Whenever you are in need of funds to tackle some unexpected emergency and if it doesn’t fall into the regular lending bracket like car loan or a house loan, a personal loan is the best solution. The reason can be anything – getting medical help, getting a two-wheeler, paying credit card outstanding, going on a holiday, or taking up an educational course.
It is very easy to get yourself a personal loan without any collateral. You don’t even need to specify the reason for which you need the personal loan. All you need to mention is the amount of money you require and the time frame within which you will be repaying the loan.
Let us understand some features of a personal loan:
- Anybody can apply for personal loan as long as they have the capacity to repay the loan within the stipulated period of time.
- Personal loan interest rate are generally higher as there are no collaterals associated with personal loans. To borrow money at a lower interest rate, one can keep security like their car or house.
- You can also go with unsecured personal loan at a lower rate if you have a flawless credit score. Having a good credit score would be the result of you making your payments on time and having a good debt-to-income ratio.
- Personal loans generally come with a fixed repayment period, which can range from 12 months, 24 months or 36 months. The longer the duration of your loan, the lesser will be your monthly payment. Although the amount of interest that you might end paying over the term will be higher. Short term loans regularly necessitate high monthly premiums, but they incur lesser overall interest as you generally end up paying your principal amount faster.
There are few things to keep in mind while borrowing a personal loan:
Ensure that there is no prepayment penalty
While certain lenders don’t charge anything extra if you pay back the loan before the agreed repayment date, there are others that charge exit fees or a repayment penalty. Make sure that you are aware of the terms and conditions before you sign the agreement.
Stay away from accidental overdrafts
While asking for a personal loan online, you might need to connect your loan with your checking account for automatic withdrawals. In a scenario like this there is a high chance of your account being drained or overdrawn. To avoid such a disaster it is necessary that you talk to your bank and set up a low balance chart.
Stay away from scam artists
There are a lot of scam artists out there who do unfair practices and levy exorbitant rates. If you come under the influence of such a lender, you would end up having a tough time coming out of debt. Thus, it is highly suggested that you do enough research and look for reputed lenders.
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