BEFORE you go for any loan it is essential that you consider the advantages and the disadvantages associated with them.
When an individual should consider the option of personal loan? The answer to this question depends on the circumstances. If a person needs money urgently and doesn’t have any asset but owns a credit card, then the personal loan is recommendable. Cash withdrawal is far more difficult using the car instead of a personal loan. One can get the loan at lower rate when an individual has gold, property or shares. However, it is not true that people with bad score have no other option to get online loans. With low scores even, lenders allow some of the borrowers to have the money.
Personal loans, as the name suggests can be put to use for any purpose deemed correct by the individuals. It may include any of the mentioned below:
- Down payment on the car
- Home renovation
- Clearing any pre-existing debts
- Funding vacations
These are just some of the reasons which might tempt one into taking the personal loans. One can borrow these loans from the banks and the financial institutions of repute. These loans are offered for a period ranging between one to five years. These loans offer the much needed financial support to people and are never meant for a longer period.
While the personal loans are easy to get , one often ends up with multiple loans and then they find the repayment a great hurdle in their financial well being. While every individual is aware of the complications that may arise due to multiple loans they take, there are situations which force them into taking these loans. One of the best ways to deal with these loans is remain vigilant and keep a record of the loans and the repayments which one has to make towards them. One must also look at the different factors mentioned below while they decide on the loans:
- Take a note of all the terms and conditions which are applicable to the loans you take and the way they are going to affect your finances.
- Only take the loans when you can see a real benefit with them.
- Keep a track of your debts and as far as possible remain current with the payments on them.
- Check with the lenders on any hidden costs and see if you can negotiate to work it in your favor.
Getting the loans
The process of getting the loans is pretty simple. Once the borrowers apply to the lenders for a specific amount with a defined time period and providing all the necessary documentation which completes the qualifying criteria, the lenders come up with the approval and the amount is handed over to the borrowers. If the borrowers continue the repayments as per the agreed terms and complete the same within the specified time period with the interest rates on the same, the loans are closed. Complications can be seen of the borrowers fail to comply with the norms set and agreed upon for the repayments.
Personal loans are preferred over the credit card loans as there are less complications involved and the interest rates on the same are much lower than that on the credit cards.
What to remember when opting for personal loans?
Selecting the lenders is of great value and is a tough job given the current market scenario. There are a lot of lenders who are ready to offer you loans at affordable rates and flexible terms which you might be looking for. Most of the customers focus on the interest rates while they discount the other factors while selecting the lenders. While there is no denying to the fact that the interest rates are important, the reputation of the lenders and the experience in the business are the other vital factors which cannot be discounted in anyway.
There are lenders who have been operating in the markets for quiet sometime and have the repute of the better lenders which are reliable and are transparent ion their dealings. However, they may charge marginally higher interest rates but looking at the overall specifications it is worth paying.
For better reimbursement plans
There are times when we take multiple loans but when it comes to the repayment of the same we are in a zinx. It is because these loans come with different payment schedule and for one to keep a track of these is not at all easy. One should take up to loan consolidation which brings all the debts uinder one umbrella and the individuals are required to take care of a single consolidation loan with just one payment with a lower interest rate and affordable monthly payment.
When an individual needs the money without much documentation process or one doesn’t want to explain the reason behind taking loan, then personal loan is the best way. One can even get them within 24 hours. One has to just fill the application form and cheque reaches the doorstep of the individual or money could also be send to the account.
Let’s consider the pros and cons of personal loan to make an informed decision.
- Flexibility of use: One can obtain personal loan for various purposes such as medical expenses, travel expenses, clothes, or even house/ car improvement. The flexibility in personal loan is very essential.
- Quick availability:It is very essential for people to get the loan at time so that one can repay the amount as soon as possible. One can get loan within 24 hours even. Therefore if anyone is considering emergency fund, this is the best way out.
- Minimal documentation required: In personal loan documentation is less than as compared to car loan or home loan. There is no need of formality and the work is very less therefore the documentation and the requirements are limited. One just needs to fill the application form and fit in the requirements of the lender.
- No collateral or security needed: The tenure is less than car loan r home loan and there is no requirement of security for this. Personal loans do not need security and therefore the assets are secured. One doesn’t need to put any collateral and therefore the borrowers need not worry about it.
- High interest rates: They don’t require any security and that’s why they charge high interest rate. There is no collateral required which makes it difficult for the lender to give loan to the individual. There is risk involved and they charge the borrower for this.
- No part payments allowed: One has to pay the loan for the entire tenure. It can be very expensive.
- Need for good credit rating: Personal loans are risky as there is no security involved and therefore they require a good credit rating. The loan is available only for individuals with good credit ratings.
- Variable loan and interest as per your credit rating: The borrowers with low credit rating get the interest rate which is very high and the principal given is low. Also stricter repayment terms for the people with low credit rating.
Now after analyzing both the aspects the choice is on the individual. Once an individual decides to take this personal loan, it is advisable to honor the commitment as failure to repay will affect the credit rating of the individual. One should make sure to take the loan for correct and appropriate reason like one should not take the loan just to fund the vacations. It should be considered that amount is repayable or not.