Loans are tools that can be helpful to many of us, however since it requires a financial commitment, we tend to get confused. There are many forms of loans that we can choose from but sometimes choosing a form of loan can become very difficult. There are a variety of loans that help people meet certain needs and fulfill their dreams.
What is a Personal Loan:
Personal loans are one of the most common kinds of loans availed by common people. Simply put, it is an unsecured loan that allows one to fulfill the need. It is also very important to note that many kinds of loans are simply used for specific purposes but a personal loan can be used for many reasons.
However, before we apply for a loan, we need to understand the difference between a secured and a non secured. A personal loan is an unsecured loan. This means that a personal loan does not need an asset set aside for the loan. Therefore, the borrower does not have to set aside any collaterals that can be auctioned off, in case of a default.
The interest rates on personal loans are very affordable. However, if you default on one, it can be catastrophic as it gets added to the credit score. This might further affect any future loans or credit card applications.
Personal Loan Interest Rate is very affordable so it is an ideal choice for a common man. Every bank’s personal loans such as the IDFC Personal Loan provides excellent and affordable interest rates and easy loan repayment procedures.
Is a long-term personal loan the right choice:
Long-term personal loans can be very useful and the perfect choice for people. Some of the pros are:
1. Reduces your Monthly Repayment Burden
Opting for longer repayment tenure can result in the reduction of your monthly repayment burden. If one has a tight financial condition, you can opt for a long term personal loan for your benefit.
2. Improves Loan Eligibility
Before the bank sanctions you the desired loan amount, they will check your monthly income and many other criteria in order to ensure that you can pay the amount without any delay. When one chooses a longer tenure, the EMI gets reduced automatically and the lender can sanction a longer time so as to decrease the chances of defaulting.
3. Pre Closure of Loan
Any interesting customer is given the option to pre-close the loan before their tenure matures. This happens usually at a nominal fee of 1-2% of the remaining outstanding loan balance. Opting for a long tenure will allow one to save more every month and pre-close the loan before your tenure ends. This makes it easier for one to pay for the loan.
4. Top-up Loan
Many lenders allow certain top-up loans after consumers are able to complete a certain period in their tenure. In such cases, the minimum repayment period to completely qualify for a top-up is at least 9 months. Top-ups are usually offered to individuals who have a proper repayment history and a clean credit score.
5. Improves your Credit Score
The credit score in a journey of a loan is an extremely important parameter that every lender will review. If your score is damaged, a long tenure may be a difficult option, and making timely and consistent EMIs every month can be helpful in improving the credit score.
6. Higher Loan Amount
A longer tenure gives one more time to pay the EMI and it is easier for one to pay. One can relax in such a situation. The fact that one is opting for a long tenure, allows one to go in for a higher loan amount and also lets one pre-close the loan soon. This is a strategy that particularly works well if one wishes to consolidate one’s debt.
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