Are you planning to renovate your house but don’t have enough money to do it? With the concept of personal loans, you no longer need to worry about this. Banks offer personal loans that allow you to use the amount for personal use, such as to pay off an immediate debt or to pay off an unforeseen expense.
Although the concept seems to be very lucrative, getting one’s approval is not an easy task. In order to qualify for such a loan, certain strict guidelines must be followed. Therefore, if you are planning to apply for one, there are certain points that need to be considered.
These loans are unsecured: This type of loan does not require any assets to be held such as a mortgage for the bank. However, if one defaults on the loan, the bank has the right to seize any assets, be it your property, house or car. However, in most cases, if the defaulter does not have any assets to give in lieu of the loan, it becomes very difficult for the bank to recover the money. This is one of the main reasons why it is difficult to get approved for a personal loan. In such a situation, the bank may file a legal claim against your name to carry out legal procedures.
They have a fixed amount: The amount of a personal loan depends entirely on the income of the borrower and also on the discretion of the lender. It is based on the credit score of the borrower. A credit score is a measure of one’s income that allows the lender to decide on the amount to loan. Some of the banks have limited the amount that they offer as a personal loan.
The interest rate is fixed: The interest rate is decided based on the credit rating of the borrower. In an ideal situation, the interest rate should be lower, allowing you to repay a loan at a much lower cost. The most important fact about personal loans is that the interest rate remains fixed throughout the life of the loan. However, some banks also offer variable rate loans, making it difficult for the borrower to repay.
One should always try to get the loan from a bank where he has an account. This is because it would be much easier to get approved for the loan. Care should also be taken when applying for one as there are many scams that keep happening. You should also explain to the bank about your need for money, in case they can offer something much better.