A personal loan mostly has no collateral because it is not secured by any property that the lender could seize if it defaults. As the creditor takes a significant risk, a higher rate of interest is charged on personal loans. But the high rate depends on several factors, including the credit score, debt to income ratio, credit history, amount of loan applied for, and some more. Default in payment of an unsecured personal loan can severely affect the credit score and limit the ability to obtain credit in the future. A personal loan interest rate calculator can help the borrower as certain whether he has enough repaying capacity.
Secured personal loans are also available where the bank account, house, car, or other property must be pledged against the personal loan amount. It is easier to qualify for a secured personal loan and attracts a lower interest rate than an unsecured personal loan. But if the borrower cannot keep up with the loan repayment, he can lose the collateral. This will also result in diminishing the CIBIL credit score of the borrower. The company behind rating the credit score states that the payment history is the most critical factor in its formula.
The approval of a personal loan is at the sole discretion of the sanctioning loan officer. The decision is based on the criteria specified by the Bank or Financial Institution like NBFC. The whole process can take between 2 days to 14 days. All the necessary documents like Aadhar card, PAN card, Voter ID card, income proof like salary slips, and bank statements must be submitted for verification. Once the verification process completes, the loan amount sanctioned is disbursed within seven working days by the lending institution to the borrower. Therefore, it is necessary to keep all documents ready and the PDC and signed ECS form to avoid unnecessary loan processing and disbursement delays.
If the person does not qualify for a low-interest credit card, or the credit card limits are already over, current borrowing needs are still unfulfilled. Moreover, a personal loan is the least expensive borrowing option when a person does not have any collateral to offer. It can also be considered for a relatively short and well-defined period as the personal loan typically runs from 12 to 60 months. But there are a few circumstances when a personal loan can be taken to make righteous use of it. Axis Bank personal loan EMI calculator or any other EMI Calculator can calculate the monthly installments to be paid against the personal loan in seconds.
If a person owes a substantial balance on one or more credit cards with high-interest rates, a personal loan can help pay them off and save you money. However, a personal loan is more expensive than some other loans but is a reasonable choice over a payday loan. For example, suppose a person has an older personal loan with a higher interest rate than replacing it with a new loan and saving some money. But before doing so, one must be sure whether there's a prepayment penalty on the old loan or application or origination fees on the new one.
A personal loan could be cheaper than financing through the seller or putting the bill on a credit card. A personal loan can also be used for financing an expensive event, such as a wedding or an anniversary party. In addition, it could be less expensive; payments are done with a personal loan rather than a credit card. A personal loan can also help a borrower to improve his credit score if he makes monthly payments on time, especially if he has a history of missed payments on other debts.
Also Read This-A Discounted Personal Loan
No comments:
Post a Comment