Imagine any task like buying a house, renovating a house, manage your debts or manage a marriage there is always money involved. There are a lot of us who can manage the money and does not need a supplement loan to achieve what our target is, but for many they will need to take a loan and fulfill their desired task. Does everyone know what a loan is exactly? How many types of loans are available? Do you know your financial product options? Many of us don’t!
There are a lot much type of loans available in the market, secured and unsecured. A secured loan is something where the lender lends you money against collateral for example, if you take a car loan, your car is taken as collateral i.e. if you do not pay your EMIs on time your car will be confiscated by the banks as the car was a collateral for your car loan. An unsecured loan is something where the lender provides you loan funds with no collateral, this is completely depended on you cibil report and your financial stability.
An unsecured personal loan is easy to access and can be availed with minimum documentation and without any hassles. This is the reason why many of us take this loan for granted and use the personal loan funds for various luxury wants. What we fail to understand is there are risks involved in personal loans which you may not know, which can haunt you in the later stages of loan tenure.
We will sight you some obvious risks involved in personal loans,
The Interest Rate
Interest rate is something which everyone ignores in the heat of moment to avail personal loan.it is a very important aspect of personal loan. Just because it is one of unsecured loans the interest rate is higher as compared to other loans available in the market. Many of us fail to explore more loan options which are available with different lenders and end up in higher interest rate lagoon. Did you know if you have a great cibil score you can also negotiate your interest rates with the lender? Try understanding your cibil score and get things sorted before you opt for a personal loan.
This is another aspect where the customer gets duped a lot of times. If you are opting for a higher amount of loan the lender will bank on the processing fees, the processing fees ranges from 1% to 3% of the loan amount sanctioned which again depends on from lender to lender. In some cases the interest rates will be directly fluctuating the processing charges, i.e. if the interest rate is high the processing charges will be low and vice versa. The most important thing is the processing charges are always negotiable; you just need to understand the banker and try negotiating with them on the same.
This is just like processing charges which various lenders have introduced lately. If you are going for a personal loan the banker will explain you the processing charges and also will try to supplement an insurance package saying it has come mandatory with the loan which you need to pay, but really that is not the case. The banks always try to sell as many supplements with a financial product to achieve their targets, do not fall for it! Be very clear what you want and do not let them push their products on you which you do not need.
Know your pre-closure charges
When a bank lends you money, they always want you to go for a higher tenure. The more tenure you take the more lenders will earn in interest. If you plan to close your loan before time, the lender will not appreciate it and will ask for pre-closure charges. Before signing any contract with the lender be very clear of the pre-payment charges and choose accordingly. As always different lenders have different pre-closure charges do select them wisely.
Understanding financial products are always important and those who fail to understand the same will face a lot of dilemmas in the future.
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