Finding The Best Possible Loans

It is impossible for one to meet all of your expenditure from your earning, there will always be shortfalls in your budget. It is at this point that personal loans usually come in handy, as the will be used to fill the gaps created. Personal loans are usually unsecured loans taken from banks and other financial institutions. Since they are unsecured they are usually availed on the basis of how much one earns, credit records, employment history and repayment capacity.

The fact that this loan is unsecured is what differentiates it from other loans, but this is at a cost ofcorse. As no asset can be claimed, or auctioned as collateral for default in payment these loans carry higher rates than secure loans. These rates range from 10-12% on the principal amount. In addition to the interest payable on the principal amount, one will also be required to pay a non-refundable fee on application of the personal loan. This fee in most cases is usuallyreferred to as processing fee, it is meant to cater for all the paperwork and expenses that will be incurred while processing the loan. This amount ranges between 1-2% of the principal amount.

These loans can carry either fixed or floating interest rates. Fixed interest rates have fixed monthly installments. Floating interest on the other hand implies that the monthly installments will keep decreasing following the reducing balance method on interest, this may change either on a semiannual basis or annually. In the reducing interest rate the borrower will only be required to pay interest on the outstanding loan balance, while in flat interest rate the borrower pays interest on the entire loan balance throughout the loan term.

If a borrower misses the scheduled monthly installments and is also unable to make further payments in the future, the lender will try to recover the due amount through settlements and recovery agents, which if fails the loan will be branded as defaulted, and will be included in your credit report making it harder for you to access future loans.

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