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<keyword id="35448" type="ORGANIZATION" weightage="100" keywordseo="personal-finance">Personal Finance</keyword> Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective.<ul class="summary-list"><li><keyword id="896226" type="PERSON" weightage="60" keywordseo="Avant">Avant</keyword> offers <keyword id="35520" type="PERSON" weightage="60" keywordseo="personal-loans">personal loans</keyword> for emergency expenses, car repairs, vacations, and more.</li><li>Avant loan amounts range from $2,000 to $35,000, but exact limits vary by state.</li><li>You have a good chance of qualifying for an Avant <keyword id="180660" type="PERSON" weightage="60" keywordseo="personal-loan">personal loan</keyword> with a credit score of 600. </li><li><a href="https://www.businessinsider.com/personal-finance/best-personal-loans" target="_blank" rel="noopener">See Insider's picks for the best personal loans »</a></li></ul>Table of Contents: Masthead Sticky<h2>Should you use Avant?</h2><table style="border-collapse: collapse; width: 100%;" border="1"><tbody><tr><td style="width: 50%;">You may like Avant if you ... </td><td style="width: 50%;">You may not like Avant if you ... </td></tr><tr><td style="width: 50%;"><ul class="summary-list"><li>Have a credit score as low as 600</li><li>Want to avoid prepayment penalties</li><li>Want a company with long customer service hours</li><li>Need your funds within one business day</li><li>Want to manage your loan from a mobile app</li></ul></td><td style="width: 50%;"><ul class="summary-list"><li>Need to borrow more than $35,000</li><li>Don't have an account with a bank or credit union</li></ul></td></tr></tbody></table>The bottom line: Avant is a good personal loan provider, especially if you have a lower credit score and want your money quickly. Just be prepared to pay a high APR if you do have a low score.<h2>How Avant works</h2>Avant provides personal <keyword id="6362287" type="UNKNOWN" weightage="60" keywordseo="loans">loans</keyword> through <a href="https://www.businessinsider.com/personal-finance/webbank-review" target="_blank" rel="noopener">WebBank</a> (Member FDIC), a state-chartered industrial bank. Avant offers both secured and unsecured personal loans, but we're focusing on the company's unsecured personal loan options. Unsecured loans are more common with Avant and with competing lenders.An <a href="https://www.businessinsider.com/personal-finance/unsecured-loans-vs-secured-loans-what-is-the-difference" target="_blank" rel="noopener">unsecured personal loan</a> doesn't require any collateral, such as a house or car. These personal loans can be used for a variety of purposes.Avant loan amounts range from $2,000 to $35,000. The minimum amount you're required to borrow varies by state. Avant offers loans to all 50 states and Washington, DC. The minimum loan term is 24 months, and the maximum term is 60 months. You can pay off Avant loans in full at any time without incurring an early payment penalty.Depending on your credit score and annual income, your APR will range from 9.95% to 35.99%, which is higher than some other major competitors' APR ranges. For example, <keyword id="11106586" type="UNKNOWN" weightage="60" keywordseo="best-egg">Best Egg</keyword>'s range is 5.99% to 29.99%, and <keyword id="11106587" type="UNKNOWN" weightage="60" keywordseo="marcus-by-goldman-sachs">Marcus by Goldman Sachs</keyword>' is 6.99% to 19.99%.If Avant offers you a loan with a high interest rate, you may want to look into <a href="https://www.businessinsider.com/personal-finance/best-credit-cards-for-bad-credit" target="_blank" rel="noopener">credit cards for people with bad credit</a> and compare rates between a card and a loan - you might be eligible for a lower APR and better terms with a credit card. <a href="https://www.businessinsider.com/personal-finance/borrow-money-credit-card-or-personal-loan" target="_blank" rel="noopener">Weighing the pros and cons</a> of your decision will help you get the best financial deal possible. If your loan is approved by Avant by 4:30 p.m. CT Monday through Friday, funds are generally deposited by the next business day, per