INTRODUCTION

 A loan is a redistribution of financial assets over a time between the lender and the giver of the
loan. The borrower initially receives an amount of money from the lender, which they pay back
usually but not always in regular installments to the lender. This service is generally provided at
a cost, discounted as interest on the debt, to the lender. Acting as a principal of loans is one of
the principal task for financial institution for banks. Loans are generally funded by deposits for
other institution issuing of debt contract, such as bonds is a typical form of funding.

Due to rising of basic needs, personal loan facilitated by various bank play a vital role in
fulfilling the people desire of buying their dreams. They are ideal when we need or buy a product
for ideal when do not have ready cash.

Personal loan are better choice compared with consumer durable loans. In fact before we
consider taking a consumer durable loan we might consider a personal loan instead as the
procedure is slightly longer but the rate of interest is lower. Flexibility of duration and
availability of various schemes make personal loan an attractive option.

It is an all purpose a loan, which is given in most cases without any kind of security like a car,
home, shares or any kind of property.
Most nationalized, foreign, and co-operative banks offer personal loan. Besides banks, some
other finance companies and financial institution also offer them.

Lending rates differ for different financiers and currently from 12% to 30%. These loans are
available in the range of Rs 15000 to Rs 10 lakhs. The repayment period varies widely; some
lenders usually permit repayment up to a maximum of 60 months. And most lenders restrict the
lending to a maximum period of 36 months.

Most bank will give anywhere between Rs20, 000 and Rs10 lakhs (Rs 1 million) for a maximum
for period of 60 months. To be eligible for the loan you need to be between the age of 25years
and 58years in case of a salaried individual or between 25 years and 65years if you are self-
employed.

While issuing the loans, banks look at factors like your salary or profit, the number of years you
have worked in a particular organization and the number of years you have stayed in your current
residence.

Advantages and disadvantages of personal loan

With a lot many lenders on the block willing to offer their loan services to all, applying for a loan
nowadays, is no longer a problem. Gone are the days when you had to wait to buy something or
go out and do what you wanted to, because a hassle free and available to all personal loan is now
no more a dream, but a reality.

Today, various loans are available in the market to suit individual needs of the people. In
Personal Loans as well, different types of loans are available. They can serve you well in your
financial limitations while making your living better. No delay should be done in availing a loan
especially when it suits your financial situation and can be available to you in a desired time.

A personal loan is often described as unsecured loans because it allows you to borrow money
without having to provide security against it. You can use the personal loans for the purchase of
your house or a car. The personal loans are better for a longer time period.
Following are some of the advantages of the personal loans

While making an evaluation of the cost of the loan you need to consider the TAR (Total Amount
Repayable) which means that the total amount that you owe towards the bank or a lender which
also includes the rate of interest on the loan and the payments need to be made on a monthly
basis. A suitable deal is where you get a lower TAR.

The maximum amount that you can borrow ranges up to £25,000 and the time period for the
refund is up to ten years. The advantage with the personal loan is that when you take a maximum
amount as a loan then you have to pay a lower rate of interest.

It is totally different from the terms and conditions for the mortgage. The unsecured personal
loans are not protected for your property so if you are not able to refund the loan then you can be
rest assured that your house is safe.

The interest rates for the personal loans are also fixed. This makes it easy for you to make a
planning for the payments that has to be made. The refunding amount also remains stagnant all
the way through the time period of the loan.

With a dynamic market scenario of loans the rate of interest has seen so many ups and downs.
Now to get a loan it has become simpler than ever before. The financial companies offer you
loans through their telephone service. They have toll-free numbers and they guide and provide
you the best deals and offers.

Following are some of the disadvantages of the personal loans:

Various financial companies and clever lenders introduce certain plans like- make a purchase
and pay it later, offer free gift items, etc. These will only raise your price of the loan. So take a
wiser decision and go for the basic loan with favorable terms and conditions. Always make a
choice for those loans which have a low rate of interest and where the terms of the refund are
moderate.

Don’t make a hasty decision in choosing a personal loan. It is not right to take a loan from just
another bank. Make a survey and try to find out various offers and plans that various other banks
and financial companies have to offer. Now with the internet things has become very simpler.
You can visit various financial companies, what are the offers and plans these companies are
offering. Accordingly you can take a decision whichever plan suits you.

The PPI (Payment Protection Insurance) provides you the refund on a monthly basis if you are
not able to work, you have met with an accident, in case you have suffered a heavy loss in your
business, you are not employed anywhere, and make a payment for your loan in case of your
death. You should be aware of this type of insurance as it is a costly affair and it adds an amount
ranging from £1,000 to £5,000.

According to a survey majority of the personal loans are paid off before the completion of their
tenure. You need to look out for those lenders who take heavy amount for the settling of your
loans before the tenure.

You have to handle the annual percentage rates very carefully as it entirely depends on your
financial credibility. You probably might not be eligible as to be entitled for it. You need to have
a good credit history otherwise you won’t be able to qualify for the lender’s potential customer
list.

