About Personal Loan
A personal loan is often short-term or a medium term loan that’s smaller than a mortgage and is incurred to mitigate the financial needs of the person. A peculiar thing about a personal loan is the absence of collateral, so for the most part, this one is kind of unsecured loan.
Normally the issuance of personal loan is for expenses that range in from financing a car, to structuring a debt, renovating the home, managing unexpected medical and auto repairs or even financing a good ol’ vacation. Judging by the period of time, personal loan lasts from 1 year to 5 years, unlike the mortgage ones where they run up to ten, fifteen or twenty years.
Why Choose a Personal Loan?
Personal loan as the name suggests is often partaken in order to meet the financial needs that don’t range in for high values. You can avail a personal loan for yourself on for any of the reason as you deem fit. We’ll list out the major reasons that mark the issuance of personal loan down below-
- Financing a Car
- Renovating your Precious Home
- Meeting your debts or structuring them
- Managing unexpected auto repairs or medical expenses
- Financing yourself or family a good ol’ holiday
- Funding your lavish wedding with your loved ones
- Act as liaison for meeting business expenses like marketing expenses and more
- To boost your cash flow for the moment
- Or to even buy yourself a new off the shelf Flagship Smartphone, aka iPhone.
For many, personal loan has acted as a great means to meet the ever popping personal and business expenses. Personal loan balances out the cash flow for many without causing a great deal of insurgency. There’s not much to do to avail a personal loan, as the documentation and filing procedure is pretty easy and quick. No doubt, why the multiple banks and NBFC’s are offering different packages of personal loan for all strata of the population, i.e. salaried and self-employed.
Things to Consider while Seeking a Personal Loan
Under all those shiny glitters of personal loan, there’s something you need to understand about it before diving deep into it. Personal loan on its part is a great boost of finance in need but ample consideration needs to be laid out so that it never burdens you. The below-mentioned guideline shall help you to manage it better. Read along.
- Always plan your budget as against the expenditure you’re needing it for. Seek only the budgeted amount you need.
- Have your Credit report or CIBIL score checked. Also keep track of your credit history too.
- Normally the personal loans come with a repayment period of anywhere from 1 to 5 years, so work out your APR (Annual Percentage Rate) as for the interest calculation. APR calculation would help you in finding the exact amount you’ll be paying off. Generally, the interest rate ranges from 11% to 35% as per the varying circumstances.
- Take this for an example, you take a personal loan of Rs 10 lacs for a period of 4 years with the interest being charged as 11%. Your EMI amount will round off at Rs 25,846 with total interest coming in at Rs 2,40,585. Your total payable amount over the period of 4 years will be Rs 10,40,585. Don’t forget the loan processing fee on top of it coming in at around 1% to 5%.
- Have a round-up on the market and go through the multiple of options before zeroing on the best. Always look for the personal loan with lower processing fees and pre-payment options. Additional costs if not kept tab off, can mark a vivid difference in the loan amount.
- Keep your options open and seek customized personal quotes on loan so that you have plenty to choose from.
- Never just fall for the lower rates, as additional charges or flat interest rate might surge your interest and payable amount at the end. Seek answers as to whether the interest is charged on a flat basis or on reducing balance basis.
- And lastly, always read the documents and their terms carefully before signing the loan papers.