Personal loans are often thought of as the safest way of solving an immediate financial crisis. People from all walks of life rely on this extra source of cash whenever they are out of money for meeting a financial need. They are popular due to their easy application process and quicker approvals. You can also get them from regular market lenders or online lenders wherever you get a better deal. The possibility of negotiation with lenders is always an option.
However like everything else personal loans also have certain disadvantages. But you can avoid them by using your personal loans prudently. Here are a few things you should avoid while handling personal loans:
- Improper use of personal loans: Personal loans are generally used to resolve immediate financial needs like home repair, medical emergency, credit card debts, car breakage etc. But if you use them just to fulfil some luxuries or overspend on items you don’t need you may face problems repaying your loans.
- Taking absence of collateral for granted: You do not requireany collateral for taking personal loans. This means that you can get easy money within a very short time without keeping anything at stake. But this facility does not mean that you should not take the repayments seriously. Though it may sound as an advantage if you are not wise with your spending habits you can get into serious debt problems.
- Defaulting in loan repayments: You can avoid suffering the visits of bailiffs, about whom I would recommend you read more on this website, by slowly doing the payment of personal loans by having a regular source of income to fall back on. If you have a regular source of income or a valid source from where you can get money every month it will be advantageous. It will help you to avoid any defaults on your loan payments. For a stress-free living, you can also get an iva which can help you pay back the loan within a period of time without it being a burden.
- Amortization may not be sufficient: To avoid defaulting on loan payments many borrowers look forward to the option of extending their amortization terms with a lower monthly instalments. However this option may not be sufficient to resolve your payment issues as with unsecured loans the extension is very limited. Moreover by extending you may have to pay a higher interest rate on your loans.
- Do not expect immediate profits: If you have used your loan into small-scale businesses and are hoping to gain profits immediately, it may not happen. Every business requires a time to get started and return profits. If you are planning to repay your loans with the profits it may not happen. So you need to keep your other options open as well so you do not falter with your payments.
- Avoid repaying earlier: Many times repaying earlier can be counted as a violation of rules. You may even have to pay a corresponding fine with the loan if you pay at the wrong time. It is advisable that you enquire about the repayment terms before you think about repaying. If there are no fines attached you should consider paying back earlier else wait for the payment maturity term.