Wednesday, 9 November 2016

How to get the best deal on your personal loan

Loans are the need of modern life. There are so many expenses you can source from different types of loans. Personal loans are however one of the fastest disbursed loans wherein you also get flexibility to use credit for different purposes. Unlike auto loan, education loan or home loan, the purpose of personal loan is not defined. With minimum documentation, these small scale unsecured loans are easy bets in the times of financial emergencies.

However it is imperative that you know how to make best use of the different types of personal loans and find the best deal as per your requirement. Here are some quick tips to follow before you apply for a personal loan.
1.       Be it a foreign vacation with the family, education of your kid, medical emergency, renovation of your office/ home or a luxurious shopping spree for an upcoming celebration in your life, a good score would help you get a personal loan of choice.  However it is imperative that you do your homework well and compare personal loans offered by different banks.

Thus as a thumb of rule, compare different deals before you finalise one. Comparing not only helps you find the cheapest deal but evaluating different banks’ offers also educates you. This will help you compare the interest rates and total cost of the loan, and you would be able to make a learned choice at the best price.

2.       While comparing the personal loans interest rates, check out all the expenses. The cost of loan includes, monthly installment, bank’s processing fee, documentation charges and pre closure charges. So do not just stick to interest rate when comparing two offers.

3.       Next point in consideration should be an article for pre-closure of the loan. Some banks charge if you opt for pre closure of loan. So, if you wish to close the loan in the middle of the term you should clearly study this article and find the deal that doesn’t add cost to loan if you pre close it.

4.       There are many factors that can help you get a better loan deal. Take for example, you already have a loan account with ABC Bank and you are regular in your payments. The ABC bank may offer you a good deal as you are a steady customer. So if you use a credit card or have a loan from a bank, try to negotiate your request from the same bank. A bank is also interested in retaining its diligent, old customers.

5.       Not to mention, one of the most important factors that help you get the best loan deal is your credit score. A good score increases your credit worthiness and reduces bank’s risk metric. Thus with a good score you naturally become an eligible customer of a bank for lending money. According to CIBIL, 80 per cent of people with 750 or more score can access bank products as per their choice.

6.       A bank always prefer to lend to those who can repay the loan. So your job details, employer’s or company’s reputation, your personal assets such as a house, car or other assets besides your cibil score also add to your eligibility for a personal loan.

7.       Your interest rate would also depend on the number of years you want a loan for. Usually a long term loan has less steeper interest rate.

8.       As personal loans are unsecured loans, you would find that popular banks such as SBI, PNB, HDFC and alike, often offer the best deals. They are usually the first ones to announce the RBI’s repo cut on interest rates. They often offer good festival offers too. So festival time indeed could be the time to get the new credit line.

9.       If in case you lack a credit history or are just employed, you should apply for a credit card and get a secured loan. This would help you build a good history within six months and later on you can try other avenues of credit.

10.   Last but not the least, apply for personal loan only in case of emergency. For, there are other credit options that are cheaper. A secured loan is always cheaper because of collateral or security. But an unsecured loan is most risky offer by a bank. So without having an extra ordinary reputation, interest rate of personal loan is ought to be more than education, auto, or home loan.

Knowing these points I hope you are more confident about getting the best personal loan deal.

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