All one needs to know about personal loans

Personal loans are one of the myriad other kinds of loans that are available and one can borrow from a bank. These loans don’t just fulfill any specific purpose, these loans can be used to meet any individual end. The amount that is shelled out to in the form of personal loans can be used by you in order to buy anything, to pay off an existing debt, start a new business so on and so forth. It is very difficult at times to get personal loans and at times they are offered by the banks upfront. If in case you are considering of getting yourself personal loans , these are some of the points you should keep in mind.

1.These are unsecured loans – unsecured loans are loans that don’t require any security money or collateral. If in case you don’t pay an instalment of a personal loan or you delay paying an EMI for the personal loans the lender of the loan cannot take away your property as payment for the loan. This is why personal loans are at times very difficult to get. Even though the lender doesn’t have the option to seize your home or your car there is alot other action that they can surely take in order to get back their amount. They can simply report the late payment to the credit bureaus or a collection agency; they can file a lawsuit as well against you.

2.They usually have fixed interest rates – the interest rate on a personal loan is more often than not locked and it doesn’t change for the entire tenure of the loan. The loan amount that is approved for you in the case of a personal loan depends a lot on your credit score and the interest rate that is fixed on your personal loan too is decided because of your credit score. If your credit scores are good then the interest rate that you might get is less, and vice versa. Lower interest rates are always good because the cost of the personal loans is much less.

3.Personal loans affect your credit score - Most lenders or banks and financial institutions report your low credit scores to credit bureaus. At that time when you are applying for the loan your credit score is checked and your financial details are dived into in the minutest of detail. All this is done to be sure that you are in a position to repay the loan in the stipulated period of time. The key to maintaining a good credit score is to make the repayment on a monthly basis without delay.

These are some of the core points to keep in mind when going in for a personal loan.

Personal loans: Money making reasons why should you apply for one

Anytime a financial requirement arises, there are plenty options you can consider in order to appease this prerequisite. One of these options includes the loan. Under this category itself, there are plenty of loan options which you can opt for, one of which is the personal loan.

Unlike the other loans, the personal loan offers a financial flexibility for your requirements. In other words, you can use the funds from the loan for any miscellaneous option, with a few restrictions. Additionally you can easily apply for personal loan online without any stress and rush that comes with other loans. Here are some of the money making reasons as to why you should opt for this loan:

Paying down a higher interest debt: Everyone is bound to have one debt or another at some point in their lives. At this time, the amount of debts can overwhelm an individual. But by paying off multiple debts with a single amount can prove to be financially viable. For one, you would only need to focus on one debt instead of multiple ones. Debt consolidation will allow you to congregate multiple liabilities with several interest rates and repayment terms under one single roof. This will go a long way to pay down your debt, but also ease off some of your expenditures too. You can use the surplus expenditure to invest in other means to earn an extra income.

Pay off education expenses:If you are looking to further your education, a personal loan will be one of the best uses of your money. No doubt, your first thought would be to an education loan. However, this loan normally comes with certain restrictions and at times, will be larger than the personal loan amount itself. Additionally, with no credit history, you may not get the loan amount you would ideally want for your education expenses. At the same time, if you are earning and studying at the same time, you can utilize the time spent, by studying and earning at the same time. This will ensure that you get to earn the amount that you would have lost if you spent time only studying. Through this, you need not compromise on your financial expenditures and yet have sufficient funds to pay off a loan.

Flexible funding for your business:It is a common knowledge, that most business have a chance of failing within the first two years. Research has also indicated that it can stop functioning within the first 10 years. One of the main reasons for this failure is lack of cash flow. Finding funding for your business can be as challenging as starting your business itself. Not only would you need to wait for the ideal profit amount, a limited paper trail will make it difficult for start-ups to qualify for conventional business loans. But since you can easily apply for personal loan online there is no worry about the business’s current credit history before moving ahead to start your business.
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Are you aware of this personal loan trick?

During some point in your life, you will face a situation, where you may require finances. In such a case, you can opt for a loan. A personal loan is designed to provide you with several benefits, especially since it can be used for multiple purposes. You only need to submit the right documents while also ensuring that you satisfy the required eligibility factors. However, at the same time, you must be aware of the different factors that can affect your loan. To assist you in getting the best loan, you must be aware of these tricks:

Credit history plays an important role

The credit history compiles of the record of an individual’s financial history. Through this credit report, an applicant’s financial past can be reviewed, especially if there are any late payments or current debts. This history is held in the form of a score, which the banking institute refers to, when considering your eligibility for the loan. You can also get an insight to how much of a loan you can expect by using the personal loan calculator to your advantage.

