If you are facing a financial crisis and are contemplating to avail of personal loans, here are some things to consider to be benefitted by it. Maybe the terrifying thing about the financial crisis is that they come without warning. While having an emergency fund reserved for such instances is the practical thing to do, at times, depending on the nature of the financial crisis, you might not have saved up enough. Thanks to personal loans, you can still face this crisis.
Since they are unsecured loans, one of the most significant benefits of personal loans is that they can be used to face any financial need-whether it is for refurbishing your home, a medical crisis or funding higher education. The icing on the cake is you do not need any collateral to avail the loan. Let’s look at some of the dos and don’ts that you need to follow when you apply for personal loan.
Know the purpose of getting a personal loan
Personal loans are not like home loans or car loans; they can be used to meet any financial requirement. There are two reasons to get personal loans, to clear off debt or for funding higher education or renovating your house. While using a personal loan to get out of debt might seem like a bad idea; it’s not. Compared to credit cards, personal loans have much lower interest rates. It makes them a far more convenient alternative to credit card debt.
Have a look at the fine print
It is crucial to read the fine print before making being sure about a personal loan. Read up on essential details like about repayment schedule, maximum loan term, any income criteria, and how long it will take to get your loan approved.
Also, be careful about processing fees. Some loans offer extremely low-interest rates as part of many promotions but charge high processing fees to cover up the difference.
Research interest rates
The thumb rule to consider when you apply for personal loan, you should be aware why you need it. This way, you can carefully have a repayment schedule and stick to it to clear off your debts. However, before you avail one, remember to look around and compare interest rates.
Pay loan EMI’s on time
While availing a personal loan will not adversely influence your credit score, if you default on a loan, it will undoubtedly bring down your credit score. With a poor credit score, it will become difficult for you to avail any loans in the future before you sign on any documents to avail the loan, use a personal loan EMI calculator to get an estimate of the expected monthly repayment.
There are also provisions for online personal loan apply nowadays, thanks to digitisation.