Personal Loan Essentials we all Need to Know

Whether you are a salaried professional or you are an entrepreneur, situations may arise when you might be in need of urgent finances. This could be for a business purpose or funds for your home or even a medical emergency. We take a personal loan to ease our financial issues. But before applying for a personal loan do we ask ourselves the essential questions and find out the exact details of bank loans in the Philippines?

A business loan is different from a personal loan. With personal loans, the cash is readily available and the rates of interest are high. But in the case of business loans, the loan is either issued in the name of the organization and the partners running the organization will all be responsible for the repayment of the loan. Each kind of loan has its own advantages and disadvantages, but picking the right one is up to you to research and opt for.

Let’s take a closer look at the essentials of a personal loan. When you take a personal loan, you should be able to answer some basic questions. 

Some loans require that you put up an asset as guarantee against the loan so that if you are unable to repay the loan, the lender can use that asset to recover his costs. Most personal loans are not secure loans and therefore one must weigh the risks that come along with it. 

Some loans require some details like credit score, monthly income and other financial details to gauge whether you will be able to repay the loan or not. In some specific cases, the bank asks for statements of income and other assets to be sure of your total assets.

Rates of interest is the additional amount you have to pay for the loan borrowed, The higher the loan amount, the higher will be the rate of interest. The rates of interest usually range from 4 percent to 30 percent and this again differs from one bank to another and depends on the amount that you wish to borrow. 

It is important to know the exact duration over which you will be paying the amortizations of your personal loan. This is along with the interest charges on the loan. Some banks allow you to choose the tenure over which you would like to repay the loan depending on your income and financial planning. It is understood that if the repayment tenure is short, then the monthly amortizations will be higher. If the duration is longer, the monthly payment amount will reduce. 

Most often, personal loans don’t come with any restrictions as compared to home loans or education loans. It is still wise to clarify for the lender what one can use the loan for and what is not allowed or prohibited. 

We often make big mistakes here. We apply for a personal loan because we need finances immediately, but we fail to keep in mind that the entire process takes time. We must know how long the bank takes to review our application and documents. After this, we should be aware of the processing time and time to receive the money from the bank. 

Keep this in mind as sometimes our financial situation is better than other months. Check if the bank is okay if we can pay up some extra amount towards the loan on months that we can spare extra. Some banks charge a fine if you want to pay above your payment limits. Make sure that you steer away from banks that don’t give you this facility and flexibility. 

This is the most important factor while applying for a personal loan in the Philippines is your credit score. Your credit score is a determining factor for whether you should receive the loan amount or not and if you are eligible, it will also determine what amount you are eligible for. The lower your credit score, the lesser you are borrow. You can improve your credit score by making your payments on time and rectifying your past mistakes with your credit report. 

Do you have a backup plan? Have you prepared for the worst? 

We never know of the uncertainties life holds in store for us. We cannot even be sure that we will be able to repay the entire loan amount without facing any shortcomings in between. Be aware of the fine amounts for late payments and non payments of your amortization before you avail a loan in the Philippines. 

Now that you know of all the important questions that you should have answers to, you can now find all personal loan options available in the Philippines and compare them all at one place to choose the one that best suits you @ bankbazaar.ph