Things to Consider Before Availing Instant Personal Loans

Personal loans are a source of ready cash. Having them at disposal provides an empowering feeling. Not only is the borrower benefited, but the lender is also able to generate interest income. By large, the economy improves because there is a lot of cash flow. Traders, salaried persons, self-employed, students, travellers – all have money in their hands. An increase in cash flow, creates more consumerism, more investments, and more opportunities. All of these are inter-related. However, there is a catch. Personal loans could also become a debt trap. If finances are not managed properly, borrowers can spiral into debt traps from which they may never recover.

Therefore, the following considerations will have to be made before taking a personal loan.

• Taking your overall financial situation into consideration

  Personal instant loans do come to your rescue in times of need. But there is a saying that never bites more than what you can chew. Always choose instant personal loan based on your ability to repay them back and within the stipulated time frame. It is always tempting to take a personal loan that is larger than your repayment potential, or even worse – take personal loans from multiple loaners. All of this is a potential recipe for disaster.

• Consider alternative options

  Personal loans carry a high rate of interest. Most banks and financial institutions levy at least 10 to 12 percent interest on the fund amount taken. Even if an EMI is missed, late payment charges are levied. Sometimes two EMIs or more can be missed. CIBIL credit rating could go down. It could lead to financial distress. Instead of risking all this, if one does not have the ability to be consistent in payments, it is a wiser option to take interest-free hand loans or financial assistance from friends and family members.

• Find out about overdraft facility eligibility

  An overdraft facility allows you to take an amount, be charged for the amount taken, and then when you repay the money, the charges are levied only the amount that is still outstanding. You can make part payments towards the amount that was utilized. After paying the entire money, you will be charged no interest. However, to maintain the overdraft account, you will be required to keep a minimum amount of money such as 100.

• Check for negotiating interest rates

  If you have a good credit score, interest rates can be negotiated. You can check with the lending bank or financial institution if the credit managers can approach you and negotiate with you on an ideal rate of interest. There could be times when banks and financial institutions are in competition between themselves. If you are a valued customer and a good repay-er of loans, then banks can modify their interest rates to have you as their valued customer because banks understand that you will be consistent in your repayments.

• Read the loan document carefully

  Before you commit to anything, read the loan document with utmost care. This will ensure that you are not in for surprises later on. Take time out to go through the fine print. Understand the different charge structures levied. Ensure you read through the penalties section. Some banks levy higher penalties. So ensure that you are cognizant of their systems and procedures. If you feel it is not right for you, then move on to the next loan provider.

• Check your credit score before making an application

  Your credit score can have an impact on the loan amount that you receive. You might have applied for a higher loan amount, but the loan provider grants you a much lower amount because your credit rating is not up to the mark. It could be the reverse too – your loan eligibility could be higher based on your good credit rating – so the bank informs you that you are eligible for more.

• Check out the options that your preferred lender provides

  For customers who are timely with their repayments, preferred lenders provide attractive discounts, reduced interest rates, and top-up loans over existing ones. An existing customer might be eligible for more loans from the same lender. If availed, the loan amount is deposited to the person’s account, a new loan account created, and the same procedures applied. There is no need to re-apply for a loan or go through the procedures of a fresh loan application.

• Be wise in repaying your loan

  Currently, in an open economy, with enough cash flow in the market, it is easy to obtain not one but many personal loans. Prudence says that it is always wise to only have a single personal loan at a time. Even if there are multiple loans, it is a better option to have to consolidate all these loans into a single loan. Consider the tenure of the loan. Don’t choose a shorter tenure for a very high personal loan, if the EMI is more than half your monthly income. Instead, spread the loan over a tenure, where the EMI is a max of 25% of your income.

What are the advantages of taking a personal loan?

Taking an instant personal loan has the following advantages:

• You can achieve financial independence and work towards your goals without waiting on something or someone. Be it renovating your home, applying for higher education, or purchasing a new gadget, there is no need to wait for that extra income. Just buy it with a personal loan, and repay later in equated monthly instalments.

• You can get funds without providing collateral or security. Traditional loans needed pledging of property or providing some sort of security. Unsecured personal loans do not need collateral. All they need is income proof. The bank wastes no time in disbursing the loan amount within a matter of hours or even minutes.

• Quick documentation and easy process. The documentation for instant personal loans is easy, hassle-free and online.

• Transparent and foolproof. There are no middlemen involved. All dealings are with the bank. Every process is transparent. Bank communications are automated and involve no human intervention or influence.

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