Personal loans can help you solve a number of financial
problems. They can help in debt consolidation. They can be used
for home improvement. They can also be used to improve credit
score. There is a flip side to the story as well. A number of
lenders impose penalties on borrowers, not because of a default
in the repayment of a personal loan, but because of its early
repayment. That's right. Repayment of a personal loan before the
expiry of its loan period makes the borrower to pay early
redemption penalty.
The worst part is that, most of the people in the UK are not
aware of the fact that lenders impose penalties on the borrowers
who repay their personal loans early. Since the interest
rates are at all time low levels, many borrowers manage to repay
their loans before the loan tenure ends. Moreover, lenders offer
low rate second loans, i.e. if a borrower has already taken out
a loan, he is offered a new loan at a lower rate of interest to
replace the existing loan. What borrowers do not know is that
they will have to pay early redemption penalty. This takes away
the advantage of a low interest rate.
In the early stages of loan tenure, a major portion of monthly
installments comprise of interest, which results in a large
amount of unpaid loan. The early redemption penalty is charged
on this unpaid loan amount. This results in the imposition of a
heavy penalty.
So far, we have discussed about the problem that may arise as a
result of early loan repayment. Let us now discuss about the
non-repayment of a personal loan. If you default in the
repayment of a personal loan, you will acquire a bad credit
score. A bad credit score will hamper your chances of getting a
fresh loan in the future. A more serious problem arises when the
loan is secured against a property. In this case, your property
may be repossessed by the lender. To avoid this, lenders offer
insurance policies and payment protection schemes. Such policies
and schemes cover your loan repayment in the event of death,
disability, sickness or involuntary job loss.
About the author:
About the Author: The author is a business writer
specializing in finance and credit products and has written
authoritative articles on the finance industry. He has done his
masters in Business Administration and is currently assisting
Easy Loans Shop as a Finance Specialist. For More
Information Please Visit us atwww.easy-loans-shop.co.u
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