Personal Loan 101- What You Absolutely Need to Know
Daughter's marriage or her studies? Son's ambition? House makeover?
Stop worrying about 'money' to fulfill your cherished dreams now. Avail yourself to 'Personal Loans'.
A Personal Loan is perhaps a man's best friend in today's world.
'Personal loan' as the name suggests can be for any personal reason.
Such reasons vary from person to person, for instance a husband willing to give a brand new car to his wife on their silver marriage anniversary, a father thinking of investing and setting up his son's business etc. Thus a personal loan can provide you instantly with the required funds without anybody's help.
If you wish to take a personal loan, all you need to do is to be a little observant and prudently decide which bank or lender to go for.
The bank or lender that has a lower rate of interest usually tops the list.
But the rate of interest is not the only parameter one adopts.
Many a people also prefer banks that require less documentation and provide spontaneous service.
So it is entirely one's choice which bank/company to go for.
The channels may also differ in this regard like there are those who directly contact the bank/lender for this service or the ones who leave it upon their brokers/agents to do all the work for them.
Broadly there are three types of personal loans:
Line of Credit
The secured loans are those banks or lenders who want some kind of security for the loan, like your house, car and the like.
If one is unable to repay the loan, the security is taken up or confiscated by the bank giving the loan.
Such loans can provide you with a larger amount of money and a lower rate of interest.
Unsecured loans accordingly do not require any security.
They are faster compared to the secured loans.
But they do provide with you with a comparatively lesser amount of money and that too at a high rate of interest.
Line of credit loans refers to setting up of a limit to one's credit.
The lenders or banks provide credit cards, which have a certain credit limit.
The rate of interest will be charged only on the amount you withdraw from the credit limit.
You cannot go beyond your limit to withdraw the cash.
So the rate of interest varies with the kind of loan you take.
If you need a loan without much delay, unsecured loans can be the best choice provided you can cope with the rate of interest charged.
If you want to make use of your loan amount gradually at your discretion, setting up of a credit limit can be favorable idea.
However, the methodology should be to know the rate of interest and the time you think you will be able to repay the loan amount.
Then calculate the monthly installments that you will be paying to the bank or lender from which you will be taking the loan.
The lender, who will be giving you the loan will inform you beforehand of the number of monthly installments and the term of the loan.
Remember, if you are careful and loyal, a personal loan can be the best and a real friend in need.
The author, Mansi Gupta, writes about personal loan topics.