Taking a Loan with an Indian Bank Vs. Stilt

As an Indian citizen in the U.S. on a visa in the U.S., you’re in a pretty good place when it comes to taking out a personal loan. On the one hand, being a citizen of India, you can borrow from an Indian bank. On the other, you can borrow from an American lender because of your visa status.

But which type of lender is the better option?

Below, we break down the typical borrowing processes for an Indian bank and for Stilt–a U.S. lender with a history of working with visa holders and immigrants–so that you can decide.

What is a Personal Loan?

Before we proceed, however, it’ll be helpful to lay out a definition of what constitutes a personal loan. A personal loan is:

• Unsecured, meaning there is no collateral involved
• Generally, between $1,000 and $50,000

One of the benefits a personal loan is that there’s little limitation on what they can be used for. Some common reasons people take personal loan include but are not limited to:

• Debt consolidation / Refinancing
• Education expenses (tuition, living expenses while in school)
• Medical procedures (including emergency medical needs)
• Weddings
• Vacations

Now that we have a clear understanding of what a personal loan entails, we can look at how the borrowing process typically works at an Indian Bank.

Taking a Personal Loan from an Indian Bank

Taking a loan from a bank in India will be a very different experience from taking a loan in the U.S. On the surface, the two experiences will look similar, but when you take a closer look, there are few things that set them apart.

Below, we discuss some of the differences and drawbacks.

Loan Process at Indian Banks

Generally speaking, the borrowing process in India and the U.S. follow a similar pattern:

• Apply for a loan
• Submit the necessary documentation
• Get approved
• Have funds disbursed (usually within a week)

It’s in the details of the loan process, however, that the drawbacks start to present themselves.

High Interest Rates

Interest rates for personal loans at most Indian banks begin at ~11.49%. Bear in mind that these are the minimum rates, and chances are your loan with an Indian bank will have a higher rate than this.

In most cases, though, most personal loans in India have interest rates of at least 30%.

Hidden Additional Charges

In addition to the principal and the interest on your loan, Indian lenders tend to charge a slew of additional fees when giving loans, including:

• A non-refundable application fee
• A processing fee equivalent to 1-2% of your principal

These are just a few of the additional fees Indian banks typically charge with personal loans. Many borrowers don’t realize that, between these fees and the high interest rates, their loan amounts can double and triple by the time they’re finally paid back.

Overly Complicated Borrowing Process

While the borrowing process for Indian banks and Stilt lines up on paper, the process with Indian banks often times requires steps to be tediously repeated.

Borrowers have complained in reviews of various Indian lenders that the process can require several or more visits to the local bank branch. This is usually a result of their being no online application process and it could mean additional days or even weeks added to the borrowing process, which means you will have to wait longer to receive your funds.

Much More Documentation Required

In addition to your completed application, you may be required to provide some (or all) of the below:

Proof of Identification:

• Driving license
• Ration card
• Passport
• PAN card
• Voter’s ID card
• Employee ID
• Bank passbook

Proof of Age:

• PAN card
• Birth certificate
• 10th class marksheet
• Bank passbook
• Passport
• Driving license

Address Proof:

• Bank passbook or Bank account statement
• Voter’s ID
• Ration card
• Passport
• Utility bill (telephone, electricity, water, gas) – less than 2 months old
• LIC policy/ receipt
• Letter from a recognized public authority verifying the customer’s residence address

Income Documents (for Salaried Individuals):

• Form 16
• Certified letter from Employer
• Pay slip (Last 2 months)
• Increment or Promotion letter
• IT returns (for 3 years)
• Proof of investments (like fixed deposits, shares, etc)

Income Documents (for Self-Employed Individuals or Businessmen):

• Last 3 years Income tax returns of the applicant along with computation of income duly attested by a Chartered Accountant
• Last 2 years Balance Sheet and Profit & Loss account of the firm- duly attested by a Chartered Accountant

Additional Income Documents for Self-Employed Individuals

• A brief introduction of his profession/business
• Passport size photographs
• Photocopy of Registration Certificate of establishment under Shops and Establishments Act/Factories Act
• Photocopy of Registration Certificate for deduction of Profession Tax
• Proof of investments
• Certificate of Practice
• Receipts of advance tax payments (if any )

Uncommon Collateral Practices

Another thing to be wary of is requests for collateral. Generally speaking, personal loans do not require that the borrower put collateral against the principal. Some borrowers who’ve worked with Indian banks have complained that for loan amounts of $10,000 or greater, they’ve been asked to provide collateral. A few borrowers have even recalled being asked for $5,000.

