Personal Loans serve as viable options when you want to satisfy immediate financial needs. Their instant disbursal and easy application process make them an appealing option. Besides, unlike other forms of Loans, you need not submit any collateral to avail of them.
Today, you get a Personal Loan for various purposes. Some examples include higher education, medical expenses, debt consolidation, holidays, etc. However, you also get such a loan based on the interest rates. It is essential to know about them to select one that suits your needs. Here are a few explained:
- Secured Loans
It is wise to opt for such Loans if you have any financial assets like jewellery and property. Such Personal Loans offer lower interest rates because of collateral. The lender can seize the collateral submitted if you fail in repayment. Hence, it is best to ensure that you pay the Equated Monthly Instalments on time.
- Unsecured Loans
They are the most popular form of Personal Loan in India. They levy the highest interest rates. Lenders face a higher risk due to no collateral submission. Hence, they find a means to compensate for the risk-bearing. Also, factors like your credit score, income, and debt-to-income ratio determine the rate charged. These factors indicate your creditworthiness the best.
- Fixed and variable-interest Loans
In most cases, lenders also offer Fixed-Interest Loans. These come with fixed Personal Loan interest rates that stay consistent throughout the Loan tenure. You also get an idea of the rate charged beforehand through the website or Banking app. In Variable-Interest Loans, the interest rate fluctuates based on market benchmark changes. As a result, you pay varying interest during the Loan term.
- A personal line of credit
Such a Personal Loan does not have any fixed instalments or duration. It is a revolving credit you can avail of instead of a lump sum. It works just like a credit card. Lenders offer this facility based on collateral or by connecting to your checking account. Such quick Personal Loans are apt for emergencies and immediate financial needs. They come with various benefits and interest rates.
Hence, you get the option to select one that satisfies your financial requirements. However, it is best to compare lenders and check for their offerings before doing so.
- Debt consolidation Loan
This is a combination of all the Loans. It has a lower Annual Percentage Rate. Thus, you pay lower interest rates instead of multiple varying rates. It is best to opt for them if you have many debts and want to simplify the repayment. The amount is also disbursed to your Bank Account immediately.
Tips for choosing a Personal Loan
- Consider the purpose of the Personal Loan
- Take into account the repayment terms
- Read the fine print of the terms and conditions
- Mind the interest rates
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