The personal loan is often borrowed to meet the unforeseen expenses .But if you have the habit of using personal loans to meet needless expenses you are at risk .If the expense can wait till you get the required amount on your own ,then what is the need of personal loan The article throws light on factors to be kept in mind while going personal loan way.This article Questions that you should ask yourself.
- Types of personal loans
- Factors affecting personal loans
Tips on getting best deal personal loans
Here are some very simple personal loans tips that would help you make an informed decision about the type of loan to get and who and where you could get it from. The First Question you should be really asking yourself is:
- Do I really need it?
- Can I manage without a personal loan?
- Is it for a frivolous expense- like a holiday- that I could really avoid?
- Is it possible that I could secure the money by other means- like borrowing from a relative, taking up a part time job, sale of an asset? If you can avoid it, then don't take the monkey on your back!
- A Personal Loan would vary according to certain factors
- The amount that is to be borrowed
- The rate of interest
- Whether it is a fixed or a variable rate of interest
- Loan repayment term( in months or years)
- The down payment or deposit
- The associated fees or costs- broker fees, prepayment fees, origination fees.
- The insurance that the lender would require
In other words, you are buying a sum of money for more than it would cost the lender. It would be a mistake to consider only the rate of interest before taking a personal loan. There are also arrangements fees and penalties of prepayment that you would have to consider. Many of the "no-fee" credit lines carry with them a prepayment penalty. This is the way the lender/broker makes his profit. Please work out the total expenses of your small or big personal loan before signing up for the loan agreement.
Personal Loans are of various types, mainly Secured Personal Loans and Unsecured Personal Loans.
Secured Personal Loans
These loans are given by the lender upon the pledge of collateral by the borrower to secure the loan- like property, or a car. Subsequently as the lender stands to recover his money if there is any default in repayment, the rate of interest charged on the loan is less.
Unsecured Personal Loans
Such loans are given to the borrower with no pledge of collateral or security. As the lender faces a very high risk of losing his money should the borrower default on repayment, the interest rate is quite high.
Unsecured Bad Credit Personal Loan
Here again the borrower with a history of bad credit rating is being given a loan without forwarding any collateral on his part. All the lender has is the borrower's signed promise to repay the loan. Therefore such personal loans are also called signature loans. Signature loans would be issued in full entirety upon the receipt of a signed activation letter or a letter of commitment from the prospective borrower. Consequently to protect the lender's money, the rate of interest charged would be high.
Guaranteed Personal Loan
A guaranteed personal loan comes with a requirement from the lender that the borrower must be having a certain level of income and a good credit rating. He should provide the lender with sufficient proof of his ability to make the repayment.