Points to Remember While Taking a Personal Loan

If you are considering taking a personal loan, then I must say that it really should be a well thought decision. As with this decision comes a lot of liability. If you’ve decided to take a loan then the next step is to find the right bank who can lend this loan to you. No-one will guide you to the right bank or loan provider which is best suited for your personal loan requirements.

There are plenty of options when it comes to banks, financial institutions and individual financers in the market but, you should do your research well as this will be a long term association.

Your selection can have impact on your loved ones and other relatives, and that is the reasons you can’t take this lightly. Question is how to select the best loan company when you have these many choices and which is perfect for you? Yes, we are going to help you solve this question today.

There are certain things which you should keep in mind when you’re evaluating loans from various financial institutions/NBFC. We’re just here to help you but the decision is actually yours.

There are some factors based on which you can compare personal loans from various lenders. Here they are:

Loan Amount

Personal Loan amount offered to the consumer is different in every bank and financial institution. It is a good idea to ask a bank about their max and min personal loan disbursement amount for a loan. Eg, if you need a low amount loan, then you should look for the banks whose range start from a very low amount of money. There are financial institutions who offer as high as Twenty six lakhs in a loan. If you need a high personal unsecured loan amount then HDFC personal loan should be in your list.

Loan Rates

interest-rates

The next thing that you should compare is the loan rates offered by several banks. Who would like to pay more when there are options available for lower rate of interest?
You can check the loan rates provided by lenders online but, it is advisable to go inquire about rate of interest yourself. The reason behind this is financial institutions provide various interest rates as per the credit score of individuals.

For example, you have got a good history of repaying your equal monthly installments, then there’s a strong possibility that you will get a lower rate of interest. The average rates range from 10% to 34% based on your credit score

Processing Cost

Besides the rate there are additional charges which loan provider charges to process the loan application. The fees also commonly called processing charges.It is the lender which decides on the % of the processing fee to be charged from the borrower.

For example, when you’re applying for Rs 6 lakh as loan from a lender whose processing fees is 1.5Percent, then you will have to pay Rs 9,000 as service or processing charges. Processing fees vary from bank to bank but, generally it ranges from 2 to 2.5 % of your loan amount if your loan amount is big then processing fees will have an impact on your pocket and hence should be a selecting factor of your lender.

Loan Eligibility

Loan-eligibility-Vector

Becoming eligible for an unsecured loan is the basic requirement to get a personal loan.If you’re not eligible then no bank or financial institution will offer you a loan. You might get a loan from a private loan provider with a higher rate, which might put a hole in your pocket. Yes, you should check the eligibility criteria before choosing and applying for any personal loan. If you do not do this in the first place, then chances are you’ll end up killing considerable amount of time and your energy.
I’d personally say this should not be missed at all.

Necessary Documents

documents

We all hate paperwork, but for a easy personal loan approval, it is very important to submit all the required documents at once. Papers required by lenders are generally similar but might have differences as per the loan company and your credit profile. Often, some of our documents do not have right personal information. So, checking into required documents section of financial institutions gives you an idea of what is needed.

Payment Option

Concern about high installments and EMI’s is definitely there at the time someone takes a loan. Is loan repayment amount is nightmare for you? To take care of this concern, lenders have flexible instalment options. If loan EMI’s is more than what you could pay off every month then, make sure you consider reducing your loan amount. Not every banks will have all sorts of repayment options so, it is usually a good idea to talk about this while you are applying for a personal loan.

Loan Duration

Longer the loan length, lower the EMI amount. When your salary doesn’t allow to pay the loan EMI’s in a timely manner then it is best to either reduce the loan amount or increase the duration of the loan. Not to worry, your lender will definitely give you an option to choose your loan duration but, it may have some dependency on your credit rating.For example, you can opt for a flexible duration ranging between one to five years while taking hdfc bank personal loan.You can search more such offers on the internet.

Penalty Fees

penalty

Every customer who’s got the right intention will always pay his or her EMI’s by the due date. However, when there is any default, then could be because of some unforeseen reason. Loan companies also understand this problem. That is why there are certain penalty charges that are already fixed by loan companies in case of missed repayment. You should research and compare the loan offers on this basis irrespective of how much confident you are about your punctuality or pay back ability.

You can also read personal loan application tips before applying loan.

Lenders face lot of default in lending products and hence they decide the percentage or fixed fees on delay of the payment (it can be both too). Charges also acts as a reminder for borrowers to EMIs on time. As we pointed out earlier, penalty can vary from bank to bank and also dependent on your rate and time you have defaulted.

All these factors are easy to find on the loan companies site or the application form which you fill for the personal loan. It’s just that we are not 100 percent aware of these and their impact on us.

They think that the most important thing is to have the loan amount as early as possible. Simple homework of 2-3 hours is exactly what you need to find all the things about these elements. It is obviously possible if you have a look at several websites of banks and nbfc’s.

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Difference between Personal Loans and Payday Loans

In the earlier years people used to hesitate from taking personal loan, because of the high rate of interest and inability to pay on time, but the system is changing rapidly and people take personal loans pretty casually. To avail a personal loan is also pretty easy and there is a wide range of banks and lenders from which you can chose. Payday loans are also similar to a personal loan but for a much-much shorter time. The principal of personal loan and Payday loan is to pay for things which you might not be able to purchase at once. Let’s compare the both and look at their some of the pros and the cons.

