All You Want To Know About Personal Loans
A loan is a kind of liability but is an extremely useful one if you are aware of when and how to get one. If an individual is not in a shape to pay back the money in the required time frame then taking up a loan would not be a good idea. Thus, loan refers to an amount borrowed from a friend, relative, or financial institution that needs to be returned along with an additional sum of money known as interest in a given period.
There are a lot of types of loans available:
- Personal loans
- Cash advances
- Student loans
- Mortgage loans
- Home equity loans
- Small business loans
Thousands of years ago the concept of the loan was exercised by farmers as they borrowed livestock or capital in place of the grains they produced. Later, this concept was also implemented by some kings in their kingdoms. As seeds were one of the most useful elements in farming, the bargain was willfully accepted by everyone. In the later years, a lot of other things began being used as collateral. In those times, no specified rules were governing the borrowing and lending of goods thus, exploitation of the poor was a common practice. Though such exploitation is also existent in the present times, the rate has significantly come down.
In India, personal loans are of the most commonly taken loans. This is when an individual takes money from a source of finance and pays back in fixed monthly installments. The main difference is that the loan is not backed up by any collateral or security. Long term personal loans are when the repayment period is for three or more than three years. These types of loans have lower interest rates to be paid over a long period which is why they look attracted to most of the investors. Whereas, the most eminent disadvantage is that it forces the borrower to stay in debt for a longer period, which ends up becoming a trap for a lot of people.
The interest rates are comparatively higher than most of the developed countries of the world due to the higher rate of inflation. Thus, to avoid high-interest rates people opt for long term loans as their rates are comparatively lower. Some widely acclaimed banks provide the cheapest personal loans in India. Owing to the vast number of options available to customers, now they can choose the bank that suits their purpose the most. Even after considering this, some investors still prefer informal sources for borrowing money as they are also available at very short notice with no or minimal collateral.
In short, taking loans for personal or professional reasons is vital for the economy to move on the desired track. Thus, loans benefit the society in every way as the borrower gets the desired amount and, the interest paid on the amount benefits the banks to payment of salaries and premium on deposits of the common folk. However, the source of loans needs to be chosen after considering all the possible options carefully.