Personal loan tips

Assess the amount your loan requirement and then decide the amount of personal loan you need. Do not borrow more than you need just because your bank is providing you with it. After all it comes at a cost and in this case at a high cost. Also let the loan amount be such that [...]

Prove your creditworthiness: A good credit score will improve your bargaining power. Banks would go the extra mile to have you as a customer if you have a clean credit history. Therefore you may get a discounted rate. To ensure that you have a good credit score, make sure you have an impeccable repayment history.
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There are two consequences of the entire move. The first which many people actually figure out and are comfortable with is the amount of funds that they need to raise on their own. Consider a case where a person takes a loan of say Rs. 1 lakh and this has to be repaid in the instalments of Rs. 5,100 in 24 months. If the lending institution asks for 2 instalments to be put up at the start of the loan itself then Rs. 10,200 has to be put upfront. Most people consider this to be an acceptable point while taking a loan because they consider this as a down payment that is a part of their responsibility towards the loan. They consider that they just got under Rs. 90,000 as the loan and the remaining amount is what they are financing for the entire purchase. This way of looking at the entire matter enables them to understand the position as far as the cash flow structuring is concerned.

Another area where a lot of people are faced with difficulty is the manner in which the interest rate is calculated. The normal human tendency is to opt for a rate that is lower because this seems to suggest that the burden on a borrower will be less. But this is not always the case because a person can end up paying a higher amount of interest even when the rate of interest on the loan is lower than some other loans. This has to be considered carefully, and a decision about selecting a particular personal loan or rate of interest should be made only after a proper analysis of the entire position.

One of the basic points that have to be always followed when using a Personal loan is that the amount should be used only when the other low-cost borrowing options are not available. For example, if a person wants to use some amount for, say, repairing a house then a personal loan will make sense only when specific loan for this purpose is not available. In most cases, loans for a specified purpose are cheaper than a personal loan.

There are situations when a credit card has a large amount outstanding on it. The moment the amount is rolled over the interest cost on it starts accumulating. With it, any additional expense also gets the same interest levied on it. This means that there will be no credit period for subsequent expenses and the interest will be charged even when the amount is paid back on time. If a person falls into this trap he/she will have to pay an interest rate in the range of 35% to 42% per annum.