the company's website. You can reach Avant via their customer service email address, support@avant.com. Or call 800-712-5407 Monday through Friday, 7:00 a.m. to 10:00 p.m. CT, or weekends from 7:00 a.m. to 8:00 p.m. CT.Avant also has a mobile app with a smooth, well-designed interface. The app has 4.5 out of 5 stars in the Apple store, and 3.8 out of 5 stars in the Google Play store. Avant has a <a href="https://support.avant.com/" target="_blank" rel="noopener">Support Center</a> with answers to questions, sorted by topic.You can get a variety of personal loans from Avant, including:<ul><li><a href="https://www.businessinsider.com/personal-finance/best-debt-consolidation-loans" target="_blank" rel="noopener">Debt consolidation</a></li><li>Emergency expenses</li><li>Life events</li><li>Car repair</li><li><a href="https://www.businessinsider.com/the-top-5-diy-home-renovations-to-maximize-your-property-value" target="_blank" rel="noopener">Home improvements</a></li><li><a href="https://www.businessinsider.com/hidden-costs-moving-2018-7" target="_blank" rel="noopener">Moving expenses</a></li><li>Vacation</li><li>Other (this is not clearly defined on Avant's website)</li></ul>You'll need to meet the following requirements to apply:<ul><li>You must be over the age of 18 (19 if you live in Alabama)</li><li>You must have a personal bank or credit union account (prepaid card accounts aren't eligible)</li><li>You must be able to provide documents to verify your income, identity, and other information as requested</li></ul><h2>What credit score do you need to qualify for an Avant loan?</h2>To qualify for a personal loan, Avant states on its website that most customers have a <a href="https://www.businessinsider.com/personal-finance/what-is-a-bad-credit-score" target="_blank" rel="noopener">credit score</a> between 600 and 700. However, your credit score isn't the entire factor in your loan approval, so you may still consider applying with a lower score. Here's how scores break down, according to FICO: <ul><li>Very poor: 300 to 579</li><li>Fair: 580 to 669</li><li>Good: 670 to 739 </li><li>Very good: 740 to 799 </li><li>Exceptional: 800 to 850</li></ul>Your credit score will not be impacted if you check your loan rates with Avant, because the company only generates a soft credit inquiry.Avant will perform a <a href="https://www.businessinsider.com/personal-finance/what-is-a-hard-inquiry-credit-report" target="_blank" rel="noopener">hard credit inquiry</a> once you continue with the loan application, which will likely affect your credit score. A hard inquiry gives a lender a comprehensive view of your credit history, but may negatively affect your score.Avant may be a good choice for you if you have a lower credit score, because Avant has more lenient credit score requirements than other personal loan companies. Keep in mind that the lower your credit score, the higher your APR could be - and Avant rates go up to 35.99%. Here are some tips you may consider to improve your credit score before applying for a loan: <ul><li><a href="https://www.businessinsider.com/personal-finance/how-to-get-free-credit-report-check-credit" target="_blank" rel="noopener">Ask for and examine a copy of your credit report</a>. Look for any mistakes on your report that could be tanking your score. If so, reach out to the credit bureau to talk about fixing the error.</li><li><a href="https://www.businessinsider.com/personal-finance/how-to-increase-your-credit-score-improve-credit" target="_blank" rel="noopener">Keep credit card balances low</a>. Sustaining a credit utilization rate - the percentage of your total credit you're using - of 30% or less will prove to lenders that you can handle your credit well.</li><li>Design a system for paying bills in a timely fashion. Your payment history makes up a significant percentage of your credit score, and lenders prefer to see stable payments in the past. Set up calendar reminders or automatic payments so you don't find yourself playing catch up.</li></ul><h2>Is Avant trustworthy?