Loan Glossary

A RBI-licensed financial data-sharing framework (Sahamati). Lets you share bank statements, investment data, and tax information with lenders digitally in seconds, with full consent control.

Penalty charged if your NACH/ECS mandate is dishonoured (insufficient funds). Typically ₹250–₹750 per bounce. Multiple bounces damage your CIBIL score significantly.

A 3-digit number (300–900) representing your creditworthiness. Calculated by TransUnion CIBIL based on your loan repayment history, credit utilisation, and account age. Above 750 is excellent.

An asset pledged as security against a loan. Personal loans are typically unsecured (no collateral). Gold loans, home loans, and loan against property are secured — collateral reduces lender risk and lowers interest rates.

Government of India's digital document wallet. Stores PAN, Aadhaar, driving licence, ITR, and educational certificates. SafeBorrow can fetch documents directly from Digilocker with your consent.

Equated Monthly Instalment — the fixed amount you repay every month. Calculated as: P × r × (1+r)^n / ((1+r)^n – 1) where P = principal, r = monthly rate, n = tenure in months.

Interest calculated on the original loan amount for the entire tenure, regardless of repayment. Appears cheap but is significantly more expensive than reducing balance. Common in two-wheeler loans and some fintech products.

Fixed Obligation to Income Ratio — the percentage of your income already committed to EMIs. Most lenders approve loans only if your total FOIR (including new EMI) stays below 50–60%.

Full repayment of the outstanding loan amount before the tenure ends. Differs from prepayment (partial repayment). Saves significant interest but may attract a foreclosure charge.

A credit check by a lender when you formally apply for a loan. This appears on your CIBIL report and may reduce your score by 3–7 points. Multiple hard inquiries in 30 days can signal credit hunger to lenders.

Know Your Customer — the process of verifying your identity and address before a lender disburses a loan. Includes PAN verification, Aadhaar OTP, and sometimes video KYC. Mandatory under RBI guidelines.

Loan-to-Value Ratio — the percentage of the asset value a lender will finance. Relevant for secured loans (gold, property). For personal loans (unsecured), lenders focus on income and CIBIL instead.

Marginal Cost of Funds-based Lending Rate — the minimum interest rate below which banks cannot lend (for floating rate loans). Set monthly by RBI-regulated banks. Your floating rate EMI may change when MCLR is revised.

A grace period at the start of a loan during which you are not required to pay EMIs. Interest still accrues during moratorium. Common in education loans (repayment starts after course completion + 6 months).

National Automated Clearing House — a mandate that authorises your bank to auto-debit your EMI on the due date. Setting up NACH reduces chances of missed payments and eliminates manual transfers.

Non-Banking Financial Company — a RBI-registered financial institution that offers loans but cannot accept deposits like a bank. Examples: Bajaj Finance, MoneyView, KreditBee. Often more flexible than banks on eligibility.

No Objection Certificate — a document from your lender confirming your loan is fully repaid. Important for removing the loan from your CIBIL report and for future loan applications. Request within 30 days of closure.

A charge levied if you repay your loan before the agreed tenure. Typically 2–4% of outstanding principal. Many lenders waive this after 12–24 EMIs. Always check before taking a loan.

A one-time fee charged by the lender to process your loan application. Typically 1–3% of the loan amount. Deducted upfront from the disbursed amount (you receive loan amount minus processing fee).

Interest calculated on the outstanding principal each month. As you repay, the interest portion decreases. More beneficial than flat rate. Most personal loans use reducing balance. At 12% reducing ≈ 21.5% flat rate equivalent.

The rate at which RBI lends to commercial banks. When RBI cuts repo rate, banks' cost of funds falls, and rates on new loans tend to decrease. Repo rate is 6.5% as of Jun 2024.

A credit check that does not affect your CIBIL score. Examples: checking your own score, pre-qualification checks, employer background checks. SafeBorrow eligibility checks are soft inquiries.

A digital KYC process where a bank official verifies your identity via a video call. You show your PAN and face on camera. Accepted by HDFC, ICICI, and IDFC First — eliminates branch visits.