There can be certain situations and moments in life when your savings and income may not be sufficient to finance a specific task or event. The budget can be underwhelming, and you may need an external impetus to complete the purchase. Sometimes a family member or a close friend can lend you the money during an emergency, but that is not a reliable and favorable way to get monetary help. You should seek funds from a credible lender with proper paperwork and formalities so that there is no scope of any trouble and the funds can be repaid over a specified tenure without any issues. This is where personal loans play a crucial part. For any personal financial need, an individual can rely on this type of loan.
Personal loans are the type of credit that comes under the category of unsecured loans, and they are easy to apply for and get sanctioned. Compared to other secured loans in the market, a personal loan has a quick processing time and has multiple benefits with no limitations on the use of funds. They can be used for both short-term and long-term needs. Since it is an unsecured type of loan, there is no need for collateral or security to keep with the bank in exchange for money. You can get the loan amount directly by submitting some necessary documents and fulfilling the eligibility guidelines set by the lending party.
There are multiple benefits and features of Personal loan that make it an excellent attraction for borrowers looking for funds immediately.
Some of the critical characteristics and uses of personal loans include-
Quick processing time and loan disbursement:
Unlike other unsecured loans, a personal loan has a fast processing time. The funds can be transferred to the borrower within 24-32 hours after the loan application gets approved. If the applicant brings the necessary documents in one visit, the loan can be approved quickly and without additional visits. With the onset and advancement of online banking, people can apply for personal loans online directly on the lender’s website by filling the online application form and depositing the documents directly on the portal without visiting the bank branch.
This is one of the key benefits of taking a personal loan. Borrowers can take a personal loan to pay off their existing debit or credit card bills by using the funds received from the lender and repaying the debt as a lump sum. In contrast, the outstanding balance can be reimbursed as part of the monthly installments of the personal loan.
Lower interest rates than credit cards:
By taking a personal loan, the borrower can repay his credit card debt and get free from the high interest charged by the credit card provider. The personal loan can then be repaid with a lower interest rate and more flexible loan tenure.
There is no need to mortgage anything:
Unlike gold loans, there is no need to keep any asset as security with the lender. Many people do not own any liquid assets like gold and in times of emergency, taking the route of a personal loan is the best option.
To improve your credit/CIBIL score:
Although credit score is a determinant criteria when it comes to approving personal loans, it goes the other way around as well. By taking a smaller amount as a personal loan, you can fulfil your need while also improving your credit score by repaying the loan before the tenure ends. This will enhance your creditworthiness, and the lender will be impressed by your repayment capability. This will help you to get loans of higher amounts in the future with ease.
Flexibility over the loan amount:
An individual can apply for a personal loan of an amount as low as Rs. 50,000 and up to a high amount of Rs. 30-40 Lakh. If you have a respectable credit score and a stable income, then a personal loan of a high amount can be availed.
The interest rates for personal loans are usually higher than interest rates for secured loans since no collateral is associated with them. Many lenders like State Bank of India (SBI), Axis Bank, Canara Bank, etc., charge interest rates starting from 10.00%-12.50% and going up to 18%-21.50%.
If you wish to get a lower rate of interest for your loan, certain factors need to be satisfied, like-
- Improved credit score.
- Making repayments on or before time.
- Checking various offers from multiple lenders.
- Comparing the interest rates of competitors.
- Having a stable income to negotiate with the bank for a lower interest rate.
- If you have an existing relationship with the bank, then the borrower will receive a special scheme, and the processing fee can be reduced or waived off..
The main reason for a personal loan is its feature of using the loan amount for multiple purposes without any accountability.
The borrower can use the money obtained from the personal loan for any of the following motives-
- Paying for a hospital emergency: The cost of getting a health check-up is itself very high, and if you need to pay for surgery or costly tests, that can be a burden for your savings.
- Funding for your child’s higher education: A father can use this loan for any purposes related to education. With personal loans, you can even cover the costs of stay and food easily.
- To remodel your house: If you need a small amount of money to make certain additions to your house, then going for a personal loan over a home loan is a wise decision.
- To fund a foreign trip or pay for your wedding.
The repayment options for a personal loan are very flexible as well, and having a good relationship with the lender can be fruitful in the long run. You should have a proper structure in mind before applying for a personal loan, and only after doing adequate research for the various offers in the market should you choose a specific deal. The borrower should repay the loan amount before the tenure ends to maintain a healthy credit score and avoid any debt trap.
Thanks for stopping by and checking me out. I’m Pooja Dharan, a writer, blogger, and author with over 2 years of writing experience. Check out some of my published works. I’ve published so many articles in online publications; blog posts. Being a part of this field for a long time now, I written many informative articles and blogs benefiting and assisting many in this field. And this article is all about Personal loan, which clarify all your quires regarding loan.