There is no denying the fact that one could face an urgent need for money at any time. And there could be numerous reasons for the same: from wedding at home to a shortfall in a big expense lined up. And when there is no other financing option available on horizon, people tend to rely on something best to be avoided in usual circumstances i.e., ‘a personal loan’.
While you are applying for a personal loan, you must be careful about a number of considerations, for example, this should be resorted to when there is no other option available. Second of all, make sure that the processing fee charged is reasonable, and the prepayment charges are not punitive.
Needless to mention that the personal loans carry a high rate of interest. So, before take a call, you must be mindful of the following six points:
Higher rate of interest: When you are raising a personal loan, be ready to pay a higher rate of interest on your loan. The interest could be as high as 14-16 percent per annum.
Processing charges: Besides the rate of interest, personal loans also bear some processing charges – which could also be exorbitant. It is, therefore, advisable to factor in these charges before taking a call of which bank to raise the loan from.
Alternative loan options: More often than not, you can raise a loan in a different category, and in that case, you could be able to get away with it by paying a lower rate of interest.
Option of prepayment: Just check whether you can prepay the loan if you get access to surplus funds during the loan period. And if yes, then how much extra penalty charges do you need to pay?
Loan on credit cards: Oftentimes, banks offer personal loan offers against the credit limits of credit cards. This is a good option to receive the money instantly but one must be aware that these loans carry unusually high interest rates. Sometimes the longer process is more economical and shorter route can turn out to be more expensive.
Pre-approved loan offers: Just as loans on credit cards, some pre-approved personal loan offers are given on the internet banking. But it is advisable to negotiate for a lower rate of interest after submitting the necessary documents such as salary slips and income tax returns. This way, one can get a better deal in terms of a lower rate of interest.
To sum up, the option of personal loan should be availed only when there is no other option available. The reasons include higher rate of interest, processing charges and penalties imposed at the time of prepayment of loan. And the pre-approved offers given against the credit card limits are also projected as personal loans but they carry exorbitant interest rates and bring your credit card limit down.
