personal loans

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INTRODUCTION

T.Y.BBI PERSONAL LOAN

INTRODUCTION

A loan is a redistribution of financial assets over a time between the lender and the giver of the loan. The borrower initially receives an amount of money from the lender, which they pay back usually but not always in regular installments to the lender. This service is generally provided at a cost, discounted as interest on the debt, to the lender. Acting as a principal of loans is one of the principal task for financial institution for banks. Loans are generally funded by deposits for other institution issuing of debt contract, such as bonds is a typical form of funding.

Due to rising of basic needs, personal loan facilitated by various bank play a vital role in fulfilling the people desire of buying their dreams. They are ideal when we need or buy a product for ideal when do not have ready cash.

Personal loan are better choice compared with consumer durable loans. In fact before we consider taking a consumer durable loan we might consider a personal loan instead as the procedure is slightly longer but the rate of interest is lower. Flexibility of duration and availability of various schemes make personal loan an attractive option.

It is an all purpose a loan, which is given in most cases without any kind of security like a car, home, shares or any kind of property.

Most nationalized, foreign, and co-operative banks offer personal loan. Besides banks, some other finance companies and financial institution also offer them.

Lending rates differ for different financiers and currently from 12% to 30%. These loans are available in the range of Rs 15000 to Rs 10 lakhs. The repayment period varies widely; some lenders usually permit repayment up to a maximum of 60 months. And most lenders restrict the lending to a maximum period of 36 months.

Most bank will give anywhere between Rs20, 000 and Rs10 lakhs(Rs 1 million) for a maximum for period of 60 months. To be eligible for the loan you need to be between the age of 25years and 58years in case of a salaried individual or between 25 years and 65years if you are self-employed.

While issuing the loans, banks look at factors like your salary or profit, the number of years you have worked in a particular organization and the number of years you have stayed in your current residence.Advantages and disadvantages of personal loan

With a lot many lenders on the block willing to offer their loan services to all, applying for a loan nowadays, is no longer a problem. Gone are the days when you had to wait to buy something or go out and do what you wanted to, because a hassle free and available to all personal loan is now no more a dream, but a reality. Today, various loans are available in the market to suit individual needs of the people. In Personal Loans as well, different types of loans are available. They can serve you well in your financial limitations while making your living better. No delay should be done in availing a loan especially when it suits your financial situation and can be available to you in a desired time.

A personal loan is often described as unsecured loans because it allows you to borrow money without having to provide security against it. You can use the personal loans for the purchase of your house or a car. The personal loans are better for a longer time period.

Following are some of the advantages of the personal loans-

- While making an evaluation of the cost of the loan you need to consider the TAR (Total Amount Repayable) which means that the total amount that you owe towards the bank or a lender which also includes the rate of interest on the loan and the payments need to be made on a monthly basis. A suitable deal is where you get a lower TAR.- The maximum amount that you can borrow ranges up to 25,000 and the time period for the refund is up to ten years. The advantage with the personal loan is that when you take a maximum amount as a loan then you have to pay a lower rate of interest. It is totally different from the terms and conditions for the mortgage. The unsecured personal loans are not protected for your property so if you are not able to refund the loan then you can be rest assured that your house is safe. - The interest rates for the personal loans are also fixed. This makes it easy for you to make a planning for the payments that has to be made. The refunding amount also remains stagnant all the way through the time period of the loan. - With a dynamic market scenario of loans the rate of interest has seen so many ups and downs. Now to get a loan it has become simpler than ever before. The financial companies offer you loans through their telephone service. They have toll-free numbers and they guide and provide you the best deals and offers. Following are some of the disadvantages of the personal loans: Various financial companies and clever lenders introduce certain plans like- make a purchase and pay it later, offer free gift items, etc. These will only raise your price of the loan. So take a wiser decision and go for the basic loan with favorable terms and conditions. Always make a choice for those loans which have a low rate of interest and where the terms of the refund are moderate.- Dont make a hasty decision in choosing a personal loan. It is not right to take a loan from just another bank. Make a survey and try to find out various offers and plans that various other banks and financial companies have to offer. Now with the internet things has become very simpler. You can visit various financial companies, what are the offers and plans these companies are offering. Accordingly you can take a decision whichever plan suits you. - The PPI (Payment Protection Insurance) provides you the refund on a monthly basis if you are not able to work, you have met with an accident, in case you have suffered a heavy loss in your business, you are not employed anywhere, and make a payment for your loan in case of your death. You should be aware of this type of insurance as it is a costly affair and it adds an amount ranging from 1,000 to 5,000.

- According to a survey majority of the personal loans are paid off before the completion of their tenure. You need to look out for those lenders who take heavy amount for the settling of your loans before the tenure. You have to handle the annual percentage rates very carefully as it entirely depends on your financial credibility. You probably might not be eligible as to be entitled for it. You need to have a good credit history otherwise you wont be able to qualify for the lenders potential customer list.Here are few guidelines before taking any concrete decision regarding the personal loans: - Analyze all the offers and schemes before applying for the loan. There are various lenders who are not real and their motive is just to earn profits. - To be entitled for a personal loan the procedure followed is rigorous although there is less documentation involved in it. - Go through the contract thoroughly and reassess the closure price and for any hidden cost (If any). It is an important step which will only benefit you. - If you are planning for a personal loan then most of the time it is cheaper than getting a credit card. Excluding the consumer durable loans the rate of interest for the personal loans are high.Personal loans - Special emphasis on bad credit personal loans

Before approving a loan application, the lender calculatesthe following two affordability parameters to make sure that the chances of repayment are not bleak: Credit history, to ascertain the loan seeker's past financial record as good or average or bad.

Debt to income ratio (DTI = Debts/Income), to compute the loan seeker's current monetary position.

Depending on the above-mentioned calculations, the lender categorizes the loan seeker as: prime customer (person with a good credit record), near prime customer (person with an average credit record) or sub-prime customer (person with a poor or bad or adverse credit record).

A sub-prime client is further categorized to get a better idea of the hazards that he may pose - low adverse credit, medium adverse credit or heavy adverse credit. After this detailed evaluation and classification, the lender approves the loan application/amount and decides the loan terms/conditions.Sub-prime loan seekers can avail credit support under the 'bad credit personal loans' category. Available in both secured and unsecured form, this special personal loan sub-category helps people bring their lives back on track.

For obvious reasons, prime and even near-prime customers can negotiate for a favorable loan deal. But, sub-prime customers have to settle for high APRs, and stringent loan terms and conditions. Still, secured loans are more gainful and are generally easier to get as compared to unsecured loans.

Secured bad credit personal loans, the best solution for homeowners and property owners are comparatively safer for the lenders, as they are availed by pledging collateral. As a result, there are chances that the loan seeker may get a less stringent loan deal.

But, unsecured bad credit personal loans, probably the only option for those UK residents who are incapable of offering collateral, are risky for the lenders, as they are availed without pledging collateral. As a result, the creditor cannot afford to offer a flexible loan deal.

How to ensure a safe personal loan?

The online media for applying for loans is becoming increasingly popular these days. Being time saving and convenient, it's preferred by most of the borrowers. Nobody likes visiting the bank manager in persona to apply for a loan. But, one must ensure that s/he is applying to the right lender and not to a loan shark. Loan sharks are unli