Such loans are given on the basis of the credit situation of the borrower. If your credit score is good then you will get your loan very smoothly. This loan does not include the use of any property or collateral assets.
This loan is given on the basis of fixed assets like home or car or any other property that is used as a source of payment to the lender in case of non-payment of the loan.
This type of loan does not have a fluctuating interest rate. Interest rate is fixed throughout the period of the loan and generally helps the borrower to predict the future payment with accuracy.
In this type of loan the interest rate changes as per the market situation and it is not fixed.
A secured line of credit takes into account the fixed asset like home or car and unsecured line of credit is not guaranteed by any kind of asset and it always comes with higher rate of interest with high risk involved.
It is very much similar to unsecured loan as it involves taking a new loan to pay off consumer debts. Consumers can apply through bank, credit union to avail such kind of loan.
Now that you have decided to go for taking up a loan to fulfill your personal needs, you must know some important things for a smooth flow of money:
Make sure that you have a good credit history and a score as well. This will help you in paying off the loan amount in required time limit. You will also save yourself from being in the defaulter’s list.
Research well and study about lenders to be aware of the best interest rates available. This will help you in getting lowest interest rates and you will be able to repay the loan easily.
You need to steer clear of all the doubts related to costs that are attached with the personal loan. Such costs are processing fee, late payment fee and prepayment fee that you need to be aware of to manage your finances better in future.
It is very important to prioritize your personal needs for which you require loan. You need to borrow loan for buying home, car, any medical emergency or for planning a wedding and meeting the expenses. Take a look at your requirement closely and then plan your loan accordingly.
It is also important to look for a hassle free documentation while applying for a loan. As many apps have come into existence with new-age technology, so you can easily submit your application through these apps and get your loan sanctioned upto a certain amount.
Keep your repayment period as short as possible as this will help in paying off principal and interest component within time.
Low Interest Rates: If you compare bank loans with credit cards or overdraft then you will find that the interest rate of a bank loan is at a much lower side.
Flexibility Of Usage: While you opt for a bank loan, you can spend it the way you want to, without following any rules or guidelines attached to it. Venture capitalist will not give you such a freedom to choose your spending and it might restrict the way you spend the money.
Control: Generally, if you borrow loan from venture capitalists or certain investors, you need to give some equity or say in your company. However, if you borrow a loan from the bank, you don’t have to give any such equity to the bank. You just have to pay the loan amount on time, its as easy as that!
When a loan transaction takes place, then there are two parties that are involved in this transaction. First party is the bank that gives the loan and second party is the borrower who applies for the loan from the bank. Applicant will file the application for the loan and after looking at all the favorable conditions, the bank approves the loan amount. Bank has full right to reject the loan application if there is any discrepancy in the application.
After looking at the payment capability of the applicant, bank decides the amount that is to be sanctioned for the loan. It might be a big amount or a small one but the financial condition of the applicant decides the amount that he gets as a loan from the bank.
Bank has the full authority while sanctioning the loan to the borrower. It might give the full amount or the partial amount to the borrower. It can also reject the application in case bank feels that borrower’s application is not promising enough.
Loans are generally given in cash but in few exceptional cases they can be provided in the form of machinery, raw materials etc.
You need to open a current account so that bank can easily disburse the loan amount through that account.
Higher amount loans are provided against the collateral but small amount loan can be sanctioned on personal guarantee basis.
The time limit of repayment of loan is set by the bank and it varies from the nature of loan. Loans can be long-term, short-term or mid-term depending upon the requirement of the borrower.
Loans can be paid on installment basis or it can be a one time arrangement. Banks generally look upon the cash flow situation of the client on the basis of which the loan repayment conditions are laid by the bank.