</h2>Avant is a Better Business Bureau-accredited company, and the BBB gives Avant an <a href="https://www.bbb.org/us/il/chicago/profile/consumer-finance-companies/avant-llc-0654-88588503" target="_blank" rel="noopener">A in trustworthiness</a>. The BBB assesses trustworthiness by evaluating a business' responses to consumer complaints, truthfulness in advertising, and transparency about business practices. However, good BBB scores don't guarantee you will have a good relationship with companies. They're merely a guideline to help you get started on your hunt for a personal loan provider. Avant does have a recent controversy. In 2019, the company settled a case with the Federal Trade Commission where it was <a href="https://www.ftc.gov/news-events/press-releases/2019/04/online-lending-company-agrees-settle-ftc-charges-it-engaged" target="_blank" rel="noopener">found liable</a> for putting unauthorized charges on customers' credit card, and for illegally requiring customers to agree to automatic payments from their bank accounts when taking out a loan. Due to Avant's recent history, you may decide you're more comfortable using a different personal loan company.<h2>The pros and cons of <keyword id="11106589" type="UNKNOWN" weightage="60" keywordseo="avant-personal-loans">Avant personal loans</keyword> </h2><h3>Pros</h3><ul><li>Quick access to funds. If your loan is approved by 4:30 p.m. CT Monday through Friday, funds are generally deposited by the next business day. The exact time will depend on your bank and its processing time. </li><li>No prepayment penalty. You can make additional payments toward your loan, and you won't be charged an extra fee.</li><li>Mobile app. Avant has a strong mobile app. Not all personal loan companies come with apps.</li></ul><h3>Cons</h3><ul><li>Multiple types of fees. You'll have to pay an administration fee of up to 4.75%, which will be deducted from your loan proceeds when the loan is funded. If you miss a scheduled payment, you may incur a late fee, which will vary by state. If a scheduled payment is returned unpaid, dishonored payment fees may apply. </li><li>High maximum APR. Compared to competitors like Best Egg, Marcus, and Lightstream, Avant's maximum APR of 35.99% is high. Best Egg's max is 29.99% APR, and Marcus' and Lightstream's are 19.99% APR.</li></ul><h2>How to get an Avant personal loan</h2>The application is available online and can be completed in a few minutes. You'll need basic information for the initial application, including:<ul><li>Name</li><li>Contact information including your address, phone number, and email</li><li>Whether you rent or own your home</li><li>How much you pay for housing each month</li><li>Date of birth</li><li>Social security number </li><li>Employment status</li><li>Individual income (monthly net income)</li><li>Reason for applying for a personal loan and how much you want to take out</li><li>Other financial information, such as how you would rate your credit quality</li></ul>You'll be able to see your offers and interest rate range within a few minutes. You'll need to undergo identity verification to complete the application process, and you may need to provide confirmation of certain financial details before your application is approved. After you've verified your information, the funds will be delivered to your bank account as requested, usually by the next business day. <h2>How does Avant compare to other personal loan lenders? </h2>Although rates are specific to borrowers, Avant interest rates are higher than those offered by other big-name lenders. Here's how Avant compares to the competition.<table style="height: 207px; width: 100%; border-collapse: collapse; margin-left: auto; margin-right: auto;" border="1" cellpadding="10px"><tbody><tr style="height: 72px;"><td style="width: 24.2887%; height: 72px; text-align: center;"><a href="https://www.avant.com/" target="_blank" rel="noopener"></a><a href="https://www.avant.com/" target="_blank" rel="nofollow noopener sponsored"><div type="image" title="Avant logo" height="319" width="426" msid="82093598" hostid="261"></div></a></td><td style="width: 27.6215%; height: 72px; text-align: center;"><a href="https://www.marcus.com/us/en/personal-loans" target="_blank" rel="noopener"><div type="image" title="Marcus by Goldman Sachs High