A personal loan is essentially the funds that are needed at the time of emergency. They are regarded as unsecured loans which can be easily obtained when a person draws salary regularly. Below, take a look at the 5 important factors that one needs to bear in mind at the time of acquiring a personal loan.
1. Pick a Loan with Low Interest Rate:
Given that a personal loan is an unsecured loan, they come with a high rate of interest. Therefore, it is crucial to pick a personal loan with a low rate of interest. Remember, any bank or lending institution will pick a loan based on numerous factors such as the reliability of your income, the credit score etc.
2. Check other charges and fee:
When it comes to taking a personal loan, it is important to check the other charges applied by the bank. For instance, you must check the processing fee that the bank charges and which is usually in the range of 1-3% of the personal loan. There are times when the bank offers discount on its processing fee and you will obviously want to apply for such personal loans. Apart from this, applicants must also take pre-payment penalty charges into consideration. This amount is calculated as the percentage of the amount outstanding. People with additional funds can prepay their loans to save the amount that they would end up paying in the form of interest rate. But, remember a high prepayment fee is something that you would want to avoid.
3. Check if you can repay your loan:
Before you acquire any personal loan, you must ensure that you are in a position to repay the same. It is best that you keep an EMI calculator handy and calculate the EMI to understand whether you can pay the entire loan amount along with the interest rate without experiencing any financial trouble. It is always a good idea to determine your cash flows and choose an EMI amount that does not exceed 40% of the total income you take home.
4. Don’t Take More than You Need:
Banks tend to offer a much higher loan amount when compared to what you actually require. But, you must evaluate your requirements carefully and take a loan accordingly. In case you want to take a loan to meet your wedding commitments or even if you need one to travel to foreign locations, it is always better to estimate the costs and check whether you can gather enough funds yourself and then proceed further to acquire the remaining funds.
5. Don’t Fall for Gimmicks:
A number of banks and financial institutions offer personal loans today. However, you should steer clear of offers that promise a high amount of loan and lower rates of interest. It is recommended that you go through the loan offer and fine print before you take any decision.
In case you are planning to take a personal loan then seek assistance from Empire Broking! As the reputed financial services provider in Australia, Empire Broking offers a wide range of financial services including home loans, investor loans, credit cards and more.