Here are few guidelines before taking any concrete decision regarding the
personal loans:

- Analyze all the offers and schemes before applying for the loan. There are various lenders who
are not real and their motive is just to earn profits.

- To be entitled for a personal loan the procedure followed is rigorous although there is less
documentation involved in it.

- Go through the contract thoroughly and reassess the closure price and for any hidden cost (If
any). It is an important step which will only benefit you.

- If you are planning for a personal loan then most of the time it is cheaper than getting a credit
card.

- Excluding the consumer durable loans the rate of interest for the personal loans are high.
Personal loans - Special emphasis on bad credit personal loans

Before approving a loan application, the lender calculates the following two affordability
parameters to make sure that the chances of repayment are not bleak:

 Credit history, to ascertain the loan seeker's past financial record as good or average or
bad.
 Debt to income ratio (DTI = Debts/Income), to compute the loan seeker's current
monetary position. Depending on the above-mentioned calculations, the lender
categorizes the loan seeker as: prime customer (person with a good credit record), near
prime customer (person with an average credit record) or sub-prime customer (person
with a poor or bad or adverse credit record).

A sub-prime client is further categorized to get a better idea of the hazards that he may pose -
low adverse credit, medium adverse credit or heavy adverse credit. After this detailed evaluation
and classification, the lender approves the loan application/amount and decides the loan
terms/conditions.

Sub-prime loan seekers can avail credit support under the 'bad credit personal loans' category.
Available in both secured and unsecured form, this special personal loan sub-category helps
people bring their lives back on track.

For obvious reasons, prime and even near-prime customers can negotiate for a favorable loan
deal. But, sub-prime customers have to settle for high APRs, and stringent loan terms and
conditions. Still, secured loans are more gainful and are generally easier to get as compared to
unsecured loans.

Secured bad credit personal loans, the best solution for homeowners and property owners are
comparatively safer for the lenders, as they are availed by pledging collateral. As a result, there
are chances that the loan seeker may get a less stringent loan deal.

But, unsecured bad credit personal loans, probably the only option for those UK residents who
are incapable of offering collateral, are risky for the lenders, as they are availed without pledging
collateral. As a result, the creditor cannot afford to offer a flexible loan deal.
How to ensure a safe personal loan?

The online media for applying for loans is becoming increasingly popular these days. Being time
saving and convenient, it's preferred by most of the borrowers. Nobody likes visiting the bank
manager in persona to apply for a loan. But, one must ensure that s/he is applying to the right
lender and not to a loan shark. Loan sharks are unlicensed lenders who take advantage of those
who are rejected elsewhere or are suffering from extreme bad credit. These lenders usually prey
on vulnerable people like the unemployed, lone parents, bad credit holders, etc.

So, whenever you apply for personal loans, make sure that the online lender you are dealing
with is registered with OFT (Office of Fair Trading) and regulated by FISA (Finance Industry
Standard association). Loan sharks are not licensed and therefore they operate outside the law.
These unlicensed moneylenders charge very high interest rates and use violence and threat if the
borrower is unable to repay the loan.

Personal loans should be taken with great care and caution. The loan agreement should be read
carefully before signing and if needed, professional help from a financial consultant should be
taken. An unlicensed lender otherwise may make you life hell. He does the following:

 Grant you personal loans on very expensive rates

Personal cash loan

It can be a viable short-term solution for temporary monetary problems because these allow
consumers to receive funding for bills, expenses, and other necessary costs. When handled
wisely, however, a personal cash loan can lead to serious trouble. If help is needed, funding can
be qualified for quickly, with little documentation. However, because of higher interest rates and
serious default terms, one should cautiously consider taking out this form of funding.

There are many different funding programs, including payday advances, cash advances or other
unsecured cash loans. They are available through store-front and financial companies, as well as
on the Internet. While there really are no regulations for which a personal cash loan can be used,
people typically use them to help pay bills on time, or to pay for some unforeseen expense that
they do not have adequate savings to cover. Unfortunately, some people may also use personal
cash loans to meet their perceived need for instant gratification. Using money in this manner can
get a person into financial trouble quickly. Because these programs can have high interest rates
and little tolerance for missed payments, they are best used in emergency situations, or when the
borrower knows they can repay the obligation. Getting a personal cash loan can be quick and
easy, which is good for the person who is in financial need. Lenders who offer personal cash
loans do not have many requirements. Most lenders require the borrower to be at least 18 years
old and to have had a checking account open and in use for at least 90 days. The borrower also
must show documentation that proves they receive a minimum of $1000 per month to qualify.
Most lenders typically do not require good credit and rarely run credit checks for instant loans.
However, lending companies may check for other outstanding debts or in-process bankruptcies.

This funding can be a blessing or a curse to the one who is borrowing. When a person takes on a
personal cash loan, it is important to realize they are in debt to the lender. As the Bible says,
"borrower is servant to the lender" (Proverbs 22:7). This can be very overwhelming and should
encourage the individual to seek financial freedom. However, unforeseen financial difficulties
sometimes arise and people need personal cash loans to pay these obligations. It is important to
be very selective in this process and choose lenders that offer the lowest rates and best terms.