yield online savings account" height="377" width="600" msid="82093599" hostid="261"></div></a></td><td style="width: 26.5817%; height: 72px; text-align: center;"><a href="https://www.bestegg.com/personal-loans/" target="_blank" rel="noopener"><div type="image" title="best egg logo" height="319" width="426" msid="82093600" hostid="261"></div></a></td></tr><tr style="height: 42px;"><td style="width: 24.2887%; height: 44px; text-align: center;">Min. credit score600</td><td style="width: 27.6215%; height: 44px; text-align: center;">Min. credit scoreUnspecified</td><td style="width: 26.5817%; height: 44px; text-align: center;">Min. credit score640</td></tr><tr style="height: 20px;"><td style="width: 24.2887%; height: 20px; text-align: center;">APR9.95% to 35.99%</td><td style="width: 27.6215%; height: 20px; text-align: center;">APR6.99% to 19.99%</td><td style="width: 26.5817%; height: 20px; text-align: center;">APR5.99% to 29.99%</td></tr><tr style="height: 20px;"><td style="width: 24.2887%; height: 20px; text-align: center;">Origination fee?No*</td><td style="width: 27.6215%; height: 20px; text-align: center;">Origination fee?No</td><td style="width: 26.5817%; height: 20px; text-align: center;">Origination fee?Yes</td></tr><tr style="height: 51px;"><td style="width: 24.2887%; text-align: center; height: 51px;">Avant Personal Loans</td><td style="width: 27.6215%; text-align: center; height: 51px;"><a href="https://www.marcus.com/us/en/personal-loans" target="_blank" rel="noopener">Apply for a loan</a></td><td style="width: 26.5817%; text-align: center; height: 51px;">Best Egg</td></tr></tbody></table>*While Avant does not charge an origination fee, it does charge an administration fee of up to 4.75%.<h3>Avant review vs. Marcus by Goldman Sachs review</h3>Avant charges an administration fee of up to 4.75%, which will be subtracted from your loan proceeds when it's funded. You'll also pay a fee if you miss a scheduled payment or if a scheduled payment is returned unpaid.You won't pay any fees with <a href="https://www.businessinsider.com/personal-finance/marcus-bank-review" target="_blank" rel="noopener">Marcus</a>, including late fees. Rather, you'll rack up more interest if you don't pay on time, and your final payment will be bigger.With Marcus, you'll receive a 0.25% discount on your loan by signing up for AutoPay; Avant does not offer this perk. While Marcus has no official minimum credit score requirement, the company recommends a minimum credit score of 660 in an <a href="https://www.marcus.com/us/en/resources/credit-score/credit-score-for-a-personal-loan" target="_blank" rel="noopener">informational post</a> on its website. This suggestion is higher than Avant's loose guidelines by a significant margin. If your credit score is below 660, Avant is likely the better option. That said, the lower your credit score, the higher an APR you will probably pay. <h3>Avant vs. Best Egg personal loans</h3>You'll pay a late fee with both loan providers - Avant's late fee depends on which state you live in, while <a href="https://www.businessinsider.com/personal-finance/best-egg-personal-loans-review" target="_blank" rel="noopener">Best Egg's</a> late fee is $15. Both have additional fees baked into the cost of the loan. Avant charges an administration fee of up to 4.75% of your loan amount, while Best Egg's has an origination fee ranging from 0.99% to 5.99%.Avant also has a lower minimum credit score guideline than Best Egg - though both companies have relatively low minimums. As a result, Avant might be the better choice if your credit is toward the lower side of "fair."You'll receive your funds roughly in the same amount of time with both companies. Avant claims most customers will receive their funds the next business day, and Best Egg says the majority of customers will get their money within one to three business days.Ryan Wangman is a reviews fellow at Personal Finance Insider reporting on mortgages, refinancing, bank accounts, and bank reviews. In his past experience writing about personal finance, he has written about credit scores, financial literacy, and homeownership.Related Content Module: More Personal Finance Coverage

