A personal loan comes handy during financial emergencies. They are very helpful as they are disbursed quickly and don't require collateral. But, you should be very careful while availing a personal loan. This is because it might affect your financial future as it charges a high rate of interest.
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Here are the important factors you need to consider before availing a personal loan.
Personal loans charge a very high rate of interest as they are unsecured. The interest rate on personal loans ranges between 11% to 22% a year. Interest rates are fixed depending upon borrowers income, creditworthiness, age, Company you work for and so on. Before availing a personal loan, you must compare the interest rate charged by different lenders and select the lender who offers lower interest rates.
2. Charges on personal loan
Charges levied on personal loan vary from lender to lender. These charges include documentation charges, collection charges, repayment mode swap charges and cancellation charges.
Banks also levy heavy penalties in case you fail to pay your dues on time. Before availing a loan you should be aware of all the charges levied by the bank.
Personal loan repayment tenure offered by the lenders varies from 1 year to 5 years. Some lenders even offer a longer tenure of 7 years. If you are looking for lower EMIs, then you should go for a higher tenure. If you want to pay off your loan quickly, then you should opt for a shorter tenure. If you choose a longer tenure, then you will end up paying more interest.
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You can reduce the loan burden by prepaying your personal loan. But, some lenders charge prepayment charges if you prepay your loan. So, borrowers should be very careful about prepayment charges. One should always opt for the lender who does not levy prepayment charges. You should never pay anything extra while foreclosing your loan.
Like all bank charges, processing fee also varies from bank to bank. This fee includes various expenses incurred by the bank while approving your loan. The processing fee will be between 1% to 2%. Before availing the personal loan, you should check the processing fee charged by the bank, as this might be quite high in case of personal loans of a large size. Processing fee is non refundable. You are charged processing fees, even if the personal loan is not sanctioned. Be Wise, Get Rich.
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