Steps For Taking Personal Loan

You have Surveyed for the best available personal loans and decided to take a personal loan. But before you finalize the loans there are some things you should have a  self check to see if you can manage the loan.

After deciding to avail the personal you should consider the following points:

• Decide how much you really need to borrow. The loan amount in the range of 2-3 times the annual household income of the borrower can be sanctioned. Its a very important point & by knowing your borrowing power saves your time. 

• Make sure that you can afford the repayments. The loan amount granted to you also depends upon your repayment capacity. The loan is repayable in the form of Equated Monthly Installments (EMI). You repay the loan in equated monthly installments, or EMI, comprising of Principal and the Interest. The EMI depends on the quantum of loan, the interest rate and the term of the loan. The EMI typically should not exceed 50% of your monthly household income. You can also club your spouse's income along with your income if you want to enhance the loan amount that is sanctioned to you. 

• Find out the lowest rate available by visit different institutions offering loans. The money you borrow plus the accumulated interest is more often than not paid back on a monthly basis, over an agreed period of time. The amount of interest is known as Annual Percentage Rate (APR ), which indicates how much extra you will be charged each year in addition to the amount you have borrowed. All lenders are obliged by law to declare the level of interest that is charged to borrowers, so comparing different rates has become fairly straightforward. 

• Loan should be affordable & suitable. A loan should fit your pocket and the term you wish to take it for. You should get quotes of all the finance companies and map them according to your requirements. 

• Check out the administrative and processing charges. Banks and Non Banking Finance Companies charge certain processing fees for moving the case. Besides the processing fees, some institutions also charge administrative fees for getting the needed verification done. These charges are one-time charges collected by the institution. 

• Aware of the other charges like prepayment charges, credit insurance. Some companies will charge an additional fee for extras like credit insurance, prepayment charges and commitment fees which increase the effective cost. So interest costs are not the only costs, which the borrower has to bear. 

• Shop around before buying. Compare loan schemes of different finance companies on parameters such as interest rates, pre-payment clause, and upfront margin to be paid, Maximum loan amount, eligibility, etc.

• Four factors Monthly Loan Payment, Interest Rate, Duration of the Loan, Whether the Scheme suits to your requirements.   After weighing the pros and cons of all these factors, you can zero in on the institution from which you want the loan from. You will be asked to furnish personal documents to establish your age, employment details, salary slip, copy of income tax returns, etc. 

• Study the contract thoroughly. Try to get a copy of the agreement or contract & understand the important clauses within the agreement. That can help you avoid a lot of trouble in future. In case you are uncomfortable with the terms, simply don't take the loan from that lender. 

• Read the loan application and offered documents and look for the hooks. Check out the pre-payment penalty, if there is one, try to get which has the lowest rate. Check whether the interest remains constant through the contract period. Read the fine print carefully. Remember, if there is a problem later, what is written is what matters. What the marketing person tells you verbally, carries no weight. Sign an agreement/contract that has been filled up by the financier. Signing blank agreements definitely does not work favorably for you. 

• Sign the documents carefully. The company will also ask you to sign some documents. You should try to read between the lines. After carefully understanding the legal things involved in all the agreements,  put your signature. 

• Arrange the documents properly. You need to have some basic documents ready before taking out a loan: 
  1. Proof of Income 
  2. Proof of Residence 
  3. Banking History 
  4. Proof of Identity 
  5. Signature verification from the bank 
  6. Post-Dated-Cheques or Employers' Authority for salary  
      check-off facility 
  7. Photographs 

• Fulfill all the formalities. After you have fulfilled all the formalities to the satisfaction of the company, the company will send the documents along with post-dated cheques to their processing centre. It is good to have PDC's ready on intimation from the bank about approval of the loan. Some banks take 2 to 3 weeks to use PDCs. If the PDCs are ready loan disbursement will be quicker.

• Paying installments on time helps you maintaining good credit history. However if you have had problems repaying loans or other types of credit in the past, you may find that the companies offering the best rates simply aren't interested in lending to you. This is because some companies only offer loans to applicants with a good credit history on their credit report, as they are more likely to repay on time and therefore pose less of a risk to the lender. Once the loan has been sanctioned to you, make sure you pay the installments on time. This will help you to maintain a good credit relationship with the lender. It will not increase your overall loan cost, rather you will be benefited by a lower cost loan in future. 

• What the lender doesn't tell you. Most of the people are unaware that the majority of personal loan providers levy penalties on borrowers who repay their debt early. Some lenders may not give you anything in writing. Get the lender to give you all the charges, obvious and hidden, in writing, with a statement that there are no other charges. 
  

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