Avant review: Personal loans for people with low credit scores, but you'll pay a high interest rate

There are times in life when you need that extra cash to meet an immediate goal. If you have considered all other options like taking some help from friends or relatives and have not found a way out, dipping into your savings pool may not be a good idea. Instead, you can consider opting for a <keyword id="180660" type="UNKNOWN" weightage="100" keywordseo="personal-loan">personal loan</keyword>. However, there is no reason to assume that getting a personal loan is child’s play, in spite of the fact that you have had telemarketers chasing you almost daily. As with any other loan product, your <keyword id="6380215" type="ORGANIZATION" weightage="100" keywordseo="CIBIL">CIBIL</keyword> score will determine your loan eligibility here as well. 
 
As the name suggests, a personal loan can be taken to meet a number of personal financial goals. You may need to pay for a medical procedure, make home improvements, pay for your own wedding or that of a sibling or you could be a small business owner who needs to make an urgent purchase for business expansion. At times, people also opt for personal loans to refinance or consolidate debt that is demanding a high rate of interest. But have you really considered which situations are best to take a personal loan? Let us consider a few instances and analyse whether you are better off with or without a personal loan. 
 
1. Refinancing or consolidating debt 
In theory, it may seem easier to pay off your credit card bills with a personal loan, but do remember that by doing so, you are only moving your debt pile from one place to another? You should, therefore, consider taking a personal loan only if you are lowering the annual rate of interest on your loan. For instance, the rate of interest on a personal loan can vary from 13.99-23%, depending on the lender you choose and your CIBIL score. This is considerably lower than an annualised rate of interest of 35% if you have managed to get yourself in the minimum amount payment cycle and are not making repayments towards your principal amount. You may also consider taking a personal loan if you have an outstanding amount on more than one credit card and wish to consolidate all payments. After all, it is obviously much easier to concentrate on paying off one loan rather than going through several repayments that are giving you sleepless nights. 
 
2. Home improvement 
You may think of taking a personal loan to make substantial changes to your home. But instead of taking a personal loan for the same, you may consider taking a bank loan for that specific purpose. Most lenders have home improvement loan products or offer renovation loans under which they finance 80-85% of the total cost of renovation you are undertaking. The lending amount for such loans can be up to Rs 30 lakh and interest rates may vary between 10.5% and 11%. Loans above Rs 30 lakh are available at 10.75-11.5% interest rates. 
 
3. Medical expense and business purchase 
If you need the money urgently for a medical procedure for yourself or someone in the family, you will be better off leveraging your medical insurance. Nowadays, most hospitals have a cashless facility – so you need not pay a lot of money immediately. However, you should not neglect this aspect and take adequate medical insurance cover well in advance. As for a business purchase, it is a judgement call that you need to make. But do consider taking a business loan from a bank prior to opting for a personal loan. There are several loans available for SMEs today that may offer better financing and repayment options. 
 
4. Wedding and vacation 
Undoubtedly, a wedding or a vacation can be a huge financial burden, but you cannot really call them unplanned or sudden. Taking a personal loan for the same means you will pay lower interest, compared to a credit card. But it is better to save up for such expenses well in advance rather than pay for them with a personal loan, which is an unsecured debt at the end of the day. 
 
Personal loans are definitely a lucrative option and relatively easy to procure these days, but it only makes sense to take one if there is an unavoidable and immediate need for money. Another reason for taking such a loan is when there is an opportunity to save money on interest rates. Otherwise, if it is that designer outfit, diamond ring for your wife or a fancy trip with your family that you badly want, it is best to save money for it rather than pay interest on the purchase. 
 
About the author: Rajiv Raj is the Director and Co-founder of <a href="http://www.creditvidya.com/">www.creditvidya.com</a>. 
Image: Thinkstock

Should You Really Go For A Personal Loan?

