3 things you should know about Personal Loans
When a financial emergency knocks your door at that time you think of a Personal Loan. If you’re applying for this specific loan first time then we would like to tell Personal Loan is kind of unsecured loan in which bank doesn’t ask for any collateral from you. Personal Loan usually comes with higher interest but the main game is of credit history, if you’ve got good credit score then you won’t face such high-interest rates. If you’re thinking about availing a personal loan, you can consider these things before your decision.
How Personal Loan works: As we know you can borrow a fixed sum and repay it with monthly installments. The loan tenure isn’t that long it generally ranges 12 to 84 months. Once you’ve repaid your loan sum, you’ll be able to apply for a new loan but this is recommendable first clear your previous loans and then goes for a new loan.
Types of personal loans:
1. Unsecured Loan: In such a loan, you no need to keep any collateral but the bank checks your income proof and your credit history. If your profile matches the eligibility criteria, you can apply for a personal loan.
2. Secured Loan: This loan works when you put your asset on the table of the bank but remember in case you fail to make payment then the lender typically has the right to claim your ornaments or asset as payment for the loan.
Interest rates and other fees:
Interest rates: Interest rate generally range from approx. five percent to thirty-six percent depending on the bank and your credit history. This is recommendable don’t extend your tenure much otherwise you have to pay more interest.
Origination fees: Some banks and lenders charge a fee so they can cover their loan’s processing cost. The fee generally ranges from one to six percent of the loan sum.
Prepayment penalties: If you pay off your loan before fixed tenure then some lenders charge a fee because early repayment means the lenders are passing up a major opportunity for a portion of the interest that they would have generally earned.