Have you ever had an emergency where you needed money, which became arduous? In such a situation, what you needed was a personal loan. It is an easy to avail, hassle-free process with various benefits. A personal loan is an incredible way of financing your emergency needs. A personal loan covers you from an unforeseen medical emergency or a vacation. In this article, we will discuss with you all about personal loans and their benefits. So, if you are considering this option for your needs, then keep reading.
Page Contents
What is a Personal Loan?
Source: money.howstuffworks.com
A personal loan is a type of loan that can be used for a variety of purposes, from consolidating debt to making home improvements. It usually requires collateral in the form of property or other assets, and the interest rate and repayment terms have to be agreed upon between the borrower and lender. Personal loans are unsecured, meaning they do not require any collateral, which makes them a great option if you don’t have much savings or equity in your home.
The amount you can borrow will depend on your credit score and income, but most lenders offer amounts up to Rs. 1 lakh. Personal loans also come with fixed interest rates, so you know exactly how much your loan will cost each month. The repayment term is usually shorter than other types of loan, meaning you can pay off the debt quickly if disciplined. However, this also means that personal loans tend to have higher interest rates than other types of loans.
Let’s move on and look at the benefits. You can also check this website to know more.
The Benefits of Personal Loan
-
No collateral
Source: marketbusinessnews.com
The best advantage of a personal loan is that no collateral is required. In other words, it is an unsecured loan and, therefore, easy to avail and get approved. However, you must know that since it is an unsecured loan, the interest rate is usually a little higher, with greater risks involved. This makes personal loans perfect for those who don’t own property or have limited savings.
-
Attractive interest rate
Personal loans typically come with attractive interest rates, making them a great option for those who want to save money in the long run. The fact that personal loan lenders do not require collateral also makes them an ideal choice for those who don’t have any assets to put up as security. Therefore, it is often the case that personal loan interest rates are lower than those for other types of loans.
-
No limitation on usage
Source: omozing.com
Unlike other loans, which are mainly for a purpose, there is no limitation on the end use of such loans. A personal loan can be availed for any purpose; whenever you are in urgent need of funds, a personal loan is indeed the easiest way to your rescue to get money. Thus, it is ideal for any sort of financial need that you may have. Personal loans can be utilized to meet immediate expenses like vacations, home renovation, medical emergency, debt consolidation and more.
-
Quick disbursal time
Disbursal time is the amount of time it takes for you to get your loan after applying for it. Personal loans are known for their quick disbursal process and are often approved within a day or two. This means that you can get money quickly, which makes these types of loans useful during financial emergencies. Along with this, the process of getting a personal loan has become easier due to advancements in technology. The loan application process can now be completed online, allowing you to save time and effort.
-
Choosing flexibility tenure
Source: livemint.com
The tenure of a personal loan can go up to 7 years, and thus there is flexibility in choosing a tenure that best suits your needs. A longer-term means that the EMI will be lower and vice versa. Once you’ve calculated the EMI, you can decide on the tenure of the loan. You can also choose the tenure that goes best with your income and financial goals.
Additionally, you can opt for pre-closure of a loan as per your convenience and save on interest payments. Some lenders may even provide additional benefits such as waiver of processing fees or a top-up loan post pre-payment in certain cases.
-
Fixed interest rates
Personal loans are generally available at a fixed interest rate. This means that the monthly installment remains fixed for the entire duration/tenure of the loan. Therefore, you do not need to worry about the charges on the rate of interest.
-
Credit score building
Source: cnbc.com
If your credit score is low, with a personal loan, you can improve your credit score by repaying your loan on time. As you go on to pay your EMIs timely on a pre-decided rate of interest, your credit score will improve and increase. However, it is imperative that you avail a loan that is within your repayment capacity. This is because missing EMIs can be detrimental to credit scores.
-
Hassle-free documentation
Personal loans are relatively easy to obtain and do not require a lengthy documentation process. The documents required for most personal loan applications include identity proof, address proof, income proof and age proof. Depending on your credit score, lenders may also ask you to provide further documents such as bank statements or recent payslips. As compared to other types of loans, the paperwork associated with a personal loan is minimal.
Conclusion
A personal loan can provide you with financial relief when you need it. It offers more flexible payment options and higher limits than most other types of loans, as well as competitive interest rates. Applying for a personal loan is easy and straightforward, making it an attractive option for anyone looking to cover unexpected expenses or consolidate debt. With the right strategy, these loans can be used to build credit and help you achieve your financial goals. Ultimately, taking out a personal loan is a great way to manage your finances responsibly while staying on top of your financial obligations.
