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Be Sure To Fully Understand A Personal Loan Before Applying

By Expert Author: Maggie

If you are short on funds, a personal loan is one option available to you. However, this may not always be the best choice, so be sure to fully understand personal loans before taking one out.

Personal loan characteristics

Personal loans are unsecured. There is no property, such as a home, offered as collateral. This is a key difference between personal loans and other types of loans.

Before granting a loan, the moneylender must tell the borrower of the prescribed terms and conditions of the loan in a language he understands. If money is not available from legitimate lenders, they will turn to loan sharks. Is it not better that they be given some recourse to borrow legally? Registered moneylenders are at least subject to strict rules. This includes the applicable interest rate to be charged, how the interest is calculated, and all other charges, such as administrative fee or late payment charges.
Rates are higher. Because they are unsecured, interest rates for personal loans are higher than secured loans (such as a mortgage or home equity loan).

They have a fixed term. A personal loan can be due at the end of a set term, in which case the interest rate is fixed.

Sometimes, a revolving line of credit is offered. Occasionally, a personal loan can also work as a revolving line of credit, like a credit card. In such a case, the interest rate is variable.

There are no tax benefits. The interest on a personal loan is not tax deductible, unlike the interest on a mortgage or home equity loan.

Advantages

If you don’t have much equity in your home, a personal loan may be your best choice if you are in need of money. If you get a personal loan with a fixed rate and term, it forces you to be disciplined and pay the loan off within the specified time frame unlike a credit card, which tempts you to continue spending.

Disadvantages

A personal loan has some disadvantages to consider. For example, the interest payments are not tax deductible. Also, rates is higher on a personal loan. Therefore, you end up paying far more on a personal loan than you would on a home equity loan for the same amount.

Still, in some situations, a personal loan is the best option. If that is the case for you, be sure to consider your options carefully. Compare products from several different lenders. Different lenders have different fees for personal loans, so it is important to shop around. Use a personal loan wisely and only get one if you really need it.

If you are looking for personal loan with flexible repayment system then contact Quick Credit Pte Ltd.

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