Can I Apply For NRI Personal Loans?

NRIs can apply for personal loans by visiting the bank’s nearest branch or the bank’s official website.

Offline Application

• If the NRI individual is currently in India, the applicant or the co-applicant can personally visit the nearest bank branch.
• Fill out the personal loan application form and furnish all the details and documents as required.
• If the bank has a branch in the NRI’s residence city, they may consider visiting that branch, and complete all the formalities.

Online Application

• Alternatively, you can simply go to the bank’s official website.
• The applicant must sign in to the website, fill out the application form, and submit the documents.
• The bank will approve and disburse the loan on successful verification of the documentation process.

Note: You may consider taking help from your financial advisor. If you plan on pledging collateral, your advisor may help you make the right decision.

RBI Guidelines on Personal Loans For NRI

According to RBI guidelines, a non-resident Indian can get a personal loan from financial institutions and banks in India. The Ministry of Finance and Reserve Bank of India govern the lending and borrowing policies. Non-resident Indians are offered zero-collateral personal loans and personal loans against overdrafts in accordance with their credit worthiness.

As of 1st January 2016, the Master Direction allows authorized dealers in India to grant INR loans to NRIs against shares and other securities, or against immovable property as collateral. The following guidelines must be followed by NRIs seeking a personal loan:

• NRIs must comply with the RBI’s directives on such loans and its directives on advances against shares, securities, and movable property; 
• Repayment of loans should be either through inward remittances from abroad or through debits to the NRE/NRO/FCNR(B)/NRNR/NRSR accounts of the borrower and out-of-sale proceeds realized through securities offered for the loan. 
• Furthermore, these loans can also be repaid by a relative (as defined under the Companies Act) of the borrower in India through an account-to-account transfer. 
• According to the above-mentioned terms and conditions, an authorized dealer may grant loans to NRIs for any other purpose in compliance with the norms of the RBI.
• The loan shall be repaid through remittance from outside India or debit to the NRE/FCNR(B)/NRO account.

Things to Consider Before Applying

Given below are some of the things that an NRI applicant should keep in mind before applying for a personal loan:

• Personal loans are usually availed for unprecedented financial needs. The interest rates on such loans are high in comparison to other loans.
• It is suggested that you should explore all the possible alternatives before arriving at a decision.
• If you have a positive credit history and a good relationship with the bank, there is a possibility that your loan may process faster.
• It might be advantageous to take the loan in the currency of the country you are residing in, as you may save on FOREX charges. But on the other hand, you might have to pay an additional processing fee to the lending institution.
• In the case of NRI loans, the banks require a co-applicant residing in India.
• Read the fine print of the lending institution before making a decision.

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Frequently Asked Questions