Merits & Demerits of Personal Loans that You Must Know

Charlie Brown By Charlie Brown, 4th Jan 2017 | Follow this author | RSS Feed | Short URL http://nut.bz/peg3agew/
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Personal loans are unsecured and are a pretty useful tool when you are in a sticky situation financially.

Merits & Demerits of Personal Loans that You Must Know

The idea of a personal loan is pretty much the first thing that comes to mind when you have a sudden financial requirement. Personal loans are unsecured and are a pretty useful tool when you are in a sticky situation financially. They are offered by most banks in the private and public sector after a simple set of credit checks and are quite convenient. That said there are a number of very distinct issues with personal loans which you should look into and consider before going ahead and applying for a loan.

The Perks of Personal Loans

Flexibility: Unlike dedicated loans, personal loans are multipurpose, so the funds you raise from the loan can be used for pretty much any purpose without any limitations. Bypassing credit card dues, getting married or paying off medical expenses, how you use your money is entirely up to you once the loan has been granted to you.

Readily Available: One of the biggest advantages of personal loans is the fact that they are available easily, and can be cleared in as less as a single working day if all your documentation is in order. This means they are ideal for any situation in which you need a substantial sum of money in a short time. They are provided by private and public sector banks and a number of non-banking financial institutions too.

Minimal Paperwork, No Collateral: Processing personal loans is a speedy affair mostly because there aren’t too many paperwork dependencies. Since they are unsecured, you do not need to lay down any security deposit or collateral alongside the loan, which reduces the risk if you end up defaulting.

Personalization: A number of options for personalization of the loan scheme are provided by banking as well as non-banking institutions when it comes to personal loans. They are usually offered to government employees as well as professionals like doctors, chartered accountants, architects, and usually come in the form of attractive interest rates or altered terms and monthly payments. Some banks also offer you the flexibility of online personal loans.

Wide Range: Personal loans are available for small as well as large sums of money and are hence ideal for a wide range of financial needs.

The Pitfalls of Personal Loans

Eligibility: Most personal loan providers have a fairly strict eligibility criterion. They are unsecured and must hence be granted with caution. Guidelines for acceptance vary from bank to bank, but a sound credit history and financial history is a must. It is very unlikely that a candidate with a bad credit history or a poor credit rating will be granted a personal loan.

Steep Interest Rates: Another issue of personal loans is the fact that they are usually high-interest loans because of being unsecured. Since there is no way the bank can recover money if you default, they protect their financial interests by charging a high rate of interest to recover as much as they can per installment.

No Partial Payment: Most financial institutions and banks who offer personal loans don’t allow any partial repayment; which means the applicant will have to pay the EMI for the entire tenure.

Conclusion

Personal loans are very useful for a person who needs access to a lump sum of money at short notice due to a financial crunch. That said they may not be the best option for you due to the high-interest rates and the strict rules regarding eligibility. In the end, you are going to have to do some research by checking out loan options offered by a few banks to see which suits you the most. You could even get some great incentives and concessions at one bank which aren’t being offered by another. Read all the fine print and look into foreclosure charges, service charges etc. before signing a contract.

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Loan, Personal Loan

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Comments

author avatar Lady Aiyanna
7th Jan 2017 (#)

When you have just a strand of hair, to make a wig, you take a loan to commercialise it. Banks are like Satan show a good face to lure you in and kill you when in pain and leave you bald too. ASB/Commonwealth Bank is famous for it.

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author avatar Lady Aiyanna
7th Jan 2017 (#)

When you have just a strand of hair, to make a wig, you take a loan to commercialise it. Banks are like Satan show a good face to lure you in and kill you when in pain and leave you bald too. ASB/Commonwealth Bank is famous for it.

Reply to this comment

author avatar writestuff
7th Jan 2017 (#)

Interesting article.. Thanks for sharing your knowledge.

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