Photographs: Rediff Archives Salil Dhawan, Investment-mantra.in
Here are ten questions to test your knowledge of personal loans. Take this quiz to understand why individuals should take special care while opting for such loans.
1. Personal loans should be availed ideally only when...
a. You need lump-sum money urgently due to some genuine emergency
b. You want to indulge in luxuries such as buying an expensive car
c. You want to trade in the stock market
The correct answer is a. Personal loans are high interest rate sloan and should generally be opted for in times of acute emergencies.
Courtesy: Investment-mantra.in
QUIZ: The difference between personal and credit card loans
Photographs: Rediff Archives
2. Is the repayment track record of your previous loans considered while calculating eligibility for personal loans?
a. Repayment history is not taken into consideration at all
b. Repayment history of previous personal loans only are taken into consideration
c. Repayment history of all your previous loans is taken into consideration
The correct answer is c. A good repayment track record could fetch you a higher loan amount at lower interest rates because it is a standing proof for your money management capabilities. In case of a bad repayment record you will be charged high interest rates and you will find it difficult to obtain a loan.
QUIZ: The difference between personal and credit card loans
Photographs: Rediff Archives
3. Are there any fees and charges payable for a personal loan?
a. Yes
b. No
c. Depends on the lending bank
The correct answer is a. There is usually a fee of about 3 per cent of the loan amount charged when you apply for a personal loan. However, this varies from bank to bank and is also based on the credit profile of the borrower.
QUIZ: The difference between personal and credit card loans
Photographs: Rediff Archives
4. Which of these is an unsecured loan?
a. Home loan
b. Personal loan
c. Car loan
The correct answer is b. An unsecured loan is called a personal loan. This implies that you don't have to give any security, as with a car or home loan where the underlying asset is mortgaged with the bank.
QUIZ: The difference between personal and credit card loans
Photographs: Rediff Archives
5. Is personal loan a...
a. Short tenure loan
b. Long tenure loan
c. Mid tenure loan
The correct answer is a. Personal loans generally come with shorter tenure. Most of the banks provide you loans for three years (36 months) to maximum five years (60 months).
QUIZ: The difference between personal and credit card loans
Photographs: Rediff Archives
6. Personal loans can be applied jointly. Is it true?
a. Yes
b. No
c. Only in certain cases
The correct answer is a. Yes. Personal loans can be applied jointly with a co-applicant (be your spouse or your parents). This helps you to increase your income eligibility and you can also avail of a larger loan amount, if you want to, as your co-applicant's income also gets added to your income and that total is taken into consideration for calculating the loan amount you will be eligible for.
QUIZ: The difference between personal and credit card loans
Photographs: Rediff Archives
7. In what context do personal loans differ from credit card loans?
a. Amount and interest rate
b. Repayment and prepayment
c. All of above
The correct answer is c. Personal loans and credit card differ in quite a few ways:
Amount: For personal loans the borrower takes a fixed amount of loan. However, in a credit card the lender sanctions a limit up to which a borrower can take a loan. The amount is not fixed. S/he can choose to take a loan lesser then the sanctioned limit as well.
Time taken by the lender to sanction loan: About 7 days of sanction time is required for a personal loan, while for a credit card it is immediate if the borrower already has a credit card.
Repayment: For personal loans, the repayment needs to be necessarily done through EMIs. For credit card loans, the borrower has the option of choosing an EMI or paying as per her/his own convenience without a repayment schedule.
Prepayment: You can repay a credit card debt at any given point of time -- there is no fixed tenure or EMI schedule attached to it. You need to pay prepayment charges in a personal loan in case you want to make an advance repayment.
Interest rate: Usually, credit card debt comes at a much higher cost than a personal loan. You should use credit card debt as a last resort when you are raising debt.
Amount: For personal loans the borrower takes a fixed amount of loan. However, in a credit card the lender sanctions a limit up to which a borrower can take a loan. The amount is not fixed. S/he can choose to take a loan lesser then the sanctioned limit as well.
Time taken by the lender to sanction loan: About 7 days of sanction time is required for a personal loan, while for a credit card it is immediate if the borrower already has a credit card.
Repayment: For personal loans, the repayment needs to be necessarily done through EMIs. For credit card loans, the borrower has the option of choosing an EMI or paying as per her/his own convenience without a repayment schedule.
Prepayment: You can repay a credit card debt at any given point of time -- there is no fixed tenure or EMI schedule attached to it. You need to pay prepayment charges in a personal loan in case you want to make an advance repayment.
Interest rate: Usually, credit card debt comes at a much higher cost than a personal loan. You should use credit card debt as a last resort when you are raising debt.
QUIZ: The difference between personal and credit card loans
Photographs: Rediff Archives
8. Which bank offers 'Jaldi Loan' scheme?
a. Kotak Mahindra Bank
b. State Bank Of India
c. HDFC Bank
The correct answer is a. Jaldi Loans are easy and fast personal loans offered to you by Kotak Mahindra Bank. You can use it for anything at all -- to renovate your home, your child's education or for a celebration in the family. These loans range from Rs 50,000 to Rs 50 lakh and are flexibly repayable in 12 to 60 months for salaried individuals and professionals / self-employed businessmen from 12 to 36 months.
QUIZ: The difference between personal and credit card loans
Photographs: Rediff Archives
9. What factors determine personal loan interest rates?
a. Your income, your company status and individual's negotiating ability
b. Credit and payment history and relationship with the bank you intend to take loan from
c. All of above
The correct answer is c. Personal loan rates in India depend on various criteria, one being the income level. Different banks have different classifications based on which interest rates are calculated.
QUIZ: The difference between personal and credit card loans
Photographs: Rediff Archives
10. What is the average personal loan interest rate prevalent currently in the market?
a. Abound 10 per cent
b. Around 5 per cent
c. Around 15 per cent
The correct answer is c. Most of the leading private sector banks currently lend personal loans close to interest rate of close to 15 per cent
Summary:
Personal loans are expensive. Make sure you take such loans only when you are in dire need of money and can't do away without availing it. Once taken, make sure you repay it without any default to keep you clear credit history in addition to getting rid of this high interest loan.
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