Personal loans are a certain type of loan that fulfills your present day requirements. These are more focused to satisfy the needs of an individual or a family and that’s why involves smaller amounts as compared to other loans provided by banks. People take personal loans for wedding, travelling, house renovations, buying electronic items like smartphones, laptops, refrigerators etc. These are a few general purposes for which people opt for personal loans. If you are considering to opt for a personal loan, here are a few points you should consider before having one.
These are unsecured loans which mean that you don’t have to present your assets as collateral before the bank before taking it. As it involves a smaller amount which is one of the main reasons banks don’t ask for collateral.
They involve smaller and fixed amounts unlike other loans and that usually depends on the lender’s income and credit score. The higher credit score you have, will let you to borrow a bigger amount. Unlike credit cards, they are a one-time loan.
Fixed Rate of Interest
Unlike other loans that a bank provides, they don’t have a floating point of interest. The rate of interest is fixed and doesn’t change during the tenure of the loan. Having a higher credit score results in lower rate of interests. Floating point of interests make it difficult for lenders to pay as it keeps fluctuating with increasing or decreasing market value.
The banks let you to fix a certain period for the repayment of the personal loans. It depends upon the lender what period they choose. Longer repayment periods mean that the lender has to pay larger interest but with smaller monthly installments. Longer repayment periods imply that the lender has to pay a loan for a longer duration and this could affect your credit score.