Over decades there has been a steady increase in the standard of living of the people. Further people now-a-days have started splurging more and more money in order to fulfill their desires. Given such a scenario it has become increasingly difficult for the general population to keep up with their wishes but just the disposable income they have in hand, this has led to an increase in the amount of money people have started loaning from banks and other moneylenders.
Loans can be categorized into various categories on the basis of the debtor. The classification mainly comes from whether the debtor is an individual person or a business. In cases where the debtor is an individual, the loans are termed as personal loans. The most common types of personal loans are car loans, mortgage loans, credit cards, payday loans and home equity lines of credit just to name a few. Everyone who is willing to take a loan wants to be able to take a loan at the lowest possible interest. Having said so, there are certain factors which play a major role in determining the rate of interest at which a person may be able to raise a loan. The most important factor being the credit score of the borrower. A person may be able to reduce the monthly payments that go in favour of personal loans by going for a longer payment terms. However, in this case the interest that will be paid by the debtor is higher. However, people are always interested in being able to secure a personal loans for bad credit too. Hence it can be said that irrespective of the credit of the borrower, everyone wishes to secure low interest personal loans.
Whether one tries to obtain personal loans online or through the old school methods, it is essential that the borrower should make the borrowing process well budgeted. Well planned loan helps you to not only secure loans easily but also makes it easy to make repayment. Moreover every borrower has 2 options while taking a loan. They can either raise a secured or unsecured loan. In case of a secured loan, the borrower will be given the loan amount against some security e.g. property that is purchased using the loan amount. Hence if the debtor is not able to repay the loan then the bank will confiscate the property which was used to secure the loan. However, if the borrower doesn’t want to risk any property then he may go for an unsecured personal loans.
CHOOSING THE RIGHT LOAN
Given the high competition in the loan markets, loans are cheaper than ever before. Not only is there accessibility to cheap government money but also cheap loans from banks. Because of the increasing competition between private banks, they seem to be on price wars and the customer may benefit from it if they can select the right banks under such circumstances.
However, even in such a situation, it is essential to ensure that the loans with low interest do not have any hidden costs to them. Hence before you select the loan you would like to raise, you need to consider as to how much amount you want to borrow and how long will the tenure of the loan be. This can be easily done by ensuring that you borrow as little as possible and try to repay the loan as soon as possible. Further, the amount you borrow should be in accordance with your credit limit. Do not borrow more than you can repay. Even though having a loan running for a longer period of time will reduce the EMI, it also will increase the total interest that you pay in totality. Hence in order to have the lowest possible interest amount, one should borrow as less as possible and repay it as soon as possible. There are numerous loan calculators available online which can help in finding out the right amount and repayment duration for your loan.
A good approach of obtaining personal loan can be by seeking one from your employer. Often employers offer loans to their employees for certain purpose and amount. Such a loan may be made tax-free by the employers. Further such a loan can be repaid over a period of time through deductions of the employee’s salary. Hence rather than taking a loan from any other lender at a higher interest rate, it may be beneficial to
There are numerous other factors that you may want to consider while taking a personal loan. Few of these factors are enumerated as follows:
1. Affordability: You need to consider whether or not the loan you are about to seek is affordable in terms of amount and duration of the loan. If not then it is advisable to review the loan details.
2. Circumstances: Another thing that may require due consideration while seeking a loan is the likelihood of change in your circumstances. If your circumstances are likely to change then you may have to consider all present and possible future conditions before you go on to take a loan.
3. Possibility Of An Early Payment: You may also need to consider the possibility of an early payment. This means to know whether or not your borrower will let to repay the loan early if you want to. In case you think that your future circumstances may let you repay the loan early, then you must seek loan from a lender who may allow you to do so.
4. Arrangement Fee: Further an adequate research may need to be carried out to know whether or not there is an arrangement fee.
5. Deferring From Payment: In order to be more comfortable while borrowing from your lender you may need to check from the lender if they may allow you to take a payment break or defer the loan payment. It is imperative to check this in advance. A lender that allows you to take a payment break will be more suitable than the one that doesn’t. This is especially the case when you have adequate reason to believe that you circumstances in future may need such a break. This may make you be more comfortable while taking the loan.
All of the above aspects go a long way in making you loan seeking and payment easy. By taking the above into consideration you may not only be able to secure a loan at a low interest rate but also be comfortable in making the repayments. Taking a loan is a huge decision for every individual. Hence it is essential that adequate planning and understanding goes into the process of the same. This way you will be able to seek the loan that is most suitable to your needs thereby fulfilling your needs and at the same time not increasing your financial burden.