Thursday, 25 May 2017

Things You Should Know About Personal Loan Disbursal Process

Personal loans are extremely popular due to their multi purpose nature. For instance, you can get a personal loan for buying a house or a car, or even for paying your medical bills. The interest rates on personal loans may be somewhat high than other types of loans, but they can be really helpful when you need a large sum of money at once.
For those who have never taken personal loans or rather any kind of loans usually have several doubts regarding the same. If you are also one of these people, then the following points will help make things clear:
Actual Disbursed Amount
You will almost never get the full loan amount that you apply for in a personal loan. This is because the lender levies multiple kinds of charges and taxes such as processing fees, service tax, etc. before finally disbursing the money.
Mode of Payment
The standard mode of loan amount payment is either through a banker’s cheque or a demand draft. Your lender may send it (whichever it is) or you could also collect it from the bank branch.
Sometimes a lender may also send the money to your account directly through a wire transfer.
Add-on Offers
Lenders, when selling personal loans may also pitch add-on products such as accidental plans and try to rope you in by telling things such as you don’t have to pay anything upfront for the facility, etc. However, these add-ons can greatly increase your EMIs depending on their nature and variety. Thus, you must think twice before giving a nod. Usually, you don’t need such add-ons so it’s alright to say “no”.
Loan Costs
You would think that the principal amount and interest rate are all that you have to deal with when you get a personal loan. However, that’s not true. There are a few other major fees that you must know about:
Processing Fee:  Almost every bank charges a processing fee on a loan, which could be anywhere between 1% to 2% of the loan amount. Alternatively, some lenders charge a flat processing fee. At any rate, you would want to take that into account before signing the papers.
Prepayment Fee: Many people don’t know about the prepayment fee, mainly because it comes into the picture very late in the loan term. The prepayment fee is the fee for repaying a loan sooner than the actual term completion. So, say you sold a house and now have enough money to repay your loan in full, which is a good idea as you will save a lot of money on interest. However, you may have to pay a prepayment fee for this.
There are some banks though, that don’t charge a prepayment fee which is why it’s best to confirm it with yours.
Late Payments
Although late payments usually attract penalties, there is one more thing you should be worried about, which is CIBIL score calculation. Every single late loan payment damages CIBIL score, which is why you must make sure that you always pay on time. By missing EMI deadlines repeatedly, you can jeopardize your credit report itself and lead to a poor credit score calculation.
Fixed Interest and Floating Interest
The interest rate applied on a personal loan can be of two types- fixed and floating. In the case of the former, the interest rate remains the same until the completion of the loan term. However, in the case of the latter, the interest rate can vary throughout the loan term as it’s based on the market fluctuations. So, if you want to minimize financial risk then you can stick with a fixed interest rate, but if you feel the interest rates may drop in the near future then floating interest rate is better.

Personal loans, just like other kinds of loans must be obtained only after due consideration. It’s also important to get to know the basics so that you know how the calculations are done, and how your money will be spent. Failing to do the homework can easily lead to a financial crisis and will damage your credit score too.  

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