Personal loans are convenient options to meet your immediate financial obligations. Whether you have a medical emergency, or wish to clear off all your outstanding debts, or fund your child’s higher education, personal loans come in very handy. They are very easy to avail as opposed to car loans or home loans because lenders do not require collateral for personal loans. Considering the fact that they are unsecured loans, lenders undertake higher risk when providing personal loans to customers, which is why the interest rates applicable to personal loans are higher in comparison with those applicable to home loans or car loans. If you are looking to avail an instant personal loan, here are some important things to consider:
While personal loans will come to your rescue in times of emergency, it is important to understand that the interest rates applicable to them are relatively high and the repayment tenures are rather short. You will have to repay the amount you borrow in Equated Monthly Instalments (EMIs), which means that you need to have surplus funds each month to meet the repayment expenses. For this, you will have to consider your overall financial situation to ensure that you can meet your repayment obligations.
Since it is very easy to access personal loans and the amount is disbursed in only a matter of minutes or hours, it is easy to get carried away and apply for a higher amount that you require. It is essential to calculate how much money you require for your immediate needs and limit your borrowing to that amount.
As mentioned earlier, personal loans offered by banks and financial institutions carry a high rate of interest. If you do not wish to pay too much towards interest, you could always consider alternatives such as loans against fixed deposits, loans against shares or even gold loans. These loans are secured as they are backed by assets, and the interest rates will be considerably lower in comparison with conventional personal loans.
If you hold an account with the bank with which you are taking a personal loan, and if the amount you are borrowing is not too high, you must ask your lender if they can provide an overdraft facility as it will be a more cost-effective option than a traditional personal loan.
Because of how easy it is to avail personal loans, a lot of people tend to take them to go on vacation or purchase a new gadget. It is advisable to refrain from doing so as personal loans must only be considered when you are in dire need of money to fulfil serious financial goals.
If you have a good credit history, you will not have a shortage of lenders who are willing to offer personal loans to you. Since banks are in competition among themselves, you can always negotiate the interest rate offered to you. Even a small reduction in interest rate can substantially lower your repayment burden.
The loan document must be read carefully and in its entirety to ensure that you are not in for unpleasant surprises later on. Go through the fine print and understand all the fees, charges and penalties. Doing so will ensure that you are well aware of the terms and conditions of your loan, thereby helping you make payments on time and clear your debt in a smooth and hassle-free manner.
Failure to repay your loan on time, or defaulting on EMI payments, could have serious implications. It is important to understand that delayed or deferred payments can not only lower your credit score, but can also make you an unreliable customer in the eyes of the banks you approach in the future. Moreover, you will face penalties on the current loan, which will increase the amount repayable, thereby increasing your financial burden.
Every time you apply for a personal loan, the lender pulls up your credit report to determine your eligibility. The higher the number of applications you send to different lenders, the more your credit report is pulled up. For each time a lender draws up your credit report, your credit score falls, albeit marginally. Before you apply for a loan, check your credit score and check the lender’s eligibility criteria for the same as doing so will ensure that your first application will be approved, thereby eliminating the need to pull up your report multiple times.
Keeping these simple tips in mind when applying for a personal loan can help you get instant access to funds in a smooth and hassle-free manner.
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