A cash loans is the one given to an individual by a bank or financial institutions after analyzing their ability (in terms of credit and income) to payback. Cash loans may be of various types such as business or personal loans, home loans, mortgage, car loans, student loans etc. Few have lower interest rates (like a car or home improvement loan) few have higher rates. Loans are categorically divided into two types, the first one has secured loans, in which loan is taken for any commodity like car or home thereby giving an option to the lender to take that commodity in case of failure to repay the loan. The second one is an unsecured loan, in which lender has not any option to take something in their custody, but here lender has an option to take a legal action against the defaulter. Okay, now you have understood the basics of a loan, so moving on to next segment.
Few things to consider before taking a personal loan (or cash loan):-
- Interest rate– Usually you may get low-interest rate if you take a secured loan as compare to the unsecured loan. The reason is simple; you give a bank permission to take your commodity (car, home etc.) in case you failed to pay back. Here, you have more risk as compare to the bank. So, you have to carefully examine the interest rate offered, as sometimes it is high than expected.
- Credit score– It is well known by everyone that credit score is very much important when taking a personal loan. It is calculated by scrutinizing credit history of an individual and it is to be noted that credit score for a different loan is different, for example, if you take a car loan and a mortgage, both may have a different credit score. A bad credit score can soar the interest rate.
- There is not a monopoly of a bank– It simply means that you have other options from where you can take a loan if you are not finding an interest rate of bank fitting your needs. There are various other financial institutions or mobile payment banks which offer instant loans without any hustle, also few offer a lower interest rate than a bank. These players are in their nascence with few reservations but can be considered ones.
- Method of calculating interest rate– There is a difference in calculating the interest rate, for example, a credit card interest rate is calculated on day basis (if you pay sooner, you could reduce interest rate) but this is not the case in cash loans (here it is usually an annual rate)
- Avoiding debt– Living life on debt is not a wise choice, however, if a debt is there in terms of paying for a vehicle which you use to go office can be a good choice. Also, if you have taken a home loan to buy or construct, then it can also be fruitful as the rate of the house rises rapidly. it’s wise to try and save money on non essentials where you can. So, here point to understand is that maintaining a debt which you can handle well is fine otherwise it may impact your financial future and may lower the chance to get cash loans.
- Avoid personal loan for certain things– Taking a car or educational loan can be considered but taking it for your travel expenses, buying essentials for a house, gambling, etc. can be a bad choice. Unnecessary addition of debt in your account can bring you disturbance in your future life, so you can simply avoid it.
Well, these were a few points that can definitely help to make a prudent decision. Apart from this, there are other things you should know as a caution sign before taking a loan.
- Check that the institution from where you are taking cash loans is registered on the government data or not as this can help you to check the credibility.
- Nowadays, spam is being done in a completely different form, sometimes via email, phone etc. Therefore, more caution is needed to verify all details about the lenders.
Hope, this piece of information has given you an insight into various things to know before taking a loan.