ATM :: Debunking Myths Indians Have About Personal Loans


Rajiv Raj | Nov 18, 2014, 04.43 PM | BusinessInsider.in
ATM
Let’s admit, we Indians hate personal loans. Before you demonise it with a set of Dracula teeth and evil horns, think again. Personal loan is not always a bad option and comes with some benefits too. In this article, we debunk myths or say misconceptions that you have about personal loans, and suggest how a personal loan can be beneficial:

Save money: Before you jump to conclusion that it does not help in saving money, let me first clear the air. In some cases it does help. Consider a situation: You badly need funds and are considering a credit card withdrawal or looking to swipe your credit cards still doubtful if you will able to pay up the entire amount in the coming billing cycle. In this situation, check with your bank if you are eligible for a personal loan as some banks offer pre-approved personal loans to their good customers. Credit cards and personal loans are both unsecured loans and comparatively easy to avail – however, personal loans are way cheaper. You will pay at least 36 per cent on your credit card as compared to 14-16 per cent on a personal loan. Also, Indian economy is witnessing risk-based lending. To put it in simple words, if you have a higher CIBIL credit score, you stand a chance to get loans at a lower interest rate CIBIL stand a better chance to negotiate better credit terms and conditions. Many banks and credit institutions offer added benefits like waiver in processing fee and speedier access to credit for consumers with a CIBIL score above 750 (ranges between 300-900).

Break the debt cycle: Have you ever paid the minimum amount due on your credit card bill thinking that you will pay off the remaining amount next month entirely and find that you are still carrying the debt months after that? If you take a close look at your statements and calculate the amount you paid as interest on this amount and compare it with the amount you would have had to pay as interest on the personal loan, which can be availed by doing a balance transfer of your credit, the latter would have worked out cheaper. Credit card dues attract an interest rate of 36 – 48 per cent, where as if you do a balance transfer of your credit, which will be treated as a personal loan against credit card, you stand to get it at the rate of 18 per cent interest per annum – little more expensive then taking a fresh personal loan, but still cheaper. This repayment can be made in EMIs, which is an added benefit. So, be a smart person, avail a balance transfer on your credit card to a personal loan to break high interest choking cycle and become debt-free.

Boost your CIBIL score: Your CIBIL score is calculated on the basis of many factors such as regular bill payments, credit usage, number of enquiries, age and a good credit mix. We always advice our customers have a good mix of credit. So, if you have only credit card and just because you take a personal loan, your score won’t dip. In fact, if you take a personal loan and repay it on time, it will improve your CIBIL score.

Source : http://goo.gl/QxQVR3

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