Personal Loans – Good Or Bad?

There is no denying the fact that in today’s consumer driven world, personal loans have a very important role to play. It is a fact that most of us are always in a hand-to-mouth sort of existence and hence, when we have some urgent requirements, we are short of funds. In such situations, these loans come in very handy. We could also have some unexpected medical emergencies or some other requirements where these cash loans can fill in the gap very effectively. The reason why they’re so popular is because of the fact that they are unsecured in nature and the whole process of application, credit appraisal, approval and disbursal is quite fast.

It isn’t uncommon for pay-day loans to be disbursed to applicants within 15 minutes. The average amounts of such loans are also quite flexible. While there are cash loans as low as $100 to $1500, you could also aspire to get secured loans of $10,000 and more. However, there are some important factors that should be taken into account whilst opting for loans. Let us have a look at the same, over the next few lines.

Interest rates

The first thing that should be considered when you are applying for a loan is the rate of interests. This is very critical because high interest rates could push you into the danger zone and you could start defaulting on your EMIs. This will certainly damage your credit history which is the last thing that you would want.

The next important thing is to have a fix as to whether a loan is necessary or not. There are quite a few conventional-minded people who are not in favor of taking loans. This, without doubt, is the ideal situation but in today’s society which is famous for consumerism, this may not be possible. Hence, for many of us, taking loans is a bad evil which may have to live with. We should therefore try and get the best out of this bad bargain because, at the end of the day, whenever we go in for such loans, we are paying hefty interests from our pocket. Therefore, our main aim should be to reduce the interest burden to the minimum.

Credit history

Another important thing that needs to be kept in mind is the importance of a good credit history. If you have a clean and blemish-free credit history, you are certain to get the best of interest rates. As a borrower, you can always bargain from a position of strength. Hence, you should understand the importance of keeping your credit history clean to the extent possible.

Best time for a loan

While there are no specific reasons for taking loans, as a responsible and prudent borrower, you should know when to go in for such loans. It would be disastrous to go in for personal loans to run your day-to-day expenses. If you do so, you are certain to fall into a debt trap sooner or later. However, if you have some high cost borrowings and credit card outstanding, it would be better to collate all the loans and pay it off with a loan taken at a much lower rate of interest.

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