- Are you aware of some important things you need to take into consideration when applying for a Personal Loan?
- Do you know how you can compare the interest rates and negotiate with financial institutions regarding the same?
- Have you tried reading about what various experts are saying only to get confused about the process?
A Personal Loan sometimes becomes a necessity for many individuals and families. Most of us take recourse to a personal loan in order to tide over an emergency. Even though there is a need for finances, individuals should not get carried away by the first offer they receive. It is important to do proper research and find out which kind of personal loan is best for you.
In this article, we speak to some leading financial and banking experts and ask them about some important things to watch out for when availing of a personal loan. However, before we begin, let us first have a brief discussion on personal loans.
Personal Loans: What are they?
If you are someone who is looking for hard money loans, you might want to understand what are personal loans, to begin with. In simple words, a Personal Loan is a lumpsum credit offered by a financial institution to an individual who requires it. As the name suggests, it can only be availed by an individual against his or her name and not by a group of persons or a business.
Experts also refer to personal loans as unsecured loans offered by institutions. This is because they do not have any form of collateral (house, jewelry, etc.) attached to them. Yes, the bank will take a look at your salary statements and income tax returns before deciding whether you will be able to afford one.
When someone takes a personal loan, they are supposed to pay interest on the principal amount and return the money over a period, usually referred to as EMIs (Easy Monthly Instalments). Most personal loans are on average two to five years long.
5 Things to watch out for when applying for a Personal Loan
- The Credibility of the Lending Institution-
Individuals should ensure that they are only availing of personal loans from credible financial institutions. This is because established institutions often do not dictate unnatural interest rates. They tend to maintain a level, which is mutually agreed upon by other lending institutions. This will ensure that your process is completely legal and documented.
- Zero Foreclosure Fees is available-
There are many times when we would like to close a personal loan before the completion of the loan period. There are some institutions, which will command a separate foreclosure fee for the same. This is an additional expenditure, which is not very helpful to the consumer. Individuals should opt for lending institutions that have zero foreclosure fees on offer.
- Interest Rates on offer-
Many individuals are swayed by the fact that they are going to receive the loan. They do not care to check for the interest rates, which are being charged. It is essential to compare the rates offered by different institutions. Even a small change in percentage points can lead to thousands of dollars being saved by the individual availing the personal loan.
- Simple Formalities and Processing-
Many banks realize that individuals who are looking for personal loans can afford to go through certain hardships. They make the paperwork and the processing difficult for the consumer. They even charge separately for the processing part of the loan. Individuals who face these issues should steer clear of such companies and institutions at all costs.
- Penalties and Flexible Payment Terms-
There might be months when you would not be able to pay the EMIs on time. However, the penalty charges for the same should be moderate and not astronomical in nature. Financial institutions make the most money on things like late payment fees, interest on interest, etc. This is why you should look at the terms and conditions properly before applying for signing.
The Final Word
According to banking experts, individuals go for personal loans for a range of reasons. It might be because of some pending student bills, or medical emergencies, or even an extravagant new purchase. If you follow all the points in the article, you can ensure that you are getting the best deals for your personal loan.
