Before Opting for a Personal Loan

By virtue of being an unsecured loan, personal loans have a very high rate of interest attached to it. So one should consider taking a personal loan only if:

You do not have an asset/security against which you can get a loan. For e.g. if you have an FD you can pledge, a secure loan might make more sense.

You have some visibility on your cash flows and are sure that you will be able to repay the EMIs (Equated Monthly Installments) in time. Else you are bound to enter into a debt trap.

There is an emergency and you need funds immediately. A personal loan can be taken because the processing time is much lesser on account of minimal documentation.

Opt for personal loans only to meet your essential needs which cannot wait. It should be your last resort. Taking it for satisfying leisure needs can prove to be costly i.e. for gambling, buying a new car (a car loan is a better bet with a lower interest) etc.

Before you choose your personal loan:

Calculate the cheapest loan offer: These loans come with very high interest rates ranging from 14% to 25%. Compare interest rates and get the complete picture by understanding the annualized interest rates for each offer. Then figure out the total amount of repayment you need to shell out with all the offers before opting for the loan of your choice.

Processing fee et al: You need to keep in mind the processing fee and other fees that will be levied when you apply for your personal loan.

Prepayment penalty check: Ask upfront if there would be any penalty payments for prepayment of the personal loan at any point in time. More often than not loan consumers tend to pay up their loans earlier than planned to be rid of debt. Hence, it's important to know if your personal loan offer allows part prepayments. If that is the case, then you should be aware from what time frame in the loan period you can start prepaying and understand the cost you incur due to such prepayments in part or full.

EMI and tenure: Evaluate all loan offers. The first condition for loan offer selection is the total money outflow that the loan will cost. The second factor is the EMI. A loan offer with a lower EMI and a longer tenure may seem attractive, as it could be easy on your purse strings, however not all such loans prove to be cost effective in the long run. Hence, first calculate the total loan cost and then try to opt for a higher EMI, which you can comfortably manage to enable a shorter loan tenure.

Keeping track of your credit history: Especially in the case of unsecured loans, your credit history, which is recorded by CIBIL (Credit Bureau India Limited) plays a critical role in your loan application being accepted. A good repayment track record ensures an instant loan approval but brownie points in the form of more attractive interest rates.

Who is eligible for a personal loan?

The eligibility criteria and their specific details may differ from banks to bank based on their perception of the risks associated with such loans. However, nearly all banks divide the potential borrowers into three categories:

Salaried individuals

Self employed individuals

Self employed professionals

Other factors which are taken into consideration are, age, residence, work experience, repayment capacity, past obligations and place of work.

What documents are required for personal loans?

Personal loans require the least number of documents, making it the fastest to be approved. Typically, financial institutions would require proof of identity, residence, income and also 3 to 6 months of your bank statements. Some banks also require guarantors and the same set of their documents.

Personal Loans - A Loan For All Times

Today in this fast paced life, money is needed almost to meet every kind of needs. But every day is not always destined to be a good day. Similarly, it is not possible for every person in this world to have sufficient money with him always. Sooner or later, he will definitely face a situation where he will be short of required money. At that time, the same person will get confused and will try to postpone his needs up till that time when he has ample money with him. But what the same person will do when his demands or financial needs would be urgent. Thus to save people from facing these situation, Personal Loans have been conceptualized.

These loans are the kinds of loans that are generally meant to meet personal causes. However, this is not a big issue as the borrower can avail these loans for any legal reason. They will not be required to specify the reason to the lending authorities. These loans can be further classified into two categories unsecured personal loans and secured personal loans.

Talking about the secured personal loans first. These loans are of secured type in nature. In other words these loans require the loan applicant to put any off his personal asset whether home, land or any other valuable property with the lending authority as a security. This security is a sort of guarantee to the lending authority that their money will be recovered in case of any default of installment made in the behalf of the loan aspirant. These lenders on these kind of loans generally charge a reasonable rate of interest. The repayment period too in these kinds of loan is also very long. This is done to ensure that the borrower does not face any problems in the repayment of loan.

The other kind of personal Loans such as unsecured personal loans. These loans are the loans which any borrower can avail without going through many legal hassles. Also these unsecured loans do not require any kind of pledged security. However, these kinds of loans carry a higher rate of interest than the secured counterparts as the interests of the lender are in a far dangerous position since there is no involvement of any security. These loans are great options for those who do not want to risk their intangible or tangible assets while availing the loans. Such people may include tenants, non property owners. Also these loans are best suited for the people who are suffering from bad credit history. But here it is important to understand what actually is this problem of bad credit history.

This is a track record of person who has defaulted in the repayment of earlier loans or debts. However this is only the general perception. It also include CCJ's, person who have not made prior use of any credit card. It also include the person who change their residents or employment very frequently. But that does not mean that the above mentioned person can't avail loan in any case. In that case they just need to apply Online and the they will be served with an exhaustive list of lenders across the globe and then the loan applicant can choose the best deal for himself.

Bad Credit Personal Loans - Using A Personal Loan To Rebuild Credit

If you have bad credit title in your credit report, then it doesn't mean you cannot get a personal loan. There are bad credit personal loans available for people with poor credit rating. If you have poor credit rating -- because you made late payments, missed payments, exceeded credit card limits, or filed for bankruptcy -- these loans not only solve your money problems, but also give an opportunity to improve your credit score.

Personal loans for bad credit are available in secured and unsecured loans. Since lenders bear higher risks these loans require a higher rate of interest and a higher down payment than the normal loans. The interest rate on the personal loan for poor credit depends mainly on your credit score, the collateral security offered, loan amount and personal income.

Secured personal loans are for the homeowners. Secured loans are the right choice if you need extra money, but you do not qualify for an unsecured loan. These loans require collateral security, which includes items like automobiles and real estate. If you default on the repayment, then the lender is free to sell the security. However, if the value of the collateral is more than the loan amount, then you can expect to pay a low interest rate.

If you don't own a home you may want to consider unsecured bad credit personal loans. Because unsecured loans are not backed by any collateral security their interest charges are higher than that on the secured personal loans. However, the worse your credit is the harder time you will be approved for an unsecured loan.

In order to get a bad credit loan, first you need to check your credit report and credit score. The higher your credits score the more favorable the rates and the terms that you would get on the personal loan. You also need to provide all your personal details to your bad credit lender accurately because providing incorrect information may lead to the rejection of your loan application.

There are many lenders out there that are willing to lend you their money. You must research the lenders thoroughly, particularly when applying for a personal loan online. Even though you need the loan so bad never agree to pay any types of processing fees. Always check out the lenders with the Better Business Bureau. Since different lenders offer personal loans at different rates make sure the loan on the most favorable terms.

If you can't get a loan from large lenders, try to approach smaller lending companies. Smaller lending institutions are more personal in considering your eligibility for a personal loan -- they take the reasons for your bad credit along with other factors. You can have a chance to get a personal loan, if you can prove that you're responsible and that you have a stable income to repay the loan.