<keyword id="8009942" type="General" weightage="20" keywordseo="walmart-owned-flipkart" source="Orion">Walmart-owned Flipkart</keyword> on Friday announced that it will be distributing <keyword id="6355975" type="General" weightage="20" keywordseo="axis-bank" source="Orion">Axis Bank</keyword>'s <keyword id="35520" type="General" weightage="20" keywordseo="personal-loans" source="Orion">personal loans</keyword> on the e-commerce platform. The platform, which has 450 million customers, will be distributing loans of up to ₹5 lakh which can be repaid in up to three years, it said in a statement. The announcement comes amid reports of <keyword id="30067" type="General" weightage="20" keywordseo="rbi" source="Orion">RBI</keyword>'s concerns on the high growth in the more riskier unsecured lending segment like personal loans and credit cards. "As Indian consumers continue to evolve, an increasing aspiration exists to enhance their lifestyles," the Flipkart statement said. The facility in tie-up with the third largest private sector lender will empower customers with increased purchasing power, it added. Flipkart's senior vice president for fintech and payments group, Dheeraj Aneja said the e-commerce platform already offers financing avenues like Buy Now Pay Later (BNPL), Equated Monthly Installments (EMI), and Co-branded Credit Cards to support buyers. "Our focus is to enable credit and enhance purchasing power by granting access to liquidity precisely when needed. These financial solutions cater to the evolving demands of consumers, offering greater flexibility and convenience throughout their purchasing journeys," Aneja added. Axis Bank's president and head of digital business and transformation, Sameer Shetty, said the bank will be able to offer lending to a wider spectrum of customers through the partnership. Customers will be able to get loan approvals in 30 seconds under the partnership, the statement said.

Flipkart to distribute Axis Bank personal loans of up to ₹5 lakh

Mumbai, The Reserve Bank on Thursday tightened norms for unsecured personal loans for banks and non-banking financial companies. The revised norms wherein risk weights have been increased by 25 percentage points will not be applicable on certain consumer loans, including housing, education, and vehicle loans. Besides, the norms will not be applicable on loans secured by gold and gold jewellery. These loans will continue to attract 100 per cent risk weight. Higher risk weight implies that banks have to keep aside more money as buffer when it comes to unsecured personal loans. In simple words, a higher risk weight restricts banks' lending capacity. Recently, RBI Governor Shaktikanta Das had flagged the high growth in certain components of consumer credit and advised banks and Non-Banking Financial Companies (NBFCs) to strengthen their internal surveillance mechanisms, address the build-up of risks and institute suitable safeguards, in their own interest. The high growth seen in consumer credit and increasing dependency of NBFCs on bank borrowings were also highlighted by the governor during the interactions with MD/CEOs of major banks and large NBFCs in July and August, respectively. "On a review, it has been decided to increase the risk weights in respect of consumer credit exposure of commercial banks (outstanding as well as new), including personal loans, but excluding housing loans, education loans, vehicle loans and loans secured by gold and gold jewellery, by 25 percentage points to 125 per cent," the RBI said in a circular. The central bank has also increased the risk weights on credit receivables by 25 percentage points to 150 per cent and 125 per cent for banks and NBFCs, respectively.