Personal Loan

Image result for Personal Loan

A personal loan is not like a home loan or a car loan, as in the bank cannot confiscate something from you. In case of Home loan, if you do not pay, the banks takes your house and if you do not pay for your car loan, the bank can confiscate your car, but that is not the case of personal loan and bank cannot directly seize your assets. That is why personal loan takes weeks to process and approve. For your personal to be approved you need a good enough credit score too. Usually banks charge high rate of interest like 12% to 15% but apply for HDFC personal loan, you can get rate of interest down to just 10%.

Pros-

  • Lower Interest Rates- Although personal rates are high but when compared to a payday loan, it is significantly low.
  • Avoid credit card debt- A personal loan has much lower rate of interest as compared to credit card processing fees and even the rate of interest charged at the time of repayment is much higher combined.

Cons-

  • The rate of interest on personal loan depends on credit score, so if your credit score is low than chances are your rate of interest charged on the personal is high. In case of a big purchase, get a new credit and enjoy 0% rate of interest in the beginning.
  • As I mentioned above, personal loan takes time to process and it is not very easy to get a personal loan approved. Especially if you have a low credit score.

Payday Loan

Image result for Payday Loan

A payday loan can be defined as a short term loan with high rate of interest. As the name suggests the loan must be paid by the time you receive your next salary. So the duration of the payday loan is only 1 months. In some cases, the income or salary is not credited every month, in that case the loan must be paid in whatever time is mentioned by the loanee, like 2 months, 3 months or 6 months.

Pros-

Credit score is not important- You can get your payday loan approved even if you have a poor credit score and even if you have no credit history.

Loan Amount can be small- As the loan duration is very short, the loan amount can also be short and the limitation on how small the loan amount can be is pretty low.

Cons-

Higher rate of interest- As mentioned above payday loan have very rate of interest that is why it is usually not suggested. The average rate of interest starts from 15%.

Payday loan can become a Debt Trap- The banks are very smart and most of the time they know the lonee would not be able to pay on time, going by their credit history, so they offer other loans to the loanee as well, which can become a vicious cycle of never ending loans and debts.

Conclusion- The payday loan should be avoided in most of the scenarios, but in case you have some kind of emergency and you need the cash quick and you can pay it by the next payday too then it would be the best choice, otherwise go for a personal loan.

CSR – Scope and Options

CSR initiatives don’t stop with donations to charity or funding working out of needy children.  All projects or programs that are directed at addressing social, environmental or economic concerns belong to the scope of CSR.   Initiatives dedicated to offering or improving Fundamental Healthcare, Mother and Child Welfare, Gender Equality, Education, Initiatives to help those in lower strata of society, Eradication of hunger and poverty, Environmental health, Repair off natural sources, and contributions to Condition run relief cash is however a few causes that become qualified as CSR activities.  Companies can direct their efforts towards such initiatives so that you can fulfil their CSR obligations.

With scope of CSR activities broadly defined, it may be the business to decide on the reasons it wants to support, based on its core values.

How to decide on the best CSR initiative?

As noted choices aplenty, mainly within the Indian context, where there’s much play the role of achieved to boost quality of existence in the common man, plus general adopt more sustainable business practices.  You need to realize that investments towards social causes that translate as direct benefits of the organization aren’t recognised as CSR spending.

In line with the Indian Companies Act, companies must first direct CSR efforts towards alleviating socio-economic, environmental or any other areas of concern in a variety of areas they function, rather of taking on CSR projects somewhere nationwide. Localizing CSR programs frequently prove effective because it is not just obvious to determine and recognize the problems, but furthermore place them into action and track their progress better.

That mentioned let’s check out some typical categories of social responsibilities that companies support.

Philanthropy

Identifying a social cause and donating to charitable groups associated with addressing this is because probably a quick and simple option designed for companies to fulfil their CSRs.

Eco-Friendly Operations

By using natural sources in the careful manner and tapping renewable reasons for energy, to effective effluent and waste management, companies can lead to a considerable alteration of their daily operations to lighten the duty round the atmosphere.

Human Legal legal rights and Ethics

The scope of human legal legal rights and ethics is certainly vast.  Efforts to make certain fair treatment and pay across all amount workforce without any discrimination, can be a fundamental requirement rather than really CSR. But going further to eliminate child work and poor working conditions and paltry wages especially if tasks are outsourced could be a worthy initiative.

Livelihood

Honing academic understanding and vocational skills and creating job options around their portion of operation enables local neighborhoods to thrive and prosper. Adopting entire villages and out promises to boost the local economy also prove a pleasurable cause.

Investing efforts, funds and time which are more viable and rewarding CSR initiatives requires extensive feet work.  Most considerably the chosen initiative must match the criteria outlined with the Indian Companies Act to get known as CSR.  Availing the help of professional CSR consultants for instance Fiinovation may help companies chart out a apparent CSR programme that falls while using stipulated CSR rules.