Personal loans are the go-to option for meeting financial goals and requirements. They are unsecured loans and do not require any collateral. You can use them for various purposes like organizing a grand wedding, taking a trip to an exotic location, meeting unforeseen medical emergencies, or renovating your home to upgrade the look.
One of the foremost Personal Loan benefits is its hassle-free application process. Besides, a Personal Loan is convenient since you can repay it over a period in pocket-friendly installments.
How Do Personal Loans Work?
Personal loans are similar to most other loans. You can reach out to a bank or lending institution to apply for the same. Next, submit all the necessary documents listed by the lender. The bank verifies the information you provide to ensure it is accurate and true. It also checks your creditworthiness before making a loan offer. If you accept the offer, the lender transfers the loan amount to your bank account, and you can use it as per your requirement.
The borrower needs to repay the loan amount in equated monthly installments (EMIs). The installment amount is calculated based on the loan amount, interest rate, and loan tenure.
5 Reasons To Get A Personal Loan
You must consider your financial situation before taking on a loan. A Personal Loan helps finance a large purchase that you cannot afford upfront. These include:
1. Home renovation: Personal loans are the
best way to pay for upgrading your home or completing necessary
repairs.
2. Emergency expenses: A Personal
Loan is a low-cost option to meet an emergency, such as the funeral
of a loved one or sudden medical bills.
3. Moving
costs: If you don’t have the cash for a local or a
long-distance move, you need to take a Personal Loan to pay for the
moving expenses.
4. Vacation expenses: The
cost of an average vacation may not require taking a Personal Loan.
But, what if you want to go on a luxury cruise? A Personal Loan
comes in handy to fulfil such vacation dreams.
5.
Wedding costs: A Personal
Loan allows prospective couples to finance big-ticket items like
the wedding coordinator, venue, bride’s and groom’s dress, etc.
Also Read :- How Personal Loan Will Help To Plan Your Summer Vacation
Top 9 Personal Loan Benefits
1. Hassle-free documentation
One of
the most significant Personal Loan benefits is minimal
documentation. If you apply online, the documentation is entirely
digital. You can upload the required documents along with your
application form. The process is entirely paperless. Some lenders
also provide a service for doorstep document collection.
For
the process, banks and financial institutions request you to
submit proof of age, address, bank account details, salary slips,
income tax returns, credit history, etc.
2. Quick
disbursal
The disbursal of a home loan takes around
3 to 4 weeks. On the other hand, a Personal Loan requires only 24
hours to 72 hours. Thus, they are the best financial product for
meeting urgent cash or payment requirements. However, you must meet
the eligibility criteria and have a good credit score to get your
loan disbursed quickly.
3. No collateral
required
Personal loans are unsecured loans. Thus,
you do not need to provide any collateral as security for default
or non-payment of dues at your end. This feature of Personal
Loans makes them accessible to everyone with a regular source of
income and a good credit history.
4. Help with
debt consolidation
Another vital Personal Loan
benefit is its ability to clear debts. If you have debts like
secured loans or high-interest credit cards, you can use the
Personal Loan to clear the dues and eliminate liabilities from
your portfolio. The interest rates on
Personal Loans are lower than on credit cards. So, you can use
the low-interest financial product to pay off high-interest debt.
5. Versatility
When it comes to using a
loan, there is no better bet than Personal Loans. Banks and lenders
do not impose any limitations or restrictions on the end-use. That
is one of the most beneficial facets of a Personal Loan. You can use
the borrowed money to plan your dream vacation, repay other debts,
purchase luxury gadgets and accessories, or host a grand wedding.
Personal loans also help to meet medical expenses in times of
emergency.
6. Build credit score
Affordable Personal Loans are a great way to build your credit
score, especially if you are new to credit or have a low credit score.
You can avail of them at attractive interest rates and repay them over
a flexible loan tenure. As you pay your EMIs and interest on time,
your credit score keeps improving. However, remember to avail of a
loan within your repayment ability. If the loan EMI is unpayable and
you miss any EMIs, it can negatively impact your credit score.
7. Flexible tenure
One of the Personal
Loan benefits attracting borrowers is a flexible repayment schedule.
The tenure starts from 12 months and can go up to 7 years.
Therefore, you can choose a tenure suitable to your finances and
needs. A longer tenure means lower EMI. So, choose a tenure that
lets you optimize your monthly outgo as per your needs.
8. Attractive rates of interest
Personal
loans are available at competitive interest rates. As a result, you
can enjoy affordable EMIs. Generally, the rate of interest is fixed.
So, your EMIs are also fixed for the entire loan term, and you have
no worries about changing interest rates.
9. Tax
benefits
Depending on the utilization of funds, you
can claim tax-related exemptions on your Personal Loan. For
instance, if you use the loan for home
renovation, construction, or making a down payment for a house,
you are eligible for tax deductions of up to Rs. 2 lakh under Section
24B for the interest paid during a financial year. However, different
use cases are subject to additional terms and conditions. Submit the
required documentation to understand how you can enjoy tax
benefits on your Personal Loan.
CIBIL Score Required For A Personal Loan
Many borrowers are worried about the CIBIL score they require for availing of a Personal Loan. Credit Bureaus, such as CIBIL, assign every individual a credit score in the form of a number between 300 and 900. If you have a high CIBIL score, your chances of loan approval are high. This is regardless of the type of loan you are applying for. Individuals with a high credit score can get higher loan amounts or lower interest rates.
A credit score below 750 can lessen the chances of getting a Personal Loan. It can also lead to a lower loan amount or a higher interest rate. A credit score below 600 requires evaluation. You must check the reasons and attempt to increase the same. Some of the reasons leading to a low credit score include delay in payments of past EMIs, missing EMIs, excessive purchases made on credit, or several applications sent to banks for credit cards or loans.
Summing Up
Personal loans are in high demand these days. In this blog, we’ve covered nine Personal Loan benefits, but plenty more contribute to its popularity. Before you opt for a Personal Loan, ensure that the amount being availed matches your repayment ability. Also, read all the terms and conditions carefully. Many lenders, fintech companies, and banks offer Personal Loans. Compare the interest rates and choose the option most suitable for you.
FAQs
- How can I increase my CIBIL score with a Personal Loan?
To increase your CIBIL score with a Personal Loan, make timely payments and maintain a low credit utilization ratio by using only a small portion of your available credit. These factors contribute to a positive credit history and can help improve your credit score over time.
- Is it better to close a Personal Loan?
Closing a Personal Loan can have a positive impact on your credit score as it indicates successful completion of the loan. But before you decide to close a Personal Loan, make sure you consider factors such as prepayment penalties, impact on credit mix, and overall financial goals.
