Personal loan is a type of unsecured loan that can be availed without any security or collateral and with minimal documentation from any bank or non-banking financial institution to meet your personal needs. It is specially for peoples who don't want to go through the hassle of providing security and documentations or for any emergency situations.
You can use it for any purpose, bank will not even ask you the reason to get the loan, use the fund for home renovation, paying your debts, education, foreign tours, shopping but taking the loan for every situation is not recommended. Medical emergency is one of the situations, in which you can think of taking a personal loan but still there are few things to keep in mind before finalising.
Interest Rate Will Be Higher
Personal loan is known as unsecured loan because unlike other loans, there is no collateral involved, which increases the risk factor for bank, that’s why they charge higher interest rates as compared to other loans. In case of home or car loan they have your home or car as a security, if you will default you will lose your home, car or any other security deposited which makes you at risk and that’s why the rate of interest is lower.
Credit Score Matters
Credit scores are the base to get a personal loan, the good score you maintain better interest rates, amount as well as tenure you will get. Ignoring your credit score can lead you ending with a lender that’s not a good financial fit.
Terms & Conditions- Read Carefully
Never ignore the documentation part and don’t do the mistake of signing it without checking. Be careful, read the terms & conditions carefully even if it looks like it will take you forever to get through all of it. Getting a personal loan is easy but it requires lots of research and care. Only with a responsible borrowing behaviour, you can avoid mistakes and get the funds you need.
Don’t Miss Hidden Charges
You must be in hurry, it’s a medical emergency and you can’t stress out a lot while searching for options. And there are chances that you will check and compare the interest rates but miss the hidden charges which will turn out to be a huge loss in coming future. There are lots of hidden charges with loan, and even some lenders try to pitch insurance policy or other extra expenses as you close the loan in hurry. It is completely your decision you want an insurance or not, it’s not a mandate, so check the papers before signing. Also, understand if they use "pre-compute" method to calculate interest, or if any prepayment penalties are applicable because if huge penalties are associated, you won’t be able to close the loan even if you have money in future.
Check the Reviews
Reviews are important, it will give you a rough idea about lender, their services and customer satisfaction level. Checking customers reviews, satisfaction level will give you a clear picture of the lender while saving you from the future hassle. Don’t fall in a trap of scammers by taking the reviews lightly, reviews are helpful, people generally ignore them and end up regretting their loan choice later.
Bank Is Not the Only Available Option
The common mistake everyone makes while applying for personal loan is they forget that, there are other financial institutes also offering loan other than your bank. It can be because of the trust they have in their bank or may be to avoid the headache of rechecking other financial institutes. By doing so, you are limiting your chances of getting better offers and interest rates, so spend some time in research and get the best available option in the market.
Also, there are few options that you can check before going for personal loan during medical emergencies.
Credit Card Cash Advance
Credit card cash advance is much easier way to get the amount than personal loan. A cash advance is basically issued using the available balance on your credit card. You can call your bank or credit card company to ask for the loan, they will charge little higher interest rate than regular transactions or normal purchases and a processing fee but its worth. You can easily negotiate and get some discount in processing fee or even negotiate rate of interest because you are a valuable customer of the bank. Depending on your credit score and buying records they will give you the best deal.
Low-Interest Credit Cards
If you make all your due payments on time and maintain a good credit score, there are chances to qualify for low-interest rates credit cards for a certain period of time. Use this new credit card as a short-term loan and pay it back at the end of promotional period. But remember to use the amount you can easily pay back otherwise non-payment can impact your credit score and future loan eligibility.
Medical Bill Repayment Plans
There are certain places where you can talk to hospital about repayment options if you are out of cash or have an unexpected medical bill. Every hospital has their terms and conditions, so you can sit with them and discuss if it can meet your expectation and help you in any way to avoid the personal loan. To the brighter side, some hospitals provide financial assistance specially to the low-income families, it’s worth a try.
No one wants to experience a financial crisis, but it happens, similarly medical emergencies are never in your hand and even if you have medical insurance sometimes it may not cover all expenses. Such crises can take a serious toll on your finances and it’s the time when personal loan comes as a life savour. You will quickly and easily get the amount, but it is important to calculate the total cost incurred with the loan including the add on fees as well as the interest rate which impacts the total cost.