Summary: Though there is disparity in the payable rate of interest and other terms and conditions, personal loan is the most cost-effective way to meet short term needs. These loans are gaining popularity in India

Indian banks after the introduction of liberalisation, privatisation and globalisation have come up with various attractive loan plans suiting almost every imaginable need. The ease of loan availability, reduced documentation and even the smarter e-lending service has become the hallmark of Indian lending system.

But one major question remains little answered even today. Is the payable loan rate equal for everyone? If it is not, how parity can be maintained? This article tries to focus light on these two aspects. The answer of the first question is depending on an individual's financial and previous credit profile, banks can charge anywhere from 12% to even 30% or more as interest rates on the loan plans for personal use. There are various other fees associated with these loans. These fees also vary from borrower to borrower and also from bank to bank.

The answer to the second question is a pessimistic one. Lending bodies across the world prefer to have disparity in the payable rate of interest on personal loan. This divide is also very much crystal clear in the hi-tech loan markets of the first world and western countries. The global credit crunch has worsened the situation. The disastrous fall of the US sub prime market has more or less affected the global economy and Indian loan market is no exception.

So, why to apply for the personal loan? Though there is disparity in terms and conditions, these loans have their own unique level of advantages. It can be assessed if we compare them with the plastic money. With the gaining popularity of plastic money, many Indians are taking cash advances from their credit cards and using them for any personal finance emergency. This practice may sound time saving compared to the applying for a loan since all a person has to do is to swipe his credit card and get ready cash. However, this easy format has its own drawbacks, which can cause a great harm to the financial health of any individual.

Why people prefer to take cash advance from credit card instead of availing a personal loan? The reason is simple as there is no inquiries, no documentation, no running to the banks and no waiting at the counter to avail the cash. On the other hand, personal loan requires a procedure, which could take anywhere between 24-48 hours for loan approval. The banks do look for income requirements, employment status, eligibility in terms of age and residence, to sanction the loan amount. When the future concerns are taken into account,these loans are far better than cash advances from credit cards. These loans charge a lower rate of interest and keeps your creditworthiness intact if you pay the installments regularly.

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