benefits of personal loan

What Are the Best Reasons to Apply for a Personal Loan?

Most people think Personal Loans must be avoided as they are a form of debt. However, that is not always the case. A Personal Loan can come to your aid in many situations in life. People have realized the advantages of Personal Loans. Hence, the number of Personal Loan applications has increased. If you wonder why one should apply for a Personal Loan, this article will give you the best reasons for a Personal Loan. 

What is a Personal Loan?

A Personal Loan is a loan that you can avail of from banks or Non-Banking Financial Institutions (NBFCs) without any collateral or security and with minimal documentation. It makes sense to get a Personal Loan when you have certain financial needs.  You can use these loans to fulfill any need or desire without any restriction. You will have to repay Personal Loans just like any other loan; at an interest rate you agreed to pay to the bank or NBFC. The loan tenure can be a few months to a few years and can be paid in equated monthly installments (EMIs). 

What is a Personal Loan used for?  

When you apply for a Home Loan, the borrowed money has to be used to buy a home only. The same applies to education loans. But with a Personal Loan, that is not the case. A Personal Loan isn’t tied to a particular use. You can utilize the funds towards any end-on a vacation, for a medical emergency, a wedding, to renovate your home, or for any other reason, you deem fit.  

How do you qualify for a Personal Loan?

You can apply for a Personal Loan with any bank or NBFC - look for options that give you access to the funds at the lowest interest rates. Once your loan application is accepted, the funds are credited to your bank account. 

You will have to start paying the EMIs from the following month. Most Personal Loans come with fixed interest rates. This means that you will have a fixed EMI payment every month.  You can get Personal Loans without putting up any collateral.  

Best reasons to apply for a Personal Loan

Now that you know about Personal Loans and how they work, let’s understand the reasons you might need them. One thing you must understand is that Personal Loans once sanctioned, will lead to an influx of funds in your account. However, it also needs to be repaid. Thus, it’s always better to have a repayment plan in place before you avail of a loan. If you don’t have a budget to pay the monthly EMIs, it’s better to delay your decision till you’re in a position to at least pay the monthly EMIs on time.  

Reasons to apply for a Personal Loan- 

Debt consolidation

Debt consolidation is one of the best reasons for a Personal Loan. You may have taken two to three loans and managing them may become difficult. When you apply for a Personal Loan to pay off multiple other loans (including credit cards), you combine everything into one payment. It makes the debt repayment process easy for you. If that includes credit card loans as well, you get an option to pay your loans at a lower interest rate. It helps you reduce the amount of interest you need to pay. 

For medical emergency

If you need money for a medical emergency, one of the best options is to get a Personal Loan. Not all medical emergencies are covered by insurance. You can use the loan amount to pay for all medical expenses - from hospitalization to medical bills without any hassle. 

Home renovations

If you want to renovate your house, you can opt for Personal Loans. You can improve your home's value. It is essential to do it every few years. Even if you plan to sell your home, you can use a Personal Loan to renovate it and increase its value. Once you sell your home, you can pay off your Personal Loan in full using the additional amount received. 

Large purchases  

Most often, when we need to make a large purchase, we tend to do it on our credit cards. It is a good option only if you can pay your credit card bill in full. If not, there is a high-interest rate you will have to pay every month. This can be one of the best reasons for a Personal Loan. You can use Personal Loans to make a large purchase - a TV or a washing machine and pay it off using the EMI option at a lower rate. 

Wedding expenses

A wedding is an expensive affair, and if you don't have the cash to make all the necessary purchases, a Personal Loan can help you finance your dream wedding. You can use the Personal Loan to take care of big-ticket items like the venue, wedding dress, photography, etc. You may also opt for a Personal Loan for wedding expenses if you are uncomfortable depleting your savings account with all the wedding expenses.

Vacation costs

If you have been dreaming of vacation and are saving hard for it, you can take your desired vacation today by getting a Personal Loan and use the savings to pay off your loan as EMI.  

When not to use a Personal Loan?

There are situations where Personal Loans may not be the best option and should be avoided. Below are some such situations: 

  • You cannot afford to pay the EMI: Before taking a Personal Loan, check if you can pay the EMI comfortably for the entire tenure. If not, taking a Personal Loan may not be a good idea. 
  • The expense is not necessary: Taking a Personal Loan is a personal choice. However, if you take a Personal Loan for something you don't need, you put your finances at risk. It’s not a good idea to finance frivolous needs with a loan. 
  • You can get a customized loan for your specific need: If you plan to buy a second-hand car, then a Personal Loan may not be the best option for such situations, as a Pre-Owned Car Loan is more suited to fulfilling your requirements. Poonawalla Fincorp offers Used Car Loans intended for people purchasing a second-hand car.  

Conclusion

A Personal Loan can be used for a multitude of purposes. It has the power to positively impact and upgrade your life provided you make the right use of the loan. Additionally, one needs to understand that it’s your financial responsibility to ensure that the loan is paid off in a timely manner. Poonawalla Fincorp offers a customized suite of quick, transparent, and hassle-free loan offerings to customers. You can visit our website to find offerings suited to your needs.

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