In present time, personal loan is considered to be the best solution to meet the urgent financial requirements of an individual. Personal loans in India are treated as the best source to arrange finance as it requires no security and less documents. With personal finance, no bank asks questions about the use of finance. But still, there are some drawbacks that should be taken into consideration that are as follows:
High interest rates
High interest rates
Personal loan is unsecured loan. In most of the cases banks won't ask for a collateral, security or guarantee before issuing any personal loan, which makes it a bit risky. In order to offset this risk, banks provide personal finance at higher interest rates. Interest rates of personal loan also vary from person to person.
How much of a risk banks consider you will determine the terms and interest rates on your personal loan. With good existing loan repayment record, serving in a reputed public sector, government, MNC, or blue chip company, you can get a low interest rate personal loan than one who deviates from the standard norms. A low risk borrower can get a personal loan at 16% interest rates while it can climb up 30% or more for others.
Not available to everyone
Several of the financial institutions usually emphasize on employment, income and residence criteria of any individual before providing for any financial help. They will only put their money where they find that very minimal risk is involved. So, a larger percentage of applicants are rejected in case of personal loans, if their income is not at the desired level or employment details are not worthy enough to trust the person.
No part prepayments
Prepayment of personal loan can be done as a whole. Banks in India generally do not allow part prepayment of any personal loan. Moreover, there is a prepayment penalty of 2-5 percent on the outstanding amount, which has to be paid to the bank while making any prepayments.
How much of a risk banks consider you will determine the terms and interest rates on your personal loan. With good existing loan repayment record, serving in a reputed public sector, government, MNC, or blue chip company, you can get a low interest rate personal loan than one who deviates from the standard norms. A low risk borrower can get a personal loan at 16% interest rates while it can climb up 30% or more for others.
Not available to everyone
Several of the financial institutions usually emphasize on employment, income and residence criteria of any individual before providing for any financial help. They will only put their money where they find that very minimal risk is involved. So, a larger percentage of applicants are rejected in case of personal loans, if their income is not at the desired level or employment details are not worthy enough to trust the person.
No part prepayments
Prepayment of personal loan can be done as a whole. Banks in India generally do not allow part prepayment of any personal loan. Moreover, there is a prepayment penalty of 2-5 percent on the outstanding amount, which has to be paid to the bank while making any prepayments.
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