What All Should I be Conscious of while obtaining a Personal Loan?

Stuck under an ever-rising pile of debt? Or have a medical emergency? Or have to urgently pay fees for your kid’s college? Don’t worry! No matter what your financial emergency is about, the personal loan will come to your rescue. 

It is amongst the quickest ways of getting funds. And you know the best part? You don’t even have to keep any of your valuable assets as security. However, the no-collateral part is not as amazing as it sounds. Since there is no security involved and the risk is higher for them, the lenders charge high rates of interest on the loan, making it costly for you.

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Also, you need to make sure that you manage your loan properly otherwise, it will put you in trouble rather than taking you out of it. In order to manage your loan properly, you must consider the following things while applying for this finance. 

#1 Considering all the Options Available

A personal loan is indeed a quick option for taking care of your financial emergency. However, these loans have high rates of interest with short duration for repayment. Therefore, the amount of repayment becomes large. 

You must consider all the available options and their monthly payments and make sure you are capable of making the repayment. Some Bank also offer personal loan in UAE 3000 salary employees. You should also assess whether you are going to opt for a personal loan in UAE without a salary transfer or with salary transfer.

#2 Taking your Credit History in Consideration

The first and hands down, the most important thing that any lender would check before approving your loan request is your credit rating. Since this type of finance does not require any kind of security or collateral, the eligibility requirements are pretty strict.

Your credit score is the most essential amongst the various eligibility requirements. It helps the lender in judging your credibility and assessing the potential risk that may come with you. 

Those who have a good credit rating have higher chances of getting approval for personal finance easily that too at a competitive interest rate. 

#3 Haggling for an Economic Rate

The lenders always have a competition between them for providing loan to the borrowers who are credit-worthy. Hence, you must put your best efforts to haggle for a better rate on the finance deal. 

You may not realize it now, but even a single percentage may lead to a considerable reduction in the repayment amount. 

#4 Determining the Loan Amount Smartly

No sane and knowledgeable person is ever going to recommend you to borrow more than what you require. You must analyze the reason why you are opting for the loan and then make an estimate of the amount you may need. 

The lender may even offer to provide you with an amount higher than what you have asked for if they find you credit-worthy. However, going overboard with your loan amount won’t be the best idea. 

Wondering why? The answer is very simple. More loan amount means more debt, and obviously more interest as well. Hence, you must only borrow the amount that you need.

#5 Keeping in Mind How Unhealthy Defaults can be for Your Credit Score

You all must already know how defaults make you brush with the courts and authorities. But, do you also know that these defaults can have a bad impact on your credit ratings too. 

You may be able to pay off your current loan successfully, but your chances of obtaining the loans sometime in the future may get harmed big time because your credit history shows all the defaults you have made in your past. If you have a clear credit report, it may also help you in haggling for more economic rates later. 

#6 Opt for this Loan Only When there is an Emergency

The banks do promote their finance products for leisure activities such as purchasing the latest gadgets or a long-planned vacation. However, it is recommended that you opt for a loan only when you are under a financial crisis. 

Your loan cost includes interest and various other fee and charges and must not be taken for not-so-important expenses such as these. If in case you fail to pay even a single installment, it may cause harm to your credit rating, hence making it difficult for you to obtain finance when you get stuck in an actual cash crunch. 

#7 Taking Your Current Financial State into Consideration

This particular point is not just valid for your personal finance, but all the other kinds of credit. You should consider your present as well as future financial state before you go for a loan. 

Personal finance may seem to you as the ideal solution in case of a financial emergency; however, if you fail to manage it properly, this potential solution may mess up your finances. In such situations, a personal loan calculator may come to your aid. 

You just need to put in the loan amount and the interest rate for finding out the monthly expenses and savings. Then, you need to assess whether the estimated EMI suits your budget. 

#8 Checking if the Bank Offers Overdraft Facility or Not

If you already have an account with the concerned bank, and the amount of loan you are looking for isn’t that big, then overdraft can be a resort. 

Usually, banks offer the facility of overdraft to their account holders who are credit-worthy. An overdraft is not a very heavy financial burden as opposed to a personal loan. 

#9 Going Through the Loan Agreement Carefully

Although it is necessary for your lender to disclose all the necessary rates and fees while you apply for the loan, it is still recommended that you go through the fine print very carefully. 

There are many charges that you must consider like foreclosure fees, rescheduling fees, processing fees, loan cancellation fees, and many more. Apart from that you also need to consider the tenure of the loan. 

There can also be some hidden charges, which if not identified in the beginning, may become a problem for you later. Hence, it is important that you go through the terms & conditions of the finance properly yourself rather than relying on the representative of the bank. Shop around and select the most suitable one. 

To Sum Up!

Personal finance is amongst the top solutions for handling a financial emergency, that too quite easily. However, it is necessary that you keep the above-mentioned points in mind before you sign the dotted line. 

If in case any issues come up in the future, then it will not only affect your financial status negatively but will harm your credit score also. This may later become a hurdle for you while opting for loans. 

About the Author:

Pardeep

Pardeep Garg is online entrepreneur, motivational speaker, and author. He is passionate about Market Research and loves to write on topics Market Research, Business, Digital Marketing, Finance, Information and Opinions to success in life.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

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