Well! Everyone has sudden expenses in life and to meet immediate requirements nothing comes better than a personal loan. Be it a sudden medical emergency, cash crunch for immediate unforeseen expenses, marriage, house expansion, house repair & maintenance, or any other unforeseen situation, a personal loan can be a big relief as it comes without needing any mortgage and is approved fast. A personal Loan is an unsecured loan and the interest rate is generally higher compared to other loans.
While the personal loan is best in case you need sudden money without security; it can be a huge problem if it’s not taken in a planned & thoughtful manner & can jeopardize your financial life. Being financially wise always helps you and a thoughtful decision can save you from being in a troublesome situation.
A personal loan with a low interest rate can be a boon as you get a lump sum amount in one goes which you can use as per your discretion for meeting out various expenses. The EMI and repayment become stress-free and easier and the loan doesn’t feel like a burden over the course of time.
Here are a few points you must take into account before making a decision on applying personal loan. You can do a cost and benefit analysis depending on your need and situation and weigh down all the available options. The borrower has to choose the option according to his or her condition and the terms set for e loan. You should make the choice in a way that solves your current purpose and does not lend you a troublesome problem too.
Interest Rate
Different financial institutions have different rates. Even a single institution offers different rates depending on the customer profile. So before you make a decision for applying a personal loan you must carefully observe the percent of interest rate that would be applied and how the rate would be calculated (Simple interest, reducing the interest rate or compound inters rate). Personal Loans can be offered to you at rates as low as 10 to 12%. However, your profile should match the preconditions laid down by banking institutions. It’s directly related to your income & you’re paying capacity.
Pre Closure Charges
Nothing is better than closing your loan before the complete tenure. But most of the banks & NBFC apply a charge on pre-closure. Charges vary from bank to bank and also depend on the discretion of the banker in charge depending on your profile. There is room for negotiation on this charge and you can discuss it clearly before going ahead.
Customer Experience
The customer experience is very crucial and you should take feedback from existing customers who have already taken loans from the particular institution. Right from the point of your inquiry till disbursement and then on the closure of the loan, it is very essential to see If an institution is helping and have human values other than their purpose of earning profit
Time Taken for Loan Approval & Sanction
Time is taken in the processing of loan approval & sanction also plays an important role if you are in an emergency. Since a personal loan is a type of emergency funding requirement, a reliable banking institution is a must so that you do not fall into an unwanted situation if the loan is rejected.
Extra Costs and Hidden Charges
You should get a written communication for all charges as most of the institution tends to hide certain charges and disclose at the time of charging only. This can unnecessarily increase the burden than your expectation. Other charges like processing fee, stamping charges, and credit appraisal charges may come into the picture while applying for personal loan so you should discuss all charges upfront.
Your Current Loans & EMI
Your paying capacity is a very important aspect to consider before taking a personal loan because if you are already paying EMIs for other loans it can be very harmful to the financial health. Defaulting on installments will not only attract bank charges but would be reflected on your future credibility also.
While you may be able to afford the overall amount with the added interest and the additional charges, at the same time, you need to manage the EMI’s to repay this borrowed amount. You must be honest with yourself, after all, only you would be aware of your repayment capability better than anybody else. Use the personal loan EMI calculator, to calculate the different rates required to afford the EMI of your loan. If you can adjust the loan tenure or the interest rate to suit your needs, go for it.
Conclusion..
A personal loan is a good way to get financial aid in the hour of monetary crunch. They are multi-utility loans and can be used for various purposes like financing weddings, child’s education, vacation, home renovation, etc. They can be used for meeting out any personal needs like paying for credit card bills or other utility bills. The borrower holds the entire jurisdiction to use the loan amount and how he wants without being answerable to the lender.
But because these loans do not require any collateral to be attached as security, they come with a higher rate of interest. Different lenders offer different interest rates which are further governed by factors like borrower’s income, repayment history, credit score, employment type, etc. Every borrower seeks a lower interest rate on personal loans so that they can save on some money. Below given tips helps you get the best interest rate deal on personal loans.
When it comes to the different loans available in the market, the personal loan has been a popular option for plenty. Not only does it offer a financial variability, but it also requires a short loan processing tenure, making it the most accessible loan. However, at the same time, you will need to expect certain disadvantages to this loan. Some of the drawbacks of this loan include high interest rates and short tenures. Apart from these features, there are plenty more you will need to consider.
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