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Thinking Of Taking A Personal Loan? Read This First

Personal Loan
Written by CreditSmart

Personal Loan Tips To Consider

People need and take a personal loan for various reasons, the top on the list being to pay off some other loan: as many as 49% of personal loans are taken to pay other debts.

Whatever the reason behind taking a personal loan may be, you should consider several factors, the high rate of interest being perhaps the most vital. You should also consider factors such as exit cost and pre-closure charges while selecting a lender.

Before applying for a personal loan, you must take into account the following things.

Do you really need it?

Sometimes we are so impulsive in our purchases or buying decisions that we forget our needs and only focus on our desires without analyzing the consequences of such purchases on our budget.

To stop such impulsive behavior, ask yourself a question: Do I really need this?  If the answer is “no”, don’t go ahead with the purchase, however strong temptation the temptation may be. Will power is equivilent to money.

Exploring cheaper options

Though a personal loan seems to be ideal for many in need, it is wise to look for other options available that are cheaper than personal loans. For example, if you have a home loan, you can get an additional top up loan: it will be cheaper and the repayment tenure will also be long.  Other advantages of such financial alternatives is you can keep check on cash flow as the EMI’s will be smaller and you will not be burdened with huge payments at the end of every month.

Take advantage of your Employer VIP status

Lenders and financial institutions are known to categorize businesses and companies. The categories are Super A, Cat A, Cat B, Cat C, and so on. Employees of these companies are considered more creditworthy and are offered lower ROI. If your employer has a VIP status, you can try negotiating ROI and other charges such as processing fees and foreclosure charges.

Exit clause

You should choose lender on your personal objectives, for example, longer tenure or low foreclosure charges. Some banks and lenders offer zero foreclosure charges and longer tenure as well. If you are expecting a bonus, you can consider prepayment of loan and it makes sense to save money if you are going for foreclosure.

Time to disbursal

It is necessary that the time of disbursal of loan amount is short and the money is directly transferred to your account. Some lenders have online decision making process and the personal loan is approved within minutes and loan amount is credited within a short period of time.

Flexibility in repayments

Today majority of the banks allows its loan customers to make flexible repayments. For example, sometimes customer can pay excess amount and redraw money if needed. It is like overdraft facility and you should choose that if it suits you.

If you take a personal loan, it is necessary that you plan a repayment schedule of the loan so that your credit score remains in good standing.

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