Personal Loans I 2014

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Do your research before taking a loan Compare loan fees and rates with different banks and financial institutions before applying for a personal loan

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here are times when your pay cheque just isn’t enough, and that is when the need for a personal loan arises.

You can find personal loan providers everywhere. However, with so many places to choose from, where do you start?

A personal loan is an amount of money, which you borrow from a bank or other financial institutions. Ordinarily, the borrower receives a lump sum and in return, he agrees to make regular repayments, usually monthly.

Assuming you have taken out a repayment loan, some of the money you repay will go towards servicing the loan and the rest of your payment will be used to pay off capital and reduce the outstanding debt.

A personal loan can be a good option if you have a number of debts, which you wish to consolidate into one loan. In doing so, you ought to be able to simplify your affairs and often reduce the overall cost of credit.

Banks and specialist finance companies all offer personal loans, so you will need to shop around. Different lenders have different preferences when deciding which borrowers to take on.

As a borrower when you are considering one deal with another, make sure you are comparing like with like. The interest rate to look for is the Annual Percentage Rate (APR). The APR is a method

A personal loan can be a good option if you have a number of debts, which you wish to consolidate into one loan. In doing so, you ought to be able to simplify your affairs and often reduce the overall cost of credit

of making a true comparison between different personal loan interest rates. It shows the true interest rate of the personal loan you are being offered.

The lower the APR on a loan the better because it means you have less interest to repay — so the loan is cheaper. Interest rates vary, and it is worth bearing in mind that some lenders are only interested in lending to people who they regard as a low risk. These people may secure lower interest rates.

Lenders vary in their approach, they will want to ask personal questions about your finances and your plans before making up their mind on whether to lend and at what interest rate.

If you cannot pay back the loan for whatever reason, talk to your lender at the earliest opportunity.

They will want to consider carefully your individual situation. If they reasonably believe your financial situation may improve, they may be prepared to suspend

loan repayments for a while or extend the term of the loan. In the final instance, they can insist on the debt being repaid.

In this day and age of Internet everything you need is just a click away. So are loans. The loan process has become easier and more customer-friendly. Consumerism has increased to such an extent that it makes us want things right now rather than wait for months or even years to save enough money to buy the things we want.

Therefore, today we don’t think twice before committing ourselves to indebtedness. The personal loan schemes are quite promising, no doubt, but we need to be extra careful.

Unsecured loans, such as personal loans are usually very expensive. While availing a loan has become affordable and simple, it does have its drawbacks.

Banks offering personals may not always tell you the full story.

Therefore it is important to delve deep into any loan offer and make the right choice.

Here are some helpful tips to look out for before you decide to avail a personal loan: ◗◗ Think twice before borrowing money without security. You

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Personal and Home Loans

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may have a better option already available: home equity extension to your home loan, a new loan that uses your property as security, a credit card, or even a rich relative.

You should do a complete and detailed market survey of various options like the interest rates they offer, the prepayment charges they levy, terms and conditions.

Consider also a credit card as your source of credit. Interest rates are higher but credit cards are easier to secure and offer greater flexibility of repayments.

Try lenders with whom you are a regular customer. Take advantage of the human factor.

Being a familiar face may earn you some slack if your credit background is smudged.

Don’t fill out applications at several financial institutions and have all of them checking into your credit history. This can make you look desperate and lower your credit score.

Be honest about why you want the loan. Your bank may be able to offer you a loan option that better suits your circumstances. There are an increas-

If you cannot pay back the loan for whatever reason, talk to your lender at the earliest opportunity. They will want to consider carefully your individual situation. If they reasonably believe your financial situation may improve, they may be prepared to suspend loan repayments for a while or extend the term of the loan. In the final instance, they can insist on the debt being repaid.

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◗◗ ing variety of different types of personal credit these days; car loans, commercial loans, leases and home equity loans are just some of the examples. ◗◗ Is the interest rate fixed or vari-

able? What up-front, annual or ongoing fees are charged?

Compare loan fees and rates with different banks and financial institutions before applying for a personal loan.

Interest rates are the most critical of all the costs that you pay. Therefore you should go for the cheapest option. Beware of banking terms like flat personal loan interest rates that appear to be cheaper but are in fact the most expensive.

For example a seven per cent flat rate would come out to an effective cost of around 13 per cent. Therefore it is better to choose a monthly reducing balance option than a halfyearly reducing option or flatrate option. This means lower effective cost for the same stated interest rate. Interestfree loans are sometimes too good to be true but view them with suspicion.

There will also be other costs such as processing charges.

You should ask for zero processing fees and zero-penalty for pre-payment option. If this is not available, then lowest cost would be better. Make sure you work out as to how much these other costs add up to. So even though the interest rate may be lower, it usually adds up to being expensive.

Make sure that all deals and offers agreed upon are supported by relevant papers. So make sure you always ask for a letter on the bank’s letterhead, mentioning loan details like, exact rate of interest, processing fees, pre-payment charges along with interest schedule.

Also before signing the documents, make sure you recheck all the terms and conditions.

Do not at any circumstance give any false information.

This may amount to fraud and could land you in trouble. Do not sign any blank documents.

Even if it takes you a few hours to fill up the form, please do so. Do not leave anything for the executive to fill up.

Once you have received a loan, do your best to pay it back as quickly as possible.

Banks make their money off the interest they charge and the sooner you pay back a loan the less money you will have to pay in interest.

khaleej times / ADVERTISING SUPPLEMENT

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Emirates Islamic’s personal finance solutions also offer flexible payment periods of up to 48 months and are available to both, salaried and self-employed customers. What’s more, customers can defer their first payment for up to 60 days.