EMI calculator

In order to get the best personal loan, you will first need to research on the market. Plenty of institutes offer a variety of different loan packages, each designed to suit the financial requirements of different audiences. However, when opting for any of these loans, you need to consider the different variants pertaining to the loan. They include the repayment tenure, interest rate and the principle amount amongst many others. But while these factors can chance according to the market conditions, tools such as the personal loan EMI calculator will help assist you make a decision.

Employment

Your employment plays an important role when it comes to taking a loan, especially when it comes to the personal loan. As this loan is an unsecured loan, there is no requirement to provide collateral. However, to compensate for this financial risk, loan providers often provide a high-interest rate. Your income determines how well you can manage the overall loan, especially if you need to pay a high EMI. Additionally, there is a considerable difference between the loans provided to employees as compared to self – employees. In addition to this, your job profile also plays an important role. Government employees are more likely to get a better loan deal as compared to other applicants.

Apart from these factors, there are plenty more you can refer to. However, it is crucial that the loan you opt for and the loan features satisfy your financial needs before you proceed with the application.

What are the different tax exemptions for the different loans?

Tax exemptions are very common with loans in India. This is very crucial as the tax benefit many times are the difference between actually being able to purchase a product and not being able to buy a product. You should be aware of what type of tax exemptions is available for different types of loans. They include the following:

1. Home loans

These are perhaps the biggest loans which a person takes in terms of an amount of money given. Therefore, tax exemptions are given to both the principal as well as the interest earned. For the principal, up to 1.5 lakh rupees can be deducted whereas for interest earned on the loan, up to 2 lakhs in rupees can be deducted if the construction was completed at least 3 years before the financial year the loan was issued on. However, it must be noted that if the property which the loan is given for has its ownership transferred before its completion, the tax benefits availed to the person who took the loan will be not be considered and he/she will have to pay the full amount of the tax benefits availed.

2. Education loans

Before education loans were unthinkable but now with everyone going to colleges abroad, loans of this sort have significantly increased. There is no upper limit for the money which will be deducted on this kind of loan. However, it can only be used for someone who is pursuing higher education. The loan is only subjected to tax exemptions either if the full loan period is complete or if 8 years have passed since you have taken the loan.

3. Car loans

Car loans are generally cheaper than both education and home loans. This is one of the reasons that individuals who have a salary are not allowed to take car loans in India. The only people who are allowed to take car loans are either businessmen or self-employed. There have been many complaints against this and it may be changed.

4. Personal loans

Personal loans are perhaps the smallest loan in terms of an amount of money that is in question. However, these are only available for a declared business or for interest on loan repayments used for projects such as construction.

However, taking a loan is a very complex matter so it is crucial that you do not take the loan without thinking it through or consulting someone.

Credit card vs personal loan: Which is the best source of emergency funds?

There will come an occasion where you will require additional funds on a short notice. This is a prominent case in any financial emergency. In this case, you can opt either for a personal loan or a credit card loan.

But how do you know which option is the best choice for yourself? Each of these options offers a unique set of features and benefits that will suit different financial profiles and requirements. Let us take a look at each step taken for each option.

Comparison between the application processes

Although most loan applications follow a similar process, they both include unique additions. In this case, both the loan applications offered due diligence. Nevertheless, the credit card loan was more easily available as compared to the personal loan. With the personal loan, one would need to submit pay slips, form 16, bank statements and KYC documents in order to get the personal loan processed. However, with the credit card loan, you only need to contact your bank for a loan and the loan amount will be credited to your account after it has been processed.

Comparison of processing fee and tenure

Both loans come with a processing fee that ranges between 0.5 to 1% depending on the institute you are applying to. However, the tenure of the credit card is considerably favourable as compared to the personal loan. The personal loan tenure is at a minimum of 12 months to 3 years as compared to 6 months of a credit card loan.

Comparison of quantum of loan

The quantum of the loan plays an important role, as it also determines the interest rates and tenure of the loan. However, it also reflects on how much funds you would want. For a small loan, the credit card is valuable, as there is a credit limit to the amount. However, if you need a loan of a larger amount, the personal loan will be a better option.

Comparison of Interest rates

Normally, the personal loan interest rate is in between 12 to 20 % depending on the institute you apply to. However, credit card interest rates are in between 10 to 18 %. However, credit card loans are normally offered at a flat interest rate. As compared to the personal loan, the interest rate for this loan is offered at reduced balance rate.

