Personal loans are a great option for those looking to make a big financial decision in their life. It could be buying a new car, planning a wedding, going on a vacation abroad, paying for higher studies, or getting a new home. Personal loans offer secured debt consolidation as they cover tons of financial needs. While taking out a personal loan is pretty straightforward, you should consider some key aspects before going for one.  Things to Consider Before Taking Out a Personal Loan from a Bangladeshi Bank  Purpose of the Loan  Personal loans are mostly taken as a form of investment source. It can be debt consolidation or a major investment for future benefit. Regardless, a loan means incurring a liability until it is paid off. It is important to properly assess whether taking the loan is a feasible decision or not.  It is also important to consider alternative funding sources like personal savings, emergency funds, or borrowing from family.  Interest Rate One of the prime things to consider is the interest rate accrued to the loan capital. Currently, Bangladesh Bank has a regulation in place that outlines the upper limit that can be charged by the banks. The Bangladesh Bank interest rate regulation can be checked from the lending rate of scheduled banks (https://www.bb.org.bd/en/index.php/financialactivity/interestlending). Read more: Top 10 Strongest Currencies in the World as of May 2024 Additionally, a borrower can use websites like aamartaka.com to compare the rates among banks, check eligibility criteria, and even apply through their designated channels. Understand the Eligibility Criteria  The first thing to consider while applying for a personal loan is to understand the eligibility criteria. Personal loans can come in both secured and unsecured options. Granted that the unsecured options will incur a higher interest rate.  However, most banks require a set of eligibility criteria for one to apply for a loan. For example, the valuation of collateral against the loan or the liquidity level of the applicant. Other aspects like personal history verification, job verification, income, and salary credit account can also be the eligibility criteria depending on the lender. Another key aspect is the history of bankruptcy or loan default which might disqualify a person from applying for a personal loan.  Have a Good Credit Rating  A credit history is one of the key determinants of loan disbursement abroad. One can’t even apply for a credit card without a stable credit rating, let alone a personal loan. Credit rating determines the creditworthiness of an individual, that is how likely they are to repay a loan based on previous credit history.  Read more: How to Buy Bangladesh Government Treasury Bond: Everything You Need to Know There are several credit scoring systems globally like FICO score and VantageScore. However, in the case of Bangladesh, the banks and NBFIs do not follow a set credit score while approving loans. Alternative credit scoring like asset ownership, utility payments, device data, and rental payments are taken into consideration. It is mostly because a large portion of the demographic is unbanked or underbanked to make credit scoring the sole determinant for loan approval. 

President of Dhaka Chamber of Commerce and Industry (DCCI) Barrister Md. Sameer Sattar said on Sunday that a contractionary Monetary Policy Statements (MPS) will help to revive the financial and private sectors. The MPS primarily aims to curb inflation by reducing the aggregate demand in the economy, continuing supply-side interventions and a stable and favourable business environment, he said in response to the declared Monetary Policy for the first half of the fiscal year 2023-24 (July-December 2023) by the Bangladesh Bank. The repo and reverse repo have been adjusted to 6.5% and 4.5% respectively to control inflation by reducing the money supply. However, the effectiveness of these instruments of controlling inflation is yet to be seen. Because reverse repo was raised earlier but inflation did not decline as expected. Read: NBR-private sector partnership crucial to achieve high revenue target: DCCI President MPS showed that the lending rate cap of 9% has been lifted. However, the lending rate will be determined based on a new policy termed as “Short-Term Moving Average Rate (SMART)”. As a result, the interest rate on bank loans may reach double-digit which may trigger manifold challenges for the survival of businesses in the current volatile geo-economic situation as well as provoking inflation. Lifting the cap of lending rate and introducing the SMART policy may also increase the cost of doing business for CMSMEs. The public sector credit growth has been set at 43% for July-December of FY24, which was 40% in January-June of FY23. On the other hand, the private sector credit growth has been set at 10.9% for July-December of FY24, which was 11% in January-June of FY23. It is apparent that private sector credit growth has slowed down due to the current geo-economic uncertainty. Read: DCCI urges industrialists to setup factories in EZs for uninterrupted power supply DCCI President believes that the target set for public sector credit may limit the scope for private sector borrowing. “To reduce public sector borrowing, efficiency and good governance must be ensured by adjustment in government spending through austerity measures, rationalization of government expenses and prioritization of development projects,” he said. He also underscored enhancing tax revenue to reduce the public sector borrowing from the banking sector. Regarding exchange rate stability, Barrister Sattar agrees that a unified exchange rate will stabilize the market. However, strong monitoring should be in place by the Bangladesh Bank so that it is properly maintained. Read: Bangladesh economy is growing to offset global challenges: Speakers tell DCCI seminar Reduction of ERQ encashment limit to 50% and increase of interest of EDF to 4.5% are necessary moves to mitigate the foreign exchange challenges. To enhance remittance inflow in the country, Bangladesh Bank needs to be very stringent to discourage the informal channel of inward remittance like Hundi. Barrister Sattar was hoping for solid recommendations from the Bangladesh Bank to deal with Non-Performing Loans (NPLs). This is because maintaining low NPLs and ensuring good governance in banks and financial institutions are critical for maintaining financial sector stability. "We hail Bangladesh Bank and the Government of Bangladesh for the formation of a committee to review the existing Bank Company Act 1991 to propose effective resolution to the growing NPLs,” he said. Since growing NPLs is limiting the private sector credit and in turn, stalling private sector growth, Barrister Sattar feels that stern measures for quick loan recovery should be brought into place. In connection, he said, Bangladesh Bank can identify and pinpoint the exact reasons, focusing on habitual defaulters, and start engaging with various institutions and stakeholders in order to work towards reducing the current backlog in recovery cases along with quick reforms to introduce ADRs in an effective manner.