Tuesday, 4 July 2017

Things one must consider before getting a personal loan

What is a personal loan? Unlike other loans like home loans or car loans there is some collateral like your home or a car this is one type of unsecured loan where no collateral is needed to avail. Personal loans comes handy when times of emergencies like medical expenses or education purposes, etc. you can access personal loan within a day or a few days depending on from which bank you are opting the loan from. The interest rates are quite high as compared to various loans available in the market and also the charges related to it, but are personal loans the right way to meet your urgent needs?
Here are some points to consider before going for a personal loan,
Consider family and friends
 In an urgent need of money do not opt for personal loan directly; try speaking to friends and relatives and try availing money from them. This will give you spare time to repay them without a deadline on your head and no interest. If for some reasons you are not able to pay the amount to the person you borrowed the money from, they will understand your current situation and spare you more time but banks won’t.  For banks monthly repayments are mandatory and if you don’t make your payments on time will lead to a personal loan bad cibil score.
Ask you bank if you have access to overdraft facilities
Overdraft is an option given by banks depending on your transactions and relations with the bank. If you are seeking a small amount try contacting your bank and if you are credit worthy they will provide you overdraft which can be repaid with a nominal interest rate.
Consider alternate cheaper loans
There are other loans as well which offer you cheaper interest rates and low processing fees. Loans like gold loans, used car loans which take the same amount of time to get processed; that is a day or two but has fewer hassles in terms of repayment. Like you can walk in with your gold in an HDFC bank and they will understand your needs consider your gold and give you on the spot loan.
Take what you need
Once considering family and friends and if there is no way of getting the money, try and understand the amount you need as a personal loan and not what your bank is offering considering your eligibility. If you need one lakh rupees try getting the same amount as loan but do not over borrow, as personal loan comes with high interest rate and less tenure for repayment.

Try negotiating for interest rates
There are different banks which offer personal loans, and in this competitive time there is different interest rate with different banks. When opting for loan try negotiating on the interest rate, either go for a flat rate of interest or reducing balance interest. This will help you save a good amount of money.
Understand the “all” in costs
After negotiating the interest terms try understanding the other costs as well like processing fees, foreclosure charges and late payment fees. Processing fees ranges from 1-2 % depending from which bank you are taking the loan from, it’s a flat rate which is deducted from the sanctioned amount. For some banks there are high foreclosure charges, if you are trying to close on the loan early some banks will charge you a lot. If you fail to pay your EMI on time it has bad consequences, there is late payment fees and then your cibil rating will also go for a toss. So, try comparing your options before you finalize on which bank you are opting the loan from.
Read loan agreement
Before you sign the agreement read the loan agreement carefully so that you don’t have any sudden surprises in future. Ask the bank relationship manager to send you a soft copy of the agreement so that you read it with ease before signing the agreement.
Check on you Cibil score
Before you apply for a personal loan check your cibil score. A low cibil score would either reject your application for loan or you may get the loan on higher interest rates. It’s always suggested to keep up with your monthly EMIs to avoid such situations.

Consider all options before taking a personal loan! it is only viable if you are in a desperate need of money, try not to take a loan for fancy things.

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