The why, when, and who’s of a personal loan
Personal Loan is emerging to be a very popular and viable option among the people for financial backing. But it is very important to know why a personal loan should be taken, when should it be availed and from whom shall an individual take a personal loan.
Let us have a look on the why, when and who’s of a personal loan.
Why Personal Loan?
A Personal Loan is a type of unsecured loan that is offered by most of the major banks and NBFCs to the individuals based upon some criteria that varies from lender to lender. As the name suggests, the loan amount can be used for any personal need or purpose as per the requirement of the borrower. An important aspect based on which the banks approve a personal loan application is credit score and stability of income. If the credit history of an individual is without any defaults and has a decent score then it is desirable for loan approval. Moreover, the stability of income and the repayment capability of the borrower must be good to avoid any inconvenience in the future.
You can check your eligibility here: Personal Loan Eligibility
A personal loan is a viable option due to the following reasons:
There is no specific purpose bound to the loan amount sanctioned by the lender. The borrower can utilize the money as per their need for any purpose, be it personal or professional. The lending institutions do not interfere in the use of money.
As it is an unsecured loan, the borrower is not required to deposit any mortgage or collateral security to the lender. If any individual wants to avail a loan without deposition of any of their assets as a guarantee, then personal loan is the next option for them.
No guarantor or third-party is involved in the deal. The deal happens between just the two parties, lender and the borrower.
Personal Loan generally gets disbursed very fast. Within 72 hours of the loan application approval, banks disburse the loan amount to the applicants bank account.
Personal Loan Interest rates are affordable. They depend on the loan tenure and the profile of the individual as well. If any individual has an existing account in a particular bank, then they shall get cheaper rate of interest on availing a personal loan from that bank.
The repayment of the loan amount is done in the form of easy EMIs. The loan tenure generally ranges from 12 to 60 months, and the EMIs shall be paid every month throughout the tenure. EMIs make the repayment method pretty easy and simplified, instead of paying off large amounts, you can pay them in installments. Check your EMI here: Personal Loan EMI Calculator
When should we choose Personal Loan?
Personal loans are popular due to their flexibility in the utilization. Since the purpose is not specified by the lender, the borrower can use the loan money as per their needs. Let us see when can we use a personal loan:
Consolidate Debt- Credit Card Debts are a common issue that most of us face as we ignore the notices and end up in a pile of debt. The interest rates on credit cards are excessive and can turn up to be a huge amount to be paid at the end. In such case, one can avail a personal loan and pay of all the debts at once. They just have to cater the personal loan EMIs monthly after that which is very less as compared to the initial burden.
Refinancing Education- It may happen that the education loan you took may turn out to be insufficient for financing your total education expense. In such a case, one can avail a personal loan to meet the financial shortcoming of the education. But this amount should just be a small part of the finance as the interest rate is high.
Business Investment- If any individual wishes to invest in a business, setu up their own startup, or purchase any stock of their choice, then personal loan is the best option available. It does not require much documentation. But the income should be stable and the credit score must be decent.
Pay for a wedding- A Big fat wedding is a dream of many. Personal Loans come handy in such cases if you want to spend lavishly but do not have enough monetary support at the time. You can make your dream wedding come true with the help of a personal loan easily.
Uncalled Emergency- There can be an uncalled emergency at any point of your life, be it paying medical bills, paying off previous debt, funeral expenses, and many more. If you do not want your savings to be depleted, then a personal loan is a convenient option for you.
Dream vacation- Everyone plans for a holiday to their dream destination but is often cancelled due to monetary shortcomings. A personal loan can help you make this dream come true.
From Whom to take a Personal Loan?
The dilemma that most people face is choosing an institution or a lender who can provide personal loan. Almost all the major banks and NBFCs provide personal loan at an affordable rate of interest but there are certain things that an applicant should keep in mind before applying for a personal loan:
A detailed research should be done by the borrower before applying for a loan on the various interest rates offered by various institutions. You should choose the deal which suits you the best in terms of tenure, EMI, and repayment structure.
The lender must have a clean history and must be reputed in the market. You do not want to end up in a deal with a fraud company and later on regretting about it.
Read the terms and conditions carefully before agreeing for the deal. Check for the additional charges involved such as processing fees and prepayment charges to avoid any future inconvenience. There must be total transparency between the borrower and the lender.
Leading Institutions providing Personal loans:
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