RBI tightens norms on personal loans for banks, NBFCs

The <keyword id="30067" type="General" weightage="20" keywordseo="rbi" source="Orion">RBI</keyword>'s decision to tighten norms for unsecured <keyword id="35520" type="General" weightage="20" keywordseo="personal-loans" source="Orion">personal loans</keyword> is credit positive because lenders will need to allocate higher capital for such loans, thus improving their loss-absorbing buffers, <keyword id="6462970" type="General" weightage="20" keywordseo="moodys" source="Orion">Moody's</keyword> Investors Service said on Monday. The Reserve Bank last week raised risk weights on unsecured retail loans, credit cards and lending to non-banking finance companies (NBFCs) by 25 percentage points. Moody's said <keyword id="586043" type="General" weightage="20" keywordseo="unsecured-loans" source="Orion">unsecured loans</keyword> have been growing rapidly in the past few years, exposing financial institutions to a potential spike in credit costs in case of sudden economic or interest rate shocks. "The tightening of underwriting norms through higher risk-weighted assets is credit positive because lenders will need to allocate higher capitals for such loans improving their loss-absorbing buffers and may dampen their growth appetite," Moody's said in a statement. It said that over the past few years, India's unsecured lending segment has become very competitive, with banks, NBFCs and financial technology (fintech) companies, including several new entrants, aggressively growing loans in this category. In the past two years, personal loans grew around 24 per cent and credit card loans rose 28 per cent on an average compared with the overall banking sector's credit growth of around 15 per cent, Moody's said. "We expect banks would be able to absorb higher risk weights on their capital because the overall banking sector's exposure to unsecured retail credit is small at around 10 per cent of loans as of September 2023 and the sector's overall capitalization is at historically high levels with a Common Equity Tier 1 ratio of 13.9 per cent as of March 2023," Moody's said. However, the impact of the new underwriting rules could vary among individual lenders depending on their exposure to unsecured loans, it added. Last week, US-based S&amp;P Global Ratings had said that the RBI's decision to tighten norms for unsecured consumer credit is likely to hit banks' capital adequacy by 60 basis points. The move could lead to higher lending rates, lower credit growth and increase the need for capital raising among weak lenders, it added.

Higher risk weight on unsecured bank loans credit positive: Moody's

If you have a pressing need for cash, then a <keyword id="180660" type="UNKNOWN" weightage="20" keywordseo="personal-loan">personal loan</keyword> is one of the options available to you. Their easy availability is one of the biggest draws. While it is certainly a good way for <keyword id="2788759" type="UNKNOWN" weightage="20" keywordseo="handy-cash">handy cash</keyword>, they are expensive and you are best advised to look before you leap into them. 
 So, today we are going of share some smart tips about personal <keyword id="6360217" type="PERSON" weightage="20" keywordseo="Loan">loan</keyword>s, which would help make this loan product work in your favour instead of creating a problem. 
 
#Tip 1: Do a smart all inclusive comparison When you plan to take a personal loan, you would observe that <keyword id="6371181" type="UNKNOWN" weightage="20" keywordseo="interest-rates">interest rates</keyword> vary from bank to bank. The best way to get an optimal loan would be not just to compare the rate of interest or EMI, but also take into account the processing charges, documentation charges and pre-closure charges. 
 
# Tip 2: Examine other options 
Secured loans such as loan against gold or other securities usually come at a cheaper rate of interest. Hence, if you do have security that you can use, do examine that option before swinging in for a high interest personal loan. 
 
#Tip 3: Do not over-shop for the loan 
When you apply for a loan you leave a “footprint” on your credit record which lenders check before approving a loan. Too many loan applications bring down your credit score. 
 As a result lenders will see you as more of a credit risk, so your latest loan application is less likely to be approved or the rate of interest will be higher. 
 
#Tip 4: Read the loan document 
Before signing on for a personal loan, read the document properly. Ensure all the terms and conditions are filled in completely and match on those that were agreed upon while taking the loan. Very often, personal loans are marketed by agents who are more interested in meeting sales targets than giving accurate updated information to the customer. So beware! 
 
#Tip 5: Use the money productively 
Use the home personal loan for productive purposes. Personal loans are easily available, but do remember that you have to repay them and they do come with a high interest rate. It is wise to take a loan if you really need it or if it is being used to generate income that will help you repay the loan and interest. 
 
 
About the author: Rajiv Raj is the director and co-founder of<a href="http://www.creditvidya.com/">www.creditvidya.com</a>.

