You may find the constant need and requirement of funds to be available to meet financial shortcomings in your budgets. No matter how well you do your financial planning, situations will yet arise where you fall short of finances. In such scenarios, you can opt for different forms of debts available in the market. There are various types of personal loans available with flexible features and customised to fit your pocket. However, you need sufficient awareness in order to be able to service your loan efficiently as well as meet your financial needs.
To know your personal loan best, you must know everything about the terms associated with the loan. Along your journey of the debt you choose, you will come across multiple jargons that are used while dealing with your personal loan. Here are 8 such jargons commonly associated with personal loans.
1. Equated monthly instalments (EMI)
EMIs are an equal breakdown of the initial sum you borrower as a part of your loan. It spread across your entire loan tenure in the form of monthly instalments
2. Foreclosure – What is Foreclosure Charge
Foreclosure is when you choose to close your loan account by paying off your final loan amount before the end of the tenure; without or with additional charges depending on the lenders’ policy.
3. Part Payment or Prepayment Charges
Part-payment or pre-payment is a concept where you pay a higher amount towards the principal outstanding in order to reduce the interest charged on the outstanding amount. You could be liable to pay a fee in order to opt for this.
4. Debt Consolidation – What is a Debt Consolidation Loan
Debt consolidation loan is a financial tactic wherein you merge multiple debts arising out of higher interest rate loans into one single personal loan which offers favourable features and lower interest rates.
5. Interest Rates –
Interest rates are the additional cost that you incur while you borrow a specific amount of fund from the lender. He will charge you an amount over and above the principal amount to choose.
6. Loan Insurance –
Loan insurance is like any other insurance opted for in order to protect a possession. This insurance protects and covers for you in times when you are unable to make payments towards your loan. When an unforeseen situation arises, the loan insurance will protect you from defaulting on your loan repayments.
7. FOIR (Fixed Obligation to Income Ratio) – What is FOIR?
Once you apply for a loan, the lenders introspect your credit history and profile to determine your capacity to repay the loan. FOIR, is one of the most used tools that lenders use to take into consideration an applicant’s eligibility and repayment capacity.
8. Credit/CIBIL Score – What is a Credit Report? How is it Different from Credit Score?
CIBIL TransUnion, formerly known as the Credit Information Bureau (India) Ltd. was incorporated in 2000. This bureau accumulates your financial/debt records such as payments towards loans and credit cards.
Credit Report – It is a report that enlists the history of your past, on-going and closed debts, and payments details of each of the loan accounts, including credit cards.
Credit Score –The credit report formulates the base of the credit score. It generated out of the parameters in the report. It’s a statistically obtained 3-digit number between 300 and 900. This score determines your creditworthiness.
An Instant Personal loan is one of the most trusted and dependable forms of debt that can be availed within a short notice and help you meet your cash requirements without any delay. When you are faced with a situation when you absolutely need the money and are out of options, it can put you in a jam. At such times, personal loans give you the option of borrowing and paying back in regular intervals.