A Comparison of Flat and Reducing Personal Loan Interest Rates

  

A Comparison of Flat and Reducing Personal Loan Interest Rates

People always say that you need to avail of a quick loan online only when it's an emergency, and you've exhausted all your other options. But try as you might; there are plenty of reasons why you may end up needing a quick loan online – from medical emergencies to credit card EMIs. You may also be hit with unforeseen expenses – in such a case, you'll have to clear it somehow with emergency funds if you're running short of cash. A personal loan can help you in such a scenario. Now, we already know how convenient and pocket-friendly it is to get a personal loan. You can approach many lenders for the same. However, you need to be careful regarding factors like the interest rate, repayment tenure, etc. The interest rate on a personal loan is calculated using one of two methods – the flat interest rate or the reducing interest rate.

In this article, we'll tell you all you need to know about both methods. In addition, this will help you understand if there's any difference between the two.

Related Blog - 5 Factors that Impact Personal Loan Interest Rates

Flat Interest Rate

This is a method of interest calculation that's traditionally applied to personal loans. Known as the 'fixed' or 'flat' interest rate, it is pretty straightforward and easy to understand. Here, the interest rate is calculated on the entire online quick loan amount that you've availed of, which is your principal amount. Every month, the principal is always considered for calculating interest. So, first, the total interest on your loan is calculated and added to your principal amount. Then, this amount is equally divided across your loan repayment tenure. So, your monthly EMI will remain the same, whether you're paying your second or second-last EMI.

Reducing Interest Rate

Under this method, the interest rate reduces every month. It is calculated upon the outstanding principal, which also reduces every month. When you pay your monthly EMIs, you pay a part of it as interest, and the rest goes towards paying off your principal amount. This is how the principal amount reduces for the next month. Consequently, the interest amount on the same will decrease as well. This will continue as you pay off your EMIs, and the interest amount will get lesser with every EMI.

Which is More Affordable?

Now for the most important question – after having understood how your lender calculates interest on your quick loan online, which method is more affordable? It is the reducing interest rate method, where your interest outflow reduces every month. But the amount you will save depends upon the interest rate, principal amount and loan terms. More often than not, the amount of money you save by employing the reducing interest method won't be significant as the flat rate method. What you can do is get good clarity regarding your loan terms before accepting a loan offer from them.

Wrap Up

The interest rate on your personal loan is calculated based on several factors – the loan type, loan amount, repayment tenure, creditworthiness, repayment capacity and so on. Rather than giving undue emphasis to the interest rate or calculation method, you need to ensure you have adequate repayment capacity for the loan. This will help you avoid a debt trap.At KreditBee, you can avail of quick loans online up to ₹2 Lakhs from the comfort of home. For more information on how you can do that

 

Understanding How Small Personal Loans Work

We've all faced a situation where an unforeseen expense took us by surprise, and we didn't have enough money to cover it, even though it was a modest amount. These unexpected expenses can be anything – a sudden visit to the doctor, home repairs, or having to send money back home. Even though you might already have a fund for emergencies, you may not want to use that for such small expenses. Some of you may be trying to achieve a savings target and may not like a small payment to come in its way and delay meeting your savings goal. However, covering all unexpected expenses, however small, is very important. They can snowball into a big problem if you don't meet them on time. All the examples mentioned earlier involve small amounts of money – but they are pressing needs all the same.

So, what do you do? Taking out a personal loan is usually considered a last resort when you've explored all your options. There's also this notion that people take personal loans for significant expenses, like emergency surgery, home renovations, or paying off debt. So, what are your options if you gave to cover a small but pressing need? You can put it on your credit card, borrow money from family/friends or use small personal loans. Credit cards are a costly option, and borrowing from family/friends can be embarrassing. So, getting a small loan is worth a try. In this article, we're going to understand how small personal loans work.

Related Blog - Reasons to Take a Small Personal Loan when Buying a Car

What is a Small Personal Loan?

There's no standard definition of a "small personal loan". Many personal loan lenders may have their own reasoning behind what constitutes a small personal loan. The term is generally used to refer to loans of roughly ₹10,000 - ₹15,000. A small personal loan works just like a personal loan. Your loan provider will look at several factors to decide your eligibility for a small personal loan. The most important is your CIBIL score. Apart from that, they will also consider factors like your repayment capacity and your documents. Typically, you need a CIBIL score of 750 and above, even for a small amount loan. But some lenders may allow for a slightly lower score (700 and above) if they're convinced about your repayment capacity and if your documents are in order.

When Should You Get a Small Personal Loan?

