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Personal Loan Bangalore
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www.personalloan-bangalore.com wishes a very happy Ganesha Festival
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Personal Loan bangalore

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Additional Cash — Should I pay back my home loan or personal loan?

Per­sonal loan or Home loan — Which one to pay

Sounds weird. You must be won­der­ing what kind of ques­tion is this. Why the com­par­i­son between home loan and per­sonal loan? But this ques­tion was asked to me by one of my close friend. My Friend Tina had around Rs 2 lakhs sav­ings and she has two loans – per­sonal loan and home loan. She wanted to reduce her finan­cial bur­den by pay­ing off a cer­tain por­tion of the loan. She was con­fused which loan to pay?

If you or any of your friend/relatives have come across sim­i­lar issues, try to under­stand the type of loan, inter­est rate and the asset purchased/expense incurred from the loan. A per­sonal loan is an unse­cured loan and a home loan is a secured loan. Inter­est rate on a per­sonal loan is much higher than a home loan. Find the pur­pose of tak­ing the home loan and how the fund was utilized.

My friend Tina took the loan dur­ing her wed­ding. It was an expense and Tina is pay­ing the monthly EMI for the expense incurred. How­ever the under­ly­ing asset in a home loan is the home itself.

Per­sonal Loan or Home loan – Which one to pay first?

My sug­ges­tion to Tina was pay off the per­sonal loan and not the home loan based on the fol­low­ing reasons –

Inter­est rate is more for a per­sonal loan as against home loan inter­est rate

There is an appre­ci­at­ing asset in case of home loan whereas per­sonal loan has a dead expense.

Personal Loan – What you should know?

Start­ing from med­ical expenses, wed­ding expenses or any other finan­cial need, per­sonal loan seems to be the 1st option avail­able and also the most pre­ferred option to all of us. With the ease of apply­ing a per­sonal loan, it has become one of the eas­i­est forms of read­ily avail­able money.

What is a per­sonal loan?
A per­sonal loan is an unse­cured loan given to the bor­rower to meet finan­cial expenses with­out keep­ing any col­lat­eral. It means the bor­rower of a per­sonal loan does not have to sub­mit any guar­an­tee to the lender. All banks and finan­cial insti­tu­tions pro­vide per­sonal loans. Nor­mally the rate of inter­est rate ranges from 14 – 30% and dif­fers from bank to bank. In addi­tions, the rate of inter­est also changes from cus­tomer to cus­tomers within the same bank based on the customer’s credit his­tory, trans­ac­tions sum­mary and deposits with the bank.

Ben­e­fits of a per­sonal loan

No secu­rity
This is the rea­son why per­sonal loan out­weighs other forms of loans. Per­sonal loans are given based on the credit wor­thi­ness of the bor­rower. Based on the borrower’s income, past pay­ment his­tory banks grant per­sonal loan with the belief that the bor­rower will pay back the loan. From a bor­rower per­spec­tive, it is the most con­ve­nient loan avail­able with­out collaterals.

Repay­ment options are easy
A bank loan tenure is from 12 – 60 months. Every month, the bor­rower has to pay an EMI (Equated Monthly Install­ment) to the lender. EMI con­sists of inter­est and prin­ci­pal. All of the banks pro­vide pre-payment facil­ity where a bor­rower has the option of pre-closing the loan with a cer­tain loan pre-closure percentage.

Easy doc­u­men­ta­tion
Per­sonal loan require min­i­mum doc­u­men­ta­tion. Usu­ally banks require a proof of iden­tity, income proof and res­i­dence proof of the borrower.

Low – High amount loans
Nor­mally bank grants home loan in the range of 20,000 to 20 Lakhs based on the income level of the bor­rower. In case of urgent fund require­ment, per­sonal loan is an ideal option.

Draw­backs of a per­sonal loan

High inter­est rate
As per­sonal loans are unse­cured, banks charges extremely higher rate of inter­est to the bor­row­ers. Rate of inter­est varies from banks to banks and from indi­vid­u­als to indi­vid­u­als. Lack of trans­parency on arriv­ing at the rate of inter­est makes it unat­trac­tive to indi­vid­u­als. The rate of inter­est varies from 14 – 30 %.

Par­tial payments
Except few banks, a major­ity of the banks does not pro­vide the option of par­tial pay­ments. Even if the bor­rower is in a posi­tion to pay the out­stand­ing loan amount, he/ she are not allowed to pay . Pre-payment of the loans are avail­able with a penalty of 2–6% of the out­stand­ing loan amount.

Additional Cash — Should I pay back my home loan or personal loan?

Per­sonal loan or Home loan — Which one to pay

Sounds weird. You must be won­der­ing what kind of ques­tion is this. Why the com­par­i­son between home loan and per­sonal loan? But this ques­tion was asked to me by one of my close friend. My Friend Tina had around Rs 2 lakhs sav­ings and she has two loans – per­sonal loan and home loan. She wanted to reduce her finan­cial bur­den by pay­ing off a cer­tain por­tion of the loan. She was con­fused which loan to pay?

If you or any of your friend/relatives have come across sim­i­lar issues, try to under­stand the type of loan, inter­est rate and the asset purchased/expense incurred from the loan. A per­sonal loan is an unse­cured loan and a home loan is a secured loan. Inter­est rate on a per­sonal loan is much higher than a home loan. Find the pur­pose of tak­ing the home loan and how the fund was utilized.

My friend Tina took the loan dur­ing her wed­ding. It was an expense and Tina is pay­ing the monthly EMI for the expense incurred. How­ever the under­ly­ing asset in a home loan is the home itself.

Per­sonal Loan or Home loan – Which one to pay first?

My sug­ges­tion to Tina was pay off the per­sonal loan and not the home loan based on the fol­low­ing reasons –

Inter­est rate is more for a per­sonal loan as against home loan inter­est rate

There is an appre­ci­at­ing asset in case of home loan whereas per­sonal loan has a dead expense.

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Ugadi Festival Offer: Personal Loan starts @ 11.49%
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Wish you Happy New Year-2016



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