Important Things Need to Remember About Personal

Loan

With almost all banks and some financial firms offer personal loans, their availability has become easy and processing times smaller. But the applicants, who can easily learn about their equal monthly instalments (EMI) quickly using an online Personal Loan EMI calculator, must bear in mind certain important things before they go for a personal loan.

Personal Loans are Unsecured Loans

Usually banks hesitate to lend unless a collateral or security is given against the loan amount. The collateral or security is pledged with the bank for the period of the loan and the bank is expected to make its recovery from the security in case the loan turns bad. But personal loan is a new concept where banks do not demand any security.

Personal Loans Do not Require a Guarantor

If the banks do not ask for security, they often ask for a creditworthy individual to vouch for the loans. This individual is known as a guarantor on your behalf. But personal loan take your income as the sole ability of your repayment and do not need a guarantor.

Stringent Checks on Repayment Ability

Since the income of the borrower is the sole criteria, the banks and lending firms run a tight check on this aspect. Usually a person’s credit score is taken into account. Sometimes banks see that a person is working with a reputed, stable employers and for a certain number of years before they advance a personal loan.

Usually the Rate of Interest on PLs is High

Since the lenders do not require security or a guarantor, they hike the rate of interest. The personal loans can cost anything between 14-26 % per annum. However, banks try to make the deal sweeter by levying interest on monthly reducing balance.

Missing a payment can invite penal charges

Banks and private lenders expect a personal loan to be serviced regularly. That is why they often charge a penalty for missing a payment.

Pre-payment Sometimes Invites Charges

Banks make a profit on interest paid. This only happens if you avail the loan for a larger amount of time. Hence they might charge a penalty for pre-payment of the loan.

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What is a Personal Loan EMI Calculator?

A personal loan calculator is an online tool offered by a bank or a third party website to quickly calculate EMI of a personal loan. Once you feed the calculator details like loan amount, interest rate, tenure and processing fees, it instantly calculates the EMI and the entire amortization table.The calculator lets you know the EMI and the total interest to be paid over the tenure of the loan.

The amortization table lets you know the amount of EMI that goes to pay the interest and the principal, and lets you know the amount repaid and the outstanding at a given period. It can tell you how much you can save if you prepay the loan.The Personal Loan EMI Calculator can also be used to examine loans with different rates of interest or tenures and the EMI thereof.

ConclusionTaking into consideration, the higher interest rates and penalties for delayed payments and pre-payments, personal loans seem an expensive loan. Though for the sake of convenience, people do not have to submit any security or guarantor, these loans are best availed as a last resort.

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