Your Guide To Getting A Personal Loan That’s Just Right For You
Personal Loans are probably the easiest and the fastest to obtain. However, there are things from interest rates to prepayment that you should watch out for when choosing one. We tell you how you can get a more affordable Personal Loan too.
Personal Loans are unsecured loans, which means that you do not have to offer collateral as a security for taking the loan, and neither do you need to hunt for a guarantor to sign on the dotted line as an approver before you get the loan. This results in your Personal Loan being disbursed within just two or three days, which is much quicker than a home, car or gold loan. However, this advantage comes with a corollary that puts many borrowers off: Personal Loans come with interest rates that are higher than other kinds of loans. So here are the ways you can get Personal Loans for cheaper.
Check and Improve Your Credit Score for Low Interest Personal Loans
A CIBIL Score indicates your ability to repay a loan. The higher your credit score the better the chances of you getting the loan from a bank or financial institution. A great credit score and you can get lower interest rates and a higher sum disbursed! To get a good credit score, you should clear all outstanding payments and pay your EMIs without fail. Closing your existing loans will also take your credit score many points higher. Remember, before taking that Personal Loan, draw out a financial a plan, taking into account your current earnings and liabilities, and outlining when and how you can back the loan.
Read Blog: Great Ways to Improve your Credit Score
Flat or Reducing Balance?
The question of whether a Personal Loan should be taken at a flat rate or a reducing balance rate is one that confuses most first-time Personal Loan borrowers. It is important to be clear on what these two terms mean. Flat interest rate is where the interest rate is calculated on the full amount of the loan where the principal amount does not reduce. A reducing balance rate is where the interest rate that is calculated every month on the outstanding loan amount. This outstanding loan amount gets reduced with every EMI you pay. Flat interest rates are normally lower than the reducing balance rate. Whenever borrowing that Personal Loan, be sure to ask the lender which method is being used to calculate the interest.
Compare and Contrast
Not all banking and other financial institutions offer Personal Loans at the same interest rates. You should get an idea of what the existing Personal Loan interest rates are. However, a difference in Personal Loan interest rates does not mean that one lender is offering you a cheaper option than another. There are other expenses that may have skipped your mind such as processing fees, pre-closure expenses and other charges. Many people fail to read between the terms and conditions while signing on for a Personal Loan. Did you know that there is no such thing as a ‘standard rate’ for a particular bank or lender? The rate published by banks is a ‘rack rate’ on which it is possible for you to get significant discounts.
Increase Your Bargaining Power
Approaching multiple lenders not only lets your compare or contrast the various interest rates, it also puts you in a position to bargain for the best deals available. You have more alternatives by playing one lender against another, provided you do this tactfully. No lending institution will bear the possibility of losing their customer to a competitor who offers better options. However, it is also important to read the fine print in the draft loan agreement to check for hidden clauses that could leave you in an unpleasant situation. If you’re unsure about a particular clause in the draft agreement, clear your doubts with the officer in charge of disbursing the loan.