Thing to Keep in Mind While Taking Personal Loan
Today, getting a personal loan is as easy as shopping online, though the procedure may involve some amount of paper work and filling out an application form. Most banks also provide you the luxury of online applications and pick of documents from your home or office. But before you jump to the bandwagon and apply for a personal loan here are a few things that you should know.
No Collaterals for Personal Loan
As these are unsecured loans there are no collateral required by the bank for granting you the loan amount. Collateral is generally an asset that you hypothecate with the bank as security in case you fail to repay the loan amount.
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For processing the loan application the banks only needs certain crucial documents like your bank statements, income proof, address proof and your photograph.
Thorough Vetting of Credit Worthiness
Being an unsecured loan the banks scrutinise your credit worthiness to the last ‘T’. All factors, such as income, place of residence and tenure of employment are considered before granting you the loan. Most banks have set parameters which you can view on their website.
Qualification Criteria are Stick
The banks are bound to reject your loan application if you do not satisfy each and every one of their loan criteria.
No Restriction for Use
There is no particular restriction on the use of personal loan. Through there may be categories like personal loan for computers / laptops or personal loan for travel, there is no real embargo on the use of the personal loan amount after it is disbursed. The only restrictions is that you cannot use a personal loan for investing in speculation like stocks, mutual funds etc.
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Best Option to Pay Off Credit Cards dues
The interest rates for credit card dues can go up to 45% p.a. and that can be a real burden on your finances. You can use your personal loan to pay off these dues and lessen the interest component that might otherwise eat away at your finances.
Easy Repayment Options
Personal loans are granted up to tenure of 12 months to 60 months. The EMIs are to be paid every month. You can select convenient repayment options like Standing Instructions (SI) to the banks or Electronic Clearing Service (ECS) to reduce the hassle of remembering your EMI due date every month.
Interest Rate on Reducing Balance
Interest Rates on personal loan are generally on reducing balance rate. Therefore, you will be charged interest only on the outstanding loan amount and not on the entire sum.
Higher Interest Rates
Due to its unsecured nature the interest rates of a personal loan as compared to other loans are high and can go up to 18%.
Interest Rates on Case to Case Basis
The interest rates generally vary from person and person and depend on a lot of factors staring with your loan amount, existing loans, income status etc.
Scope for Part Pre-payments
Now-a-days banks allow for part pre-payment of the loan amount without any charges or penal cost.
Special Privileges are offered for Existing Customers
Taking a personal loan from one’s own bank has a lot of advantages. Along with special privileges offered, the loan application, documentation scrutiny, processing and disbursement are ultra-fast and can happen in a matter of days.
Personal loans are a good way to enjoy those moments of your life without waiting for the right time to spend. Affordable personal loans are offered by almost all banks today and the process is easy to understand. Being a loan based on case to case basis the personal loan offered to your peer may not be the same as offered to you. Therefore, it is important to vet your own financial credentials and commitments before you enter into a credit relationship with your bank.