Avoid Personal Loans Trap

Avoid Personal Loans Trap

There are scenarios when even the most financially sound person has faced the financial crisis. The financial crisis is one inseparable part of a person’s life, and it may come in anyone’s life, without any notice. There are situations when the richest person has to take the financial support. Leave alone the normal people, who are managing their funds with tight hands, the need for financial support may be required any moment of time, without notice.

The need for such a financial support can be complemented by the loan, as offered by the Banks and several other financial institutions. When the credit is availed by the banks and other financial agencies for the personal use, it is called Personal Loans. This Personal Loan has come to the rescue of the many people, with the instant availability of funds. These Personal Loans have always been the helping hands during the urgent needs of the people and have solved various unavoidable circumstances in a person’s life.

But at the same time, the Personal Loan has been a cause of worry for many. Even, if the Personal Loans have been the lifesavers many times, they are the ones, which come with some hidden traps too. Lets discuss the various Personal Loan traps, which you must avoid in order to offer yourself a better experience of a Personal Loan:

Processing Fee

The Processing Fee is an impartial part of any loan. It’s the aspect, which is associated with any kind of loan form, and the personal Loans are no exception. However, the important consideration is how much you are being charged on your loan processing. While the loan processing fee varies from bank and bank and varying as per different NBFCs and other financial situations, there are situations when the processing fee can see the variation owing to the eligibility criteria. Sometimes the lenders can claim the high processing fee owing to the lower eligibility criteria, or because of the low CIBIL Score. When it comes to the general case, the processing fee varies around 2%, but many banks can charge a higher processing charge and any slight difference in the processing charge towards the higher bracket can impact your total money to be paid on your Personal Loan.

How to Avoid: Thus considering this as a trap, you need to research deep on the processing fee as charged by the lending agencies on your Personal Loans. You can even seek clarity over the processing fee and can also negotiate on your processing charge on Personal Loan.

Prepayment

Prepayment is the process where you can prepay your loan in part or as a complete even before the loan tenure gets complete. Prepayment is the process, which allows the people to foreclose the loan, by paying the entire remaining dues much before the actual loan tenure ends, and thus relieves the loan borrowers and at the same time allows in saving quite a good money in the form of the total loan amount to be paid. Thus, if your financial situation allows you to get rid of the personal loan, you can repay the loan amount remaining and can foreclose your loan.

Until sometimes before, the prepayment process attracted some penalty as the prepayment penalty. But, since it’s not eliminated; if there’s any bank which charges so, remind yourself that you are falling into the personal loan trap. Thus, any lender asking for the prepayment charges is a clear indication that you are getting into the trap, which has no means of coming out.

How to Avoid: In order to avoid such precarious situations, it would be better if you keep yourself updated with all terms and conditions of the RBI, which is the governing body of the financial agencies in India. If you are looking for a loan, it is advised if you seek a clarification over prepayment conditions from the lenders. If you are already a Personal Loan borrower, get to know what your rights in terms of prepayment are.

Late Payment Charges

You may be charged for the late payment of your EMIs in case, you don’t have sufficient funds to pay your EMIs. In cases of non-payment of EMIs, you may be charged with the penalty, which you have o pay at all cost.

How to Avoid: While, this is the right of the lending agency to slap you with the late payment fee, over the non-payment of the EMIs on time, the only thing you can do is to avoid being in such situations. It would be better if you allocate yourself with the sufficient funds much before the actual date of paying of EMIs come and remain prepared to pay EMIs well on time.

Rate of Interest

The rates of interest on Personal Loans vary with the banks. There is a wide variation in what different lenders charges on Personal Loan and there are certain conditions, which decide the Personal Loan Rate of interest. The rate of interest is, of course, varying depending upon the bank conditions, but it is influenced highly by the eligibility criteria and the CIBIL Score of the loan applicant. So, in case you are quite eligible for the Personal Loan and bear a very high CIBIL Score, and still you are being charged a higher rate of interest on Personal Loan, it’s the trap for you.

How to Avoid: In order to avoid such a trap, better equip yourself with the detailed knowledge of the rate of interest at which the various banks are offering you a Personal Loan. You can even negotiate with your lender over lowering of the Personal Loans and can emphasize that you feature high Credit score and are quite eligible for Personal Loan in all aspect.

