The world is so confusing sometimes as it is tough to judge a person’s intentions. Just imagine a loan is taken to clear another loan and this chain continues instead of putting a break at some point of time. Well, taking loans is not a bad idea altogether, but every measure has to be taken to repay it within the specified time. There are many types of loans, namely, home loans, student educational loans, auto loans, debt consolidation loans, personal loans, etc. Each of the types of loan has its own terms and conditions but a common condition “to repay the loan within a specified time” applies to all of them.
Why You Need Personal Loans?
A Personal loan can be defined as a fixed amount to fulfill personal needs. This loan carries a fixed rate of interest and has to be repaid with a specified time. A personal loan may be secured loan or unsecured loan. Well, it depends on the credit rating of the customer. If the customer has a good credit rating, without any question, the banks or the money lenders lend the loan amount to the customer as they are confident that customer will repay the total amount, i.e., principal + interest amount within the due date. But the problem arises when the customer does not have a good credit rating. In such a situation, the lenders will ask for collateral security before issuing the amount. Normally personal loans carry a high rate of interest when compared with other loan types, and the maximum tenure is up to 5 years.
How Is Personal Loan Different From Other Types Of Loan?
Normally, when a bank or lender is approached for a loan, they will ask for the purpose. So, based on the purpose, there are certain documents which need to be submitted related to the purpose. For example:- if a customer approaches for a home loan, then he/she will have to submit documents related to the house along with other documents. But in the case of personal loans, no such documents will be necessary as there is no need to specify the reason. Only documents required will be income certificate, address proof, and identity proof. Even the process involved in sanction of a personal loan is simple when compared to other types of loan. Only criteria applied is the credit rating of the customer. Check NationaldebtRelief.com for more information.
How Is Personal Loan Useful?
Personal loans are normally taken when there is no specific reason, but still there are some general expenses such as travel plans-either alone or with family; to clear of some other debts; repairs and modification of house; for marriage expenses; medical treatment (in case of no medical insurance or non- sanction of medical insurance); purchase of some household items, etc.
Repayment Of Personal Loan
Like other types of loans, even personal loan amount needs to be repaid. You can either repay it in equated monthly installments (EMI) depending on the loan amount, tenure and interest rate, or lump sum amount based on the agreement between you and the banks or lenders.
Effects Of Default In Payment Of The Loan
There is a straight and direct effect if the loan amount is not paid within the time. The interest charges will increase, along with a lot of financial stress. There will be repeated reminders from the banks or lenders reminding you of the due amount to be repaid. Your due amount will pile up. Your credit rating will start decreasing, and it will be difficult to get a loan from any other source. Your collateral security (if any) will be taken by the lender.
Solutions To Rectify The Issue
The movement one takes a loan (whether a personal loan or any other type of loan), one must be prepared to face the consequences in case of default in payment. Well, there is no need to worry as there is a solution to every problem. Some of the solutions available for the rectification of default in payment of personal loan are:-
- Approach Your Family And Friends: There is no harm in approaching your family and friends in case of emergency. If by chance, you get financial support from them, then you can settle of your due amount immediately and get back the asset (in case of collateral security).
- Take A Debt Consolidation Loan: This option is the best when you have other types of debts apart from the personal loan. A debt consolidation loan is a loan amount taken which is equal to the sum of all the debt amounts. There will be only one debt consolidation loan amount which has to be cleared rather than an infinite number of small debts. Getting a debt consolidation loan amount is not as easy as it may carry a high rate of interest apart from other strict repayment conditions. You can either make the calculation yourself or approach a good debt consolidator for the required services. Apart from solving your issues, they will try to help out in managing your future payment schedules.
- Transfer Of Loan Amount: If you have an only personal loan to be cleared, then you can always try to reduce your burden of debt. Normally, the interest rate charged by the banks will differ from one bank or lender to others. So, always check the interest rate of all the banks before taking the personal loan. But due to an emergency, if the personal loan was taken and now facing problems in clearing it, then check out for a bank which is taking a low rate of interest. There is a famous saying: “A rupee saved has more value than a rupee earned.” So, if some amount can be saved by the reduction of interest rate, then it is worth trying. By transferring the balance loan (unpaid amount), the new lender will settle the due amount to the old bank or lender. Now your time to repay the amount will increase. However, some charges like transfer fees, prepayment charges, etc. will be added to your due amount, which is unavoidable.
The credit rating can be good only if your repayment of debts is made periodically without any default. Management of debts repayment is a tactic, and everyone should practice this to enjoy a peaceful life