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Personal Loans are the fastest and most easily available of all retail loan products. They are, however, costlier than other loans (such as home loans, loans against property, or loans against shares) because of their unsecured nature. To avail a personal loan, the borrower is not required to produce any collateral or security. Further, there is no need to specify the end use of the money while taking a personal loan. All that the lender is interested in is whether a borrower is capable of paying the EMIs every month on or before the due date.  Getting a personal loan is cheaper than borrowing on credit cards. So, borrowers who have run up a huge outstanding amount on credit cards and the accumulated interest is making it almost impossible to clear outstanding, would prefer a personal loan to consolidate their credit card debt. The objective is to use the money borrowed at a lower interest rate (the personal loan) to pay off money borrowed at a higher rate (outstanding amount on the credit cards). Nevertheless, personal loans involve higher financial commitments on a monthly basis so as to reduce the perceived risk of the lenders. 

Depending on the credit profile of the borrower, the interest rate will vary and can sometimes be very expensive (almost twice the rate of home loans). Employees of reputed companies are given personal loans at competitive rates such as 12% p.a. while those who are self-employed or professions engaged in private practice are offered loans at differential rates of interest in the region of 18% - 24% p.a. Banks providing personal loans follow an objective methodology and extend it to approved categories of borrowers on a selective basis. If the applicants profile doesn't match up to any of these pre-approved categories, loan application will be rejected. Even when personal loans are granted effortlessly, there are other finer details which make this format of borrowing very expensive. There is a tiger by the tail as a host of charges follow quicker processing such as foreclosure charges, service charges, and any other hidden charges. There is no transparency in case of personal loans as documentation fees is collected separately. As lenders have planned for a fixed duration of lending, any prepayment by the borrower attracts penalty fee or foreclosure charges which can be as high as 5% of the loan amount. 

Group Fund is a dual purpose institution of saving and borrowing. It is a unique body of borrowers and investors who have a common goal of mutual help. Hence, the borrower need not disclose the purpose of drawing the money. It can be used either for a personal or business purpose such as housing, machinery, marriage, office automation, working capital, etc. Members who value this service are not concerned about paying a marginally higher rate for this special financial facility. While a Group Fund has no pre-determined interest or return-rate. The rate of return or cost of funds is determined by supply and demand, which is thrown up at the monthly auctions. Since fund is a subscriber's main source of perennial credit and savings, irresponsible behavior or conduct of the subscriber is relatively rare. As we operate on a lean operational structure, they are very quick in processing documents and disbursing funds.

A registered chit fund company like GroupFund applies financial prudence and sincerity across all its internal business processes. On account of constructing unique groups whose interests are homogeneous there is likely to be greater mutuality and participation by every subscriber. In order to make this industry safer, the government intervenes in the day-to-day operations making it counter-productive while increasing the regulatory costs of chit fund business. These costs are shared by all the subscribers as it reduces the return on investment of a saver and enhances the rate of interest for the borrowers. However, GroupFund’s promoters who have rich experience and expertise in managing this business will be quite selective in choosing the subscribers making an efficient business by driving down costs and creating value for all the stakeholders.

 

 

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