Impulsiveness

While many exciting deals and offers on Personal Loans may create a sense of availing it without losing the opportunity to get a loan at low prices, there are several other conditions and factors, which you should keep a tab on. Your impulsiveness for more money and more importantly getting those at the low rate of interest is in fact, a trap, which most people fall into.

How to Avoid: Since any money which comes an easy way, always come with the risk of getting spent in a more lavish manner, than you would have liked. Since the festive seasons are approaching and any easy money may result in the increase of the unnecessary expenses, you should reconsider your decision over the Personal Loan and should think twice, if you really are in need of the finance from banks and lending agencies. Consider with a deep approach that, if you are really in need of the additional funds or if you can quite easily deal with the current financial situations on your own. Since you are being offered a loan at special rates, doesn’t mean it that you should avail it. Reconsider your financial needs and then make a decision; avoid being an impulsive loan borrower.

Loan Insurance

In case, if any bank says that loan insurance is mandatory for the approval of the loan application, the bank representative is lying you and is building a trap for you. There are situations when your lenders claim that without loan insurance, you will not be allotted any Personal loan and that you have to opt for the loan insurance to take things further. A Trap, which you must not fall into, the Bank always ensure that you take loan insurance with the Personal Loan.

How to Avoid: All you need it to get stick to your decision, that you are not going to take any loan insurance and that you are well aware of the actual rules and regulations. You need to tell them that you have the complete knowledge of the facts related to the loan insurance and it’s never mandatory to take loan insurance to be eligible for the Personal Loan.

Loans availability on certain Products

Here are certain conditions, especially during the festive seasons that the products you intend to buy with the Personal Loan, may be or not, covered with the offer. There are certain lenders that usually collaborate with certain brands and product for the availability of easy loans. If you are intending to buy a product of certain brands, it may be a case, that product is not available with that exciting offer and discounts.

How to Avoid: Make a sound decision on what the loan is available on. There are certain deadlines for the loan availability especially during the festive season and many products available on loan and easy discounts come for the certain period, thus making a complete research over the offers and schemes coming during the festive season.

Offers and Schemes

Many times, it has been seen as that people fall prey to the tempting offers and Schemes on Personal Loan. But, one must always remember that the banks and other lending agencies are not fools to offer you with such unbelievable offers and schemes, which even may surprise you. Every schemes and offer comes with lots of terms and conditions, which people usually avoid while availing the Personal Loan. Many times, it has been seen that many terms and conditions are written in small letters with an asterisk, and written at those places, where normal eyes don’t usually pay attention at.

How to Avoid: Just go through the complete documentation before closing the deal. Any exciting and alluring deals and offers may come with terms and conditions and thus go through the beneath of the offers and any such exciting deals is the only way to get yourself protected from falling from any such trap.

Buying Expensive Items

The Personal Loans comes with the greatest blessing; that it is completely free on whatever, you can spend on, no one is going to ask of you. However, there are two sides of a coin. Even, if you have the complete liberty over how to spend the Personal Loan amount, it offers you a trap, at the same moment. Since, there’s no restriction at all, over how you spend the money, it may create a sense of lavishness and you may be tempted to buy things, which you really aren’t in need of. You may be buying a car with the personal loan (which is a depreciating asset), which may go fruitless in case, you don’t need it.

How to Avoid: Personal loan always offer a trap, which the unwanted and avoidable expenses, which could have avoided with much ease. Thus, restricting your hunger and taking a measurable and thorough approach towards your needs and demands will be a better way to avoid such a trap of buying unnecessary buying of items with the Personal Loan.

The Personal Loans are always available for your instant need of cash to meet any emergency situations, which otherwise is not manageable on your end. Every personal loan is a way to the instant disbursal of the money and you should take this availability of funds as serious offerings, during the times of the need. The people should avail this availability of loan with the responsibility. The Personal Loans are the helping hand for the people, who are in dire need of the finances during any emergency situations.

However, over the years, it has been as the personal loans have been availed by the people more, due to easy availability. However, the consumption of the Personal Loan must be thoroughly researched, and you should not fall trap into the easy availability of money. People have been borrowing money (don’t actually know, what they are spending on), but for those who are restricted on their income, must abide by the personal Loan until they are not forced to take a helping hand. Every Personal loan comes with the additional duty to repay it back with a high rate of interest. Thus, the utilization of Personal Loan Amount for urgent tasks is only recommended for the People!