It’s recommended that you get a small personal loan in the below scenarios:

1.    You have to take care of a small expense without dipping into your savings.

2.    You don't want to clear the unexpected expense with your credit card because of the high interest rate involved. Or you already have considerable credit card debt and don't want to add to it.

3.    You want to steer clear of high-interest debt like payday loans.

4.    You don’t want to borrow money from friends or family.

5.    You can't apply for a loan from the bank because they have a minimum loan amount restriction. Borrowing more than you need is always a bad idea.

6.    This is your first loan, and you have prior credit history. Taking out a small amount loan and repaying it on time will boost your credit score.

How do you apply for a Small Personal Loan?

Applying for a small personal loan is simple and straightforward. The following are the steps involved:

1.    Submit your online loan application on your lender’s website/mobile application. You’ll need to provide your personal, financial, and employment details and upload all the relevant documents.

2.    Your loan application will then be sent for approval. If the information provided and documents submitted are in order, you'll receive quick authorisation within an hour.

3.    Select your loan amount & repayment tenure and provide your bank account details.

4.    Your small loan will be transferred directly into your bank account.

Use the funds and take care of that small yet essential expense on time!

Wrap Up

Taking out a loan should always be your last option while trying to meet your financial needs. However, suppose the need is small yet equally urgent. In that case, small personal loans are a better option than credit cards or payday loans. If you're looking for a reliable loan company that provides quick access to small personal loans, turn to KreditBee. It is India’s leading personal loan platform that offers hassle-free personal loans for working professionals. 

 

Understanding the Different Types of Loans You Can Avail

No matter how meticulous we are with our finances, there comes a time in everyone’s life when they find themselves in need of some extra cash. Right from planned expenses such as wedding and home upgrades, to unforeseen expenses such as medical emergencies, every such event requires a significant amount of money, for which people often turn to loans. If you too are thinking about taking out a loan, you can always count on a trusted money loan app such as KreditBee, but at the same time, it is important to know about the various types of loans you can take and the differences between them. That is exactly what we will discuss in this blog post. Read on.

Common Types of Loans:

User Convenience

A personal loan, just like a credit card, does not involve any kind of collateral. That means you don’t have to provide any kind of security to obtain a loan. There is, however, a catch. Firstly, to qualify for a personal loan, you should have a seamless credit history; if you have made a credit settlement with a lender in the past or have a longstanding financial liability, your loan application may not be approved. Secondly, personal loans are known to have higher interest rates than other types of loans, especially the ones involving collateral.

Auto Loans

Auto loans are probably the most common type of collateralized loans available out there. Though the eligibility criteria for auto loans are not as stringent as they usually are for personal loans, they present a different set of concerns for borrowers. Firstly, when you take an auto loan, the vehicle bought using the money stays in the name of the lending body until the loan amount is paid in full with interest. Secondly, auto loans are generally approved to cover a “partial value” of the vehicle, which means the borrower has to arrange the down payment, which can be a problem for many people.

Education Loans

Who doesn’t dream of getting a world-class education and being the best they can be? The problem, however, is often the steep fees charged by educational institutes. That’s when education loans come to the rescue. There are, however, a couple of things you should know - one, all banks offering education loans have a list of pre-approved institutes for which they approve loans. If the institute you have chosen doesn’t belong on the list, the loan application will most likely be turned down. Secondly, these loans require significant paperwork, and due to a large number of applications, they usually have a prolonged processing time.

Business Loans

Business loans are probably the toughest to obtain as they require extensive paperwork and a comprehensive business plan that elaborates on how the borrower plans to use the funds and how he would repay the loan amount. The entire process typically takes weeks, if not months. Another concern with business loans is that they often involve significant collateral, that the borrower may not have the financial means to provide. As a result, a lot of business ideas are unable to get off the ground due to a lack of funding.

Home Loans

Home loans are another common type of collateralized loans that are offered to borrowers looking to buy or build a house. Besides having numerous qualification requirements, home loans also hold the purchased properties as collateral until the outstanding amount is paid in full. This means that if during the tenure of the loan, the borrower is unable to make the due payments, the lending body will have the right to enforce a foreclosure. In other words, one risks the chance of losing their property if they fail to pay the installments on time.

What's the Solution?

In the light of all that we have discussed so far, it would be safe to say that all types of conventional loans have their downsides. That leaves us with a very important question: what do you do when there is a need for money? Of course, most people, particularly those who don’t want to burden others or jeopardize their reputation, don’t turn to their friends and family for help. Bank loans, on the other hand, have their downsides. So, what does one do? The answer is getting a quick loan through a trusted mobile loan app such as KreditBee.

Why Choose an Instant Personal Loan?