While there’s nothing illegal about asking for collateral on personal loans, it is an uncommon financial practice that just adds one more hoop for you to jump through to be able to take a loan.

Long Wait Times for Disbursement

One last thing to consider is the time it takes for disbursement. While personal loans are among the loans that see the fastest disbursements of funds (generally taking a week or less), some reviews of Indian lenders have recalled disbursement taking upwards of 4 weeks. If you need money quickly, this would not be ideal.

Now, not only are you paying multiple extra fees and overly high interest rates, but you’re also waiting for weeks at a time for your funds to arrive, while in the meantime you might be in the midst of a medical emergency or be in danger of not being able to pay your tuition in time to start the semester.  

No Online Repayment Options

Indian banks tend to be behind the times when it comes to online repayment. Now that you’ve moved heaven and earth to even get your loan, the repayment process is inconvenient, too.

Many Indian banks don’t offer online repayment, which means that you must make your repayments by mail, or by making more tedious trips to the local branch.

So, how does the borrowing process at Indian Banks compare with Stilt’s?

Taking a Personal Loan with Stilt

Stilt is an U.S.-based online lender committed to providing loans for populations in the U.S. that are historically underserved. This includes, but is not limited to, visa and green card holders.

Stilt Loans Overview

Stilt loans:

• Have interest rates starting at 7.99%
• Are available from $1,000 – $25,000
• Have loan terms up to 24 months
• Have no age minimum or maximum
• Have no minimum credit score
• Have no cosigner requirement

Stilte Eligibility Criteria

To be eligible for a Stilt loan, you must:

• Be physically present in the U.S.
• Have a U.S. bank account in your name
• Have a U.S. personal phone number in your name
• Have a U.S. address in an eligible state (AZ, IL, FL, TX, PA, CA, MI, WA, UT, OH, GA, NY, NJ, WI, MA, VA)
• Have a Valid visa or another legal residency status

How it Works

The borrowing process with Stilt is fairly simple. To take a link with Stilt, you must:

• Submit an Application
• Received an Offer within 1 business day
• Sign the Promissory Note
• Get Your Funds

Below, we look at each of these steps in greater detail.

1. Submit an Application

The first step in the borrowing process with Stilt is to fill out a simple online application and submit it. Once your application has been submitted, you will be promoted to schedule a verification call.

2. Receive an Offer within 1 Business Day

Once the Credit Risk team has reviewed an application, an email will be sent to the applicant to let them know if their loan request has been approved or denied within 1 business day.

If a borrower is approved for a loan, the email will prompt him or her to upload any outstanding documents (passport scan, offer letter, references, etc).

3. Sign the Promissory Note and Get Your Funds

When all of the documents have been uploaded and then verified, Stilt will issue a promissory note to the borrower via email. Once the promissory note is signed and returned, Stilt will initiate the transfer that same day and the funds will appear in the borrower’s bank account, typically, within 3-5 business days.

Conclusion

In the end, you have to weigh whether an Indian bank or Stilt will meet your needs better. You need to answer important questions like:

• How quickly do you need your loan?
• Is it an emergency?
• What interest rate can you realistically afford?
• Will you have collateral if asked to provide it?
• How hard do you want to the borrowing process to be?

At the end of the day, the decision is yours but armed with the information provided above, you should be able to make your decision with confidence.

Have questions about the borrowing process, Indian banks, or Stilt? Leave them in the comments!

Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

See author's posts