Personal loans are one of the most versatile loans, with no restriction on what one uses them for and are unsecured loans, that is they do not need any collateral, which is the reason why they come at such a high interest rate. Personal loans can be used to purchase consumer goods, wedding, personal use, etc.
However easy it may sound, one should be very careful while selecting personal loans. Few of the important factors that one should remember while selecting a personal loan are:
1. The amount should align with your needs, which means one should not take un-neccessary high amount of debt and end up paying for long durations.
2. The tenor of the loan should be kept as little as possible, because the interest paid is a function of time and longer the tenure of the loan, more interest you pay to the lender. If you have the capacity to repay the loan in 3 years it shouldn't be extended to 4 years.
3. Variable interest loans are not always better, although there are possiblities that the interest rate might fall in future, but the chances of it going up are equal, therefore one should play safe and take up fixed interest rate personal loans. Always do research before selecting the type of personal loan.
4. As opposed to personal belief, in case of default, the lender can impound the property of the borrower for a limited time ( till repaid) or permanently.
5. Holiday period or the duration when the loan is not serviced are good for maintaining liquidity, but at the same time they increase the tenure of the loan and the borrower ends up paying more.
No comments:
Post a Comment