7 Golden Rules To Follow When Taking A Personal Loan
If, of late, you have a pressing need of cash, then a personal loan can be the best available option for you. Easy availability is the major draw of the personal loans. While it is the best way to overcome cash crunch, they are expensive and make sure you have acquired all the necessary information about these loans.
So, here I am going to discuss 7 golden rules you should follow while taking a personal loan.
Consider Doing All Inclusive Comparison
When you are looking to take a personal loan, you will see that the interest rates tend to vary from bank to bank. If you are looking to get an optimal loan, then don’t just compare the rate of interest or EMIs, make sure you take into consideration different charges such as – pre-closure charges, processing charges, and documentation charges.
● Processing Fee – You will have to pay 1%-2% of the loan amount as processing fee to your bank. These charges will then add on to the total cost of the loan. So, make sure the process fee is low.
● Late payment fee – Usually, credit institutions levy penalty (late payment charges) when you make late payments on your EMI. If you don’t have a fixed source of cash flow, then make sure you have considered this penalty as well.
Delve Into Other Options
Usually, the rate of interest for the loan against gold or other securities are quite low. Therefore, if you have any security that you can use, then make sure you have examined that option in and out before you go for a high-interest personal loan.
Avoid Over-Shopping For The Personal Loan
When you apply for a loan, you tend to leave a footprint on your credit record, which lenders check before giving a green signal to your loan. Too many loan applications tend to reduce your credit score. Owing to this, the lenders will deem you as a credit risk and this will also reduce your chances of getting your loan application approved or you will be offered high interest rates.
Go Through The Loan Document
Before you sign on the dotted line, make sure you have read the loan document carefully. Make sure you have completely filled in all the terms and conditions and match on those that were agreed upon while availing
the personal loan. Make sure you are familiar with the fees, different charges and also the penalties for non repayment. Very often, agents who market for the personal loans don’t share holistic and accurate information with the customers. So, make sure you are cautious.
Avoid Add-On Offers
At times, the banks while selling personal loans also pitch various other benefits such as accidental insurance plan. You will be told that in order to avail the benefits, you don’t need to pay anything upfront and your insurance premium will be included to your EMI. Make sure you have straightaway said No. As if paying high interest on loan was not enough, you will have to pay interest on insurance premium as well.
The situation you are in will tempt you to take a personal loan. However, there is no excuse if you fall for such add-on offers and you will be the only one who will be blamed. Well, I have just mentioned about accidental insurance, there are various other add-on offers out there. So, it is advised to avoid such add-on offers as they are no good.
Know The Process Of Deferment
This will surely come handy when you have a cash crunch and you are unable to meet the repayment obligations. While the conditions were sound when you decided to take the loan, there are chances that the things can go wrong in the future. There can be some emergency in your family or a loss of job can lead to cash crunch and inability to fulfill the payment obligations. Therefore, it is important you are aware of how to handle such a situation while accessing the loan.
Calculate Your EMIs
Since personal loan is an unsecured loan, it is offered at high interest rate (11.99% to 30% per annum), depending on your profile and your repayment competence. Usually, the banks offer up to Rs. 30 lakhs and
the term varies from 12 to 60 months. You can also use online calculators ascertain the final cost.
Guest Blog By Ankita Dixit.
Hi, my name is Ankita Dixit. I started writing from young age and most of my writing skills and knowledge are self taught. Currently, I am working as a professional writer at Paisa.co. I have write on various topics including travel, motivation, finance, technology, credit cards, insurance and entrepreneurship etc