The short answer - it doesn’t have any of the shortcomings of traditional bank loans. The long answer - obtaining an instant personal loan through a personal loan app such as KreditBee is super simple, does not involve any collateral, and is extremely quick. All you need to do is download the app, create your profile by providing some basic information, and then upload the required documents. Once your profile is verified and approved, you will be able to get a loan in as little as 15 minutes! And the best part - the amount is directly transferred to your bank account almost instantly upon approval. So, no more waiting for the fund transfer even after loan approval!

The Last Word

“Tough times don’t last, but tough people do” is a popular saying. To that, we say, more than tough, smart people last longer! If you need immediate cash, look no further than the best personal loan app

 

Up Close with Salary-Based Loans

If you're a salaried professional, you'll know how common it is to be inundated with several unforeseen expenses almost every month. This is apart from the costs that you budget for at the beginning of every month. It can be pretty frustrating in such a scenario if you don't have a cash buffer to meet such ad-hoc expenses. Dipping into your savings is also a bad idea because using it for unforeseen expenses will unnecessarily deplete it over time. Even if you leave out sudden expenses for a moment, what if you run out of money for existing financial needs or significant purchases? Taking out a personal loan is your best option. Financial institutions provide a personal loan to working professionals without requiring any security or collateral in exchange. That's why it's also called an unsecured loan. They are also known as salary-based loans or salary advance loans because you're borrowing against your salary. A few lenders also provide these loans to their customers with their own app for advance salary. Here are four benefits of these loans:

1.    Access to Higher Ticket Sizes

Salary-based loans offer you easy access to higher ticket sizes in a straightforward manner. Based on your monthly salary and personal loan provider, you can avail of a salary-based loan of up to ₹40 Lakhs! Of course, whether you will be granted such a significant amount is a different question altogether. It depends on your credit score, past repayment history, monthly income, and personal loan provider. The point here is that such loans make it easy to take care of high-ticket expenses like a vacation, wedding, or financing higher-education plans. Suppose you have to undergo expensive emergency surgery. In that case, a salary-based loan will help you out here as well.

Related Blog - How a Salary Advance Can Help You Manage the Month-End Cash Crunch

2.    No Collateral Requirements

When you avail of a salary-based loan to take care of financial emergencies, you don't have to worry about arranging security or collateral. This is quite a relief, especially for those applicants who didn't have anything to put up as collateral in the first place. It's also incredibly frustrating when a lender rejects your personal loan application, ­just because you couldn’t meet the collateral requirements (while everything else was in place). You don’t have to worry about such a scenario if you’re applying via a salary loan app. You just have to focus on building your credit score and submitting a complete loan application with all your documentation in place.

3.    Flexibility in Usage

Another advantage that comes with availing of a salary-based loan is the flexibility in usage. You can use it to meet various needs, and there's no restriction on how you can use the loan amount. This is a welcome benefit compared to automobile or home loans, where the funds are earmarked for specific purposes like buying a vehicle or a house. So, if you need to avail of a loan that has nothing to do with purchasing a home or a car, then a salary-based loan is your best bet. Once your loan application is approved, you will receive the loan amount directly into your bank account within a few hours. Suppose you're a repeat customer and already have a relationship with your lender. In that case, you may receive the funds even faster.

4.    Flexible Repayment Tenures

The loan amount and repayment tenure you can avail of differs from lender to lender. Generally, while borrowing via salary loan apps, your repayment tenure can range from 12 to 60 months. You can select the loan tenure based on your repayment capacity and pay your loan EMIs on time. Try to keep the repayment tenure as short as possible so that you spend less money on interest payments.

Related Blog - 3 Ways How a Salary Based Loan Can Help in Times of Financial Crisis

Wrap Up

The points mentioned above will give you a fair idea about the benefits of applying for a salary-based loan to meet various financial needs. Just ensure you borrow adequately and set your loan repayment tenure flexibly enough so that you don't miss a single EMI. If you're looking to get a salary-based loan, 

 

3 Signs you Need to Revise your Money Goals

When it comes to setting financial goals for ourselves, most of us think that it’s too ambitious. For the average Indian working professional, the general opinion around having financial goals is something like this: we’re already struggling to save money, how can you expect us to have separate financial goals and achieve them? But if you need your hard-earned money to work for you, you need to ensure it’s being used to achieve strong yet realistic financial goals. Now, it’s true that in the COVID-19 economy, the very prospect of meeting all your expenses and having some spare savings can be difficult for many. But we’ve all got to start somewhere. As the popular saying goes – you weren’t born to just pay bills and die. A savings goal can be anything – from saving up for the latest smartphone to clearing off a previous quick loan online, it’s different for different people. But it’s important to have goals and stick to them. Here are three signs where you might need to revise your money goals:

Related Blog - 3 Skills You Need for Successful Personal Financial Management

1.  Your Savings Account Has Too Much Money

This may seem as an impossible dream for many salaried professionals – in fact, they may not view it as a problem at all! While many of us work tirelessly, day in and day out, to ensure that our bank balance isn’t too low at any period, complaining about a large savings account balance may seem arrogant to many. But even in the world of money, there can be too much of a good thing. For example, let’s say your monthly salary is ₹50,000. In that case, you should have ₹3 Lakhs in your emergency fund. If your savings account balance has more money, you might want to consider investing that money somewhere else. Why would you let your money idle away in an account where it’s earning minimal interest?

2.  Your Discretionary Spending is Going Up

We understand that meeting your financial goals can be very tough, especially if that goal involves paying down high-interest credit card bills or loan EMIs. But when you’re done paying your bills, how are you utilising all the extra income now? Now that you don’t have to worry about paying the EMIs of a quick loan online, you may be tempted to spend. Suddenly, you’re shopping for clothes on Myntra almost every week. You see nothing wrong with spending ₹22,500 at once for a new Kindle – an amount you wouldn’t dream of spending when you had a student loan! When this happens, increase your monthly savings or start a new recurring deposit – it’ll put all this extra income to good use.

3.  Your Existing Money Goals are Too Easy

While a lot of you might be wondering if your money goals will ever be easy or achievable, let us remind you that it can. With every annual increment in your salary, you might forget to raise your savings goals in the same manner. For example, let’s say you were putting 25% of your monthly salary into savings. But even after a recent salary hike of 40%, this goal hasn’t changed. If that’s the case, it definitely should. As your income rises, your savings should rise with it. Either amp up your current goal(s) or create new ones.

Related Blog - Top 3 Tips to Help You Gain Control of Your Finances

Wrap Up

Creating strong, achievable and realistic financial goals is a way to ensure that you’re using your hard-earned money wisely. The satisfaction that comes with meeting a financial goal – like paying off a quick loan entirely – is pretty sweet. On that note, if you ever find yourself looking to get a quick loan today

Tips to Help You Gain Control of Your Finances

When it comes to our personal finances, one of the most important habits that we need to learn is to stay out of debt. Unfortunately, personal finance, budgeting, or taxes isn’t something that’s taught in schools. This lack of emphasis on money management leads to a lot of salaried professionals being clueless about managing their money. Both you and I know that saving money is hard. But that isn't an excuse for you to go broke every month or get into debt. There are simple tips that, if followed well, can help you manage your monthly salary. There's no need for you to look up online loan apps when you're broke. The goal is to manage your finances so well, that you don't need a loan in the first place. We've got 3 tips for you that'll help you do exactly that. Read on:

1. Draw Up a Customised Budget

 

If you want to be able to save a set amount from your salary every month, you first need to be able to make sense of your finances. For this, the first step is understanding where you’re spending your money and by how much. This will help give you a clear picture of how much you can realistically save. If you’re not happy with the amount that’s left for savings, try reducing how much you spend on monthly fixed items (like rent, utility bills, subscriptions, etc.). Remember, there’s no one-size-fits-all budget that applies to everyone. You need to customise your budget based on your salary and financial goals. Otherwise, you may have to depend on online loan services to bail you out in case of an emergency.

2. Save Up for Rainy Days

 

This is something that our parents have been doing for decades. In their day, they completely avoided taking out loans. Their mantra was “pay yourself” instead of “treat yourself” that’s all the rage right now. While it’s not a crime to indulge yourself, it shouldn’t become a habit. What should become a habit is putting away a fixed portion of your salary (20% is good to start with) no matter how “small” you think it is. This is how you set up an emergency fund. You put away a portion of your salary and forget about it. Once this becomes a habit, you’ll have a significant amount saved up. You can then use it to take care of unforeseen expenses without compromising on your monthly expenses.

3. Make Small yet Significant Changes

 

One of the most common misconceptions associated with saving money is that you’ll have to live a very ‘frugal’ life. This is only partially true, and it also depends on how you approach this entire exercise. Many of the things you ‘love’ can also be completely wasteful and unnecessary. It could be a magazine subscription, your daily coffee from Starbucks, expensive takeout for your daily lunch, or even a credit card you don’t need. At first, such things might seem completely harmless, but if you look a little bit closer, you’ll see that you can do without some of them. It does require self-control but eliminating such expenses will go a long way in helping you save precious money.

Wrap Up

The above points will help everyone who wants to take control of their finances. However, despite your best efforts, there will be times where you may require extra funds to meet a financial emergency.