In the end, each of the loans has its own benefits and features. These features and benefits will suit your needs depending on your financial requirements. However, it is crucial that you consider factors such as the personal loan interest rate or even the credit card benefits before you apply for each option.

Golden rules to borrowing a personal loan today

There comes a time in your life, where you will need to opt for borrowed funds in order placate your financial requirements. While there are plenty of options available in the market, loans are the ideal option for most cases.

If you have varied financial requirements, then the personal loan is the ideal choice. Through this loan, you can satisfy multiple financial requirements, without any restrictions. Additionally, you can use the personal loan EMI calculator to calculate the ideal loan amount that will suit your needs.
However, when it comes to borrowing funds, there are certain factors you will need to keep in mind. Although borrowing of funds will offer you plenty of benefits, one would also need to keep track of the repayment measures for it. Borrowing of funds come with certain golden, rules, which is given below.

Don’t borrow an amount that you cannot afford
This is one of the major rules of borrowing funds through a personal loan. A loan should provide you with a relief to your financial woes and not add to it. You must not live beyond your means. Opt for a loan amount that you ca easily repay. The thumb rule for borrowing these funds, especially for this EMI’s should not exceed 10% of your net monthly income. Use the personal loan EMI calculator to ensure that you get the ideal loan amount you can afford in this case.

Opt for a tenure that is as short as possible
The tenure of the loan affects the value of the EMI’s. in this case, the longer the tenure of the loan, the lower is the EMI. This fact will surely make it tempting for those who would want to go for a 20 to 30 long tenure. However, in this case, your interest rates will rise, making you pay for a loan amount that is more than you can afford. Additionally, this will increase your debt to asset ratio, thus reducing your chances to apply for another loan application. Use a personal loan EMI calculator to calculate the ideal loan tenure that will suit your requirements.

Ensure you make timely and regular repayments
Opting for a loan would also include repaying the borrowed fund. Whether it is a short-term debt, you must ensure that you do not miss your payments. A delay or missing a repayment will impact your credit profile. This, in turn, will hinder your chances of taking a loan later on in your life.

Avoid excessive splurging and investing 
Once you borrow funds, you will need to take the means to repay it back. Therefore, you should ensure that you avoid splurging the funds unnecessarily. Additionally, you must not use these funds to invest in other options. This is because the risks on the returns can be high. Additionally, an even safer option such as termed deposits may not offer you the ideal return on investments to match the interest rates on the loan.

What are the different personal loan mistakes to avoid today?

When it comes to opting for the ideal financial aid, the personal loan has been one of the most preferential choices. Applying for this loan today is convenient, however, at the same time, it can become a financial burden if you take a wrong step. Given below are the common personal loan related mistakes you should avoid, should you ever need to apply for this loan.

Opting for more than one personal loan:

A personal loan, by nature, is an expensive affair. Although it will provide you with the financial support you want, you should opt for this loan as a last resort. However, since individuals can easily opt for this loan, many are prone to taking this loan for every small reason. Over time, taking this loan will be more of a routine, thus inculcating more than one loan. Although servicing more than one personal loan will offer you the ideal financial support, it will damage your current finances and save while also affecting your credit score. In this way, you should reconsider your loan application before proceeding to opt for more loans than you can afford.

Borrowing a loan amount you cannot afford

When it becomes convenient to get such a loan, it is easy to get carried away borrowing funds. In this way, many unaware individuals opt for borrowing an amount that will satisfy financial requirements more than required. When it comes to the time to repay the loan, the added interest rate will make it seem nearly impossible to repay. To avoid such a situation, opt for a loan that is 35 to 40% of your income. This income should be calculated after your monthly expenses. Also, try and avoid opting for pre- approved loan offers or loans that come with unbacked loan rates.

Applying for loan without reading the fine print

Most loan applications come with a fine print regarding the terms and conditions. It may seem convenient just to skim the surface of this contrast, without reading it in detail. However, if you sign the contract without going through the details, you will be putting yourself at a grave risk. If any dispute or misunderstanding between you and your lender arises, your lender can use the contract to challenge your dispute. If the terms of the contract are pitted against your challenge, you may end up losing the challenge. Do make it a point to read and understand the details of the terms and conditions related to the loan.

Opting for a long loan tenure

Many lenders will offer you a loan tenure that will be long. Although it may seem convenient to repay a loan that will take you more than 7 years, other factors will be affected. Factors such as the EMI will be affected by the loan tenure. While it may seem pocket-friendly, you will end up paying a lot more on your EMI’s than you expect. Use a personal loan calculator to figure out the best tenure that will suit your needs, while paying off your loan amount.