Name: Shaikh Gulwaz Badruddin

Course: Mcom Part 2

Roll No: 21

College: G R Patil College of Arts Science Commerce and BMS

Topic: Credit Appraisal of Home Loan and Personal Loan

1. Meaning: Credit appraisal is the process by which a lender appraises the technical
feasibility, economic viability and bankability including creditworthiness of the prospective
borrower. Credit appraisal process of a customer lies in assessing if that customer is liable to
repay the loan amount in the stipulated time, or not.
2. Definition: Credit appraisal basically refers to assessing a particular loan application or
proposal in a thorough manner in order to gauge the repayment ability of the loan applicant.
A lender conducts a credit appraisal chiefly to make certain that the bank gets back the
money that it lends to its customers.
3. Content:
➢ Comparison Between Home Loan and Personal Loan
➢ Definition of Home Loan and Personal Loan
➢ Difference Between Home Loan and Personal Loan
➢ Similarities
➢ Conclusion
4. Credit System in India: Lenders check the fixed obligation to income ratio (FOIR):
This gives banks an idea on how much debt you have and how regular you are with
repayments. FOIR gives the fixed obligations a bank has to meet each month. Banks frown
on customers having loan EMIs of 50% or more vis-à-vis monthly income. Banks assume
that you require at least 50% of income for living expenses. If more than 50% of monthly
salary goes in loan EMIs, you could struggle with repayments.
5. Home Loan and Personal Loan:
➢ Home Loan: A mortgage loan or simply mortgage is a loan used either by
purchasers of real property to raise funds to buy real estate, or alternatively by
existing property owners to raise funds for any purpose while putting a lien on the
property being mortgaged
➢ Personal Loan: In finance, a loan is the lending of money by one or more
individuals, organizations, or other entities to other individuals, organizations etc. The
recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that
debt until it is repaid as well as to repay the principal amount borrowed.
6. Case Study: Here I Used Credit Appraisal for Working Capital Finance to Small and
Medium Enterprises in Bank of India
7. Methodology: Here I Used Secondary Data as Internet, Magazines, Newspaper, To
Know Process of Credit Appraisal and Loan Calculation Methods and Primary Data as
Credit Appraisal Process of 5 Different Banks.
8. Significance:
❖ Home Loan
➢ Tax benefits
➢ No prepayment charges
➢ High repayment Tenure
➢ Enjoy capital appreciation
➢ Saves you from paying rent
❖ Personal Loan
➢ Short Term Repayment Tenors
➢ Rapid Disbursal
➢ No collateral required
➢ Attractive Rate of Interest
➢ Simplistic Eligibility Criteria
➢ Financing up to Rs. 25 Lakh
9. Conclusion: The credit appraisal is done by involving the Evaluation of management,
Technical feasibility, Financial viability, Risk analysis and Credit rating. It is on the basis of
the credit risk level, collateral securities to be given by the borrower are determined. The
credit department thoroughly analyses the 104 Article Section Volume 7, Issue 11, May 2015
credit requirement of the company and the capacity to service the debt. The banks have
conservative norms to appraise the project the bank at the max. Banks allow a 20% hike in
projections. The credit appraisal passes through various stages and evaluations before it is
appraised.