There are a number of loans that you can avail from a bank, personal loans are one such loans. Such loans are not meant for any specific purpose, you can use the loan amount for any purpose you want to. Sometimes it is very difficult to get a personal loan and require many supportive documents. Lets dig deep into what personal loans actually are:
They are unsecured loans
Unsecured loans implies that you don’t need to use an asset as a collateral for the loan. In case the repayment of the loan by you isn’t done, the bank cannot automatically take a part of your property as the payment. However the bank can definitely resort to other actions even if it cannot take your property or car for that matter. A lawsuit can be filed against you by them, they could hire a collection agency to collect the loan and interest amount from you, they could report you to the credit agencies as well.
The rate of interest in such loans aren’t flexible.
Once the loan is taken a particular rate of interest will be quoted by the financial institution lending you the amount. This rate will not be flexible, once it is decided upon, it will remain the same for the entire tenure of the loan.
The repayment period of personal loans are fixed
When you take a loan, it is up to you to set the time period through which you are going to completely repay the loan without any outstanding. This tenure may range from 1 year to around 5 years. But in case you are unable to complete the loan repayment in the number of years stated in your loan agreement, the lending institution can always charge extra fees on your interest amount. Always keep in mind that if the loan amount repayment period is long, yu always end up paying more to the bank.
Such loans can affect your credit score
Most financial institutions that are lending you the money inform the credit agencies about your loan and the amount you have borrowed. This means that everything that pertains to your loan and the repayment and the interest rate and how timely are you in making the repayment are all informed to the credit agencies and this makes up for your credit score. If you repay your loans without any hitches and delays and if you are not a defaulter in repaying your loans you have a good credit score, however, if you delay in repaying the loans and the interest amount is not paid by you regularly, you end up having a bad credit score. Therefore it is always sensible to maintain a good credit score by properly and timely repaying the loans you have taken.