People may need a loan for various purposes, be it for home improvement, wedding, holidays, or medical emergency. Although there are several types of loans you may avail of to fund your big-ticket expenses, personal loan apply is the most favoured among borrowers.
How Personal Loans Work
After you’re approved for an instant personal loan, the funds you receive will be deposited into your bank account in a lump sum. The transfer may take as little as twenty four (24) hours or as long as a few weeks, depending on the lender. You’ll have to start making monthly payments as soon as the loan is disbursed.
Most of the personal loans have fixed interest rates, which means that your payments will stay the same every month. Personal loans are typically unsecured loan, meaning there’s no collateral behind the loan. If you don’t qualify for an unsecured personal loan, you may have to use collateral to be approved, like a savings account or certificate of deposit. You can also ask a friend or family member to co-sign on your personal loan to help you get approved.
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Whatever your loan purpose, you’ll likely have several options available to you. Financing is available through credit cards, home equity loans and more. However, in many cases, personal loans are an ideal solution for consumers. Personal loans are often less expensive than credit cards, and funding is faster than with home equity loans or HELOCs.
Additionally, because there’s usually no collateral tied, it’s a less risky form of financing than secured loans like home equity products — meaning your home, vehicle or savings account is not immediately at risk if you default.
Apart from being convenient, affordable, and fast, there are several other reasons why you must choose a PL over another type of debt. Some of them have been discussed here:
No Collateral Requirement
When you are in a financial crunch situation, you would not want to add to the stress by risking your existing assets. Personal loans are collateral-free, which means you can avail them without providing any collateral, security, or guarantor. Therefore, you can keep your assets safe by availing of an unsecured personal loan and still have access to the needed funds. Lenders determine your personal loan eligibility depending on your credit score and past repayment habits.
Personal loans are easy, convenient, and collateral-free. Still, some people hesitate in availing them due to fear of repayment default. However, you don’t need to worry about personal loan repayment since most loans come with flexible repayment terms. This means that the lenders offer you a wide window of time to choose your repayment tenure.
The longer tenure you choose, the smaller will be the EMIs, thereby making repayment easier than a fixed term. However, the personal loan interest outgo may increase with a longer tenure. Shorter loan tenure may keep the EMIs bigger but save a lot on the interest outgo. Therefore, you must use a personal loan EMI calculator to find the loan tenure with EMIs you can easily afford.
No End-Use Restrictions
One of the best things about personal loan apply is that these loans do not come with any end-use restrictions. The approved loan amount is your money, and you can use it the way you want. For instance, if you take a personal loan for a holiday, you can fund your travel to any domestic or international vacation. You can cover all the holiday-related expenses using your loan amount, including flight tickets, hotel accommodation, sight-seeing, