At this time of the poor economy, many people have resorted to personal loans to pay the rent, EMI of the car/house or even the fees for children’s school. If you fit into this category or think you might need to acquire a personal loan shortly, it is essential to know a few things. You do not make mistakes that many people do, who borrow money and end up making life even more difficult.
First, know that the lender can charge you whatever interest they want. There is no easy way out. The loan must act as a lifeline in the raging sea of debt and not as an iron ball that sinks even deeper into the drowning one. Pay attention to details that can hide a real trap in the form of high-interest rates.
Ease is expensive
As they are pre-approved and automatically made available, the easiest-to-access credit lines are also the most expensive. We are talking here about overdraft and credit cards. They concentrate on the highest rates in the market. Charging high interest is a way that creditors have found to reduce losses with possible defaults. Since they are unsecured loans, the fees charged are much higher, as the risk of default is high. In this sense, peer-to-peer lending is a great alternative. With consumer lending software, creditors create a perfect lending platform that automates consumer-financing solutions.
A highly customizable option allows lenders to design the platform according to the characteristics of the borrowers and the type of lending.
Credit and consumer behaviours
There is yet another factor to consider in pre-approved credits. It is the question of how they can change consumer behaviour. Do not get carried away by the illusion that you have money just because there is a limit on your card of up to eight times your salary. The most significant behavioural risk is when citizens see this pre-approved credit limit as an extension of their income and use it without any criteria to carry out consumer impulses.
Can higher interest be worth it?
It is essential to assess whether the value of the instalments to pay the loan fits your budget. Otherwise, what should be a solution to the problems can create more chaos. It is no use covering the body and leaving the foot out. The portion has to fit in your pocket. Try to negotiate. The higher the instalments, the greater the chance of default is. Perhaps, it is more worthwhile to spread the loan in more instalments for higher interest than risk not being able to honour the commitment.
Rights of borrowers
Did you ask for a loan and leave with a savings bond? It is wrong. Lenders must not condition the credit in exchange for the purchase of another product or service. It is prohibited to impose the sale of another product or service for the credit to be granted. Sometimes this tying attempt is disguised as an interest rate discount. Runaway from these traps. Research and try to negotiate interest rates across different credit sources, different banks and lenders.
Note that interest tends to rise concerning time to settlement and payer history. The more instalments and the longer it takes to pay the debt, the higher the fees. Likewise, when it is considered a bad debtor, the institution assumes an increase in the risk of default and increases interest rates. What you have to do is look for the least expensive option possible. Avoid the easy ones and research different options in different institutions. A tip is to take advantage of the p2p lending.
Moreover, if you are a lender and managing consumer financing, it is time to get your consumer lending software at affordable prices. It is a solution that makes it effortless to manage the entire lending and borrowing process. You can customize the platform according to your needs.
Use custom lending software.
A consumer lending software is an intelligent computer tool for credit management and personal loans for individuals who lend money in instalments. The objective of the loan calculation and administration application is to support the money lending business model. A system for administering credits and loans is currently the backbone of any modern enterprise, becoming an invisible source of power: the power of information. Access to information serves both to measure reality and to anticipate the future.
The loan calculation system enables planning, speed, and order reflected in prompt responses and practical solutions at all stages of management. Custom lending software allows you to plan the loan and financing activities before they are carried out. In addition, based on this planning, determine the most appropriate strategy to start the management, besides having quick access to information to know the status of clients.
Lending software allows ordering and filtering data on loans and collections by date, loan management movement, collection management, etc. The characteristics are monitor consumer journey, real-time monitoring, analyze financial progress, authenticity check, consumer data safety, identity verification, no fraudulent activities, self-service, etc.
There are several ways to offer credit, such as credit cards, p2p lending, personal loans, or mortgages. The terms of the debt payment include the payment of interest. Interest on credit is usually identified as an annual percentage rate or Annual Percentage Rate. This rate can be just a few percentage points, or it can be much more than 20%. The lower the interest, the less it will cost the loan applicant to pay off the debt. Evaluate each mode carefully before applying for a loan.