Is it hard to get a personal loan

Hard to get Personal Loan

Whether it is a financial emergency or an emerging debt package, a personal loan can help in many ways. It is the fastest way to get usable cash without any valuable collateral. Personal loans are, however, one of the most costly types of loans since they are not backed by any collateral and banks are more likely to offer unsecured credits. If not properly handled, personal loans could do more harm than good. As a smart borrower, you therefore have to remember these ten things before you apply for a personal loan.

Find your loan ranking

The first and most important thing that the banks check before giving you a personal credit is the credit score. Since no asset collateral supports a personal loan, the loan criteria could be even more stringent. In contrast to secure loans where the value of your collateral becomes a key determinant of your credibility, the credit value is regarded as the most important factor for personal loans. Your credit score reflects your reputation as a borrower and allows banks to assess the danger that you are facing. Those with good credit scores can easily obtain loans at a more competitive interest rate.

Look more closely at the investments

This recommendation is not just for personal loans but also for all kinds of loans. Before taking a loan, you have to weigh your present and potential financial condition. A personal loan may be the ideal response to your financial problem, but if not properly handled, your finances could be reversed. An EMI calculator is useful for that. Just enter your loan number and the interest rate to find out the EMI you have to pay every month. Prepare a budget for your monthly savings and expenditures. You have to wonder if the new EMI will suit your monthly budget.

Consider alternative alternatives

As stated earlier, personal loan interest rates are higher than secure credit which is funded by assets such as cash, land, automobiles or something else. Gold loans or home loans may be useful alternatives to personal loans at relatively cheaper rates. The interest rate on personal loans can range between 16 and 24 percent. Even if you opt for a top-up home loan (if you have a working home loan), interest rates will be lower by 9.50 percent. Unless you are able to save properties as leverage, you will investigate the possibilities for secured loans.

Determine wisely the volume

It is never advisable to borrow more than you need. Analyze the purpose for which the loan is necessary and calculate how much you will need it. The Bank may be able to give you more if it feels that you are more reliable. It’s not a good idea, though, to get the number overboard. Higher amounts mean increased debt and higher interest rates. So just borrow to what you need.

Explore the Good Deal

The unsecured loan market has become truly competitive in the last few years. A number of lenders will be prepared to provide you with a personal loan which is unsecured provided you meet their basic eligibility criteria. You will then pick the first lender that you see. Shop at lower costs and better services. Besides interest rates, other charges and other fees such as prepayment penalty, interest / late payment penalties, cheque bounce fees, etc. should also be compared.

A bank may charge a lower interest rate , for example, but the pre-payment penalty may be relatively higher. Although a particular lender may charge a slightly higher rate of interest, the processing cost is lower and there is no advance payment penalty. The second lender is better to go with.

The Fine Print Read

While banks have to disclose all important charges and charges, you should still be reading between the lines to see how it works best for you. There are several things to consider here, such as the processing fee, tenure for loans, cancellation of loans or foreclosure. These hidden charges can catch you off guard at a later date if not considered in the beginning. Read the terms and conditions; do not depend on all the specifics of the bank’s managers. Do your homework and make an informed decision.

Speak about the worst case

You should think before signing on the dotted line what effect it would have on your financial condition if you couldn’t afford to pay your EMIs on time. The default on loans not only leads to a pile of debt burden on your mind, it also affects your credit score directly. Just a late payment will bring down your credit score and it will be ruled by a full loan default. It is therefore advisable to think about and act accordingly on your future finances.

Take personal credit only in the case of an emergency

While banks will advertise their personal loan products for leisure activities, such as world tours and purchases of the new iPhone, it is best to opt for a loan only when you face a financial emergency. Loans have interest rates and should not be taken on these spending expenditures. Failure to pay a single EMI could damage your credit score, making it harder for you to obtain additional loans. You will have to take a personal loan if you believe there is no other solution.

Personal loans are the easiest way to deal with emergencies quickly, but the above points should be considered before signing the contract. For fact, any issue will not only have adverse consequences on your financial position, but will also reduce your credit rating, which would make it harder for you to take credit in the future.