5 smart tips to follow before taking a personal loan

Managing liquidity is an important aspect of personal <keyword id="25455" type="ORGANIZATION" weightage="100" keywordseo="finance">finance</keyword> planning. Even individuals with good investment portfolios find it difficult to manage liquidity. A sudden requirement of cash can push one into a situation where he/she may have to sell assets, sometimes at a discount to fair value. However, if smartly used, the traditional bank fixed deposits can come to your rescue. Banks offer personal loans against bank fixed deposits and you can raise short-term money without breaking your fixed deposits. 
 Another advantage that the borrower enjoys is the low <keyword id="37018" type="UNKNOWN" weightage="100" keywordseo="interest-rate">interest rate</keyword>, compared to other <keyword id="180660" type="UNKNOWN" weightage="100" keywordseo="personal-loan">personal loan</keyword>s. Most banks offer personal loans at an interest rate ranging between 16% and 24%. But a personal loan taken against a <keyword id="74427" type="UNKNOWN" weightage="100" keywordseo="fixed-deposit">fixed deposit</keyword> ensures that you pay just 1% more than the rate of interest payable by the bank on the fixed deposit. 
 
For example, if a bank pays 9% interest on a three-year fixed deposit, the rate of interest payable on the personal loan raised against it will be 10%. This saves a lot of money that you would have paid as interest, had it been a traditional personal loan, backed by no security. 
 
Personal loan against a bank fixed deposit is easy to obtain and the process generally takes less than one day. An individual has to submit the application form duly filled, along with fixed deposit receipts and other documents, such as pledge/lien letter and overdraft agreement as notified by the bank. There is no prepayment penalty charged by the bank on the repayment of personal loans against fixed deposit. Banks do charge a small processing fee while providing this loan. But if you have a long-standing relationship with the bank, it may choose to waive half the fee. 
 
Banks generally offer 90% of the value of the fixed deposit. For instance, if you have made a fixed deposit with a bank just one month ago, the bank will be offering you a personal loan to the extent of 90% of the amount you have invested. If the fixed deposit has already run for two years, the bank will be comfortable to lend you a bit more money than the amount you invested as some interest has been accrued on it over the past two years. Simply put, the amount of loan offered against a fixed deposit will be closer to 90% of the value of the fixed deposit. If the borrower fails to service the loan, the bank has the right to foreclose the fixed deposit to recover the money it has lent. This also means that the tenure of the personal loan given against the bank’s fixed deposit cannot exceed the residual tenure of the fixed deposit. 
 
Banks also offer overdraft facility against such fixed deposits. This enables borrowers to have access to liquidity. A borrower can use funds for a short period of time and repay the money much before the due date. In this way, he pays interest only for the time he has availed the cash from the bank. 
 
For example, an individual has a fixed deposit of Rs 1 lakh. The bank’s approved credit limit is Rs 90,000 against the FD and the tenure is 15 months. If the person draws Rs 50,000 on the 1st of the month and then repays the money on 17th of the same month, he is supposed to pay the interest on Rs 50,000 availed for 17 days. 
 However, when you take a loan against a fixed deposit, it should be free from lien or encumbrance, and the deposit should not be in a minor’s name. If this deposit is made under joint names, say a husband and a wife, all holders of the deposit have to execute the loan documents. The liability to repay the loan will lie with all holders of the deposit. The deposit holders will continue to receive interest on the underlying deposit. However, they need to service the <keyword id="6357050" type="COMPANY" weightage="100" keywordseo="EMI">EMI</keyword> on the loan against the deposit. 
 
A personal loan against fixed deposit can help you in times of liquidity crunch. But you should be looking at it as a means to raise short-term money. If you go overboard with a personal loan against fixed deposit and cannot repay on time, you stand to lose your bank fixed deposit as the bank forecloses that fixed deposit to recover the money it has lent. Also, it shows in your credit report, popularly known as the CIBIL report. Such default can pull your CIBIL scores down. Therefore, when you are raising personal loan against bank fixed deposit, do it responsibly. 
 
About the author: Rajiv Raj is the Director and Co-founder of <a href="http://www.creditvidya.com">www.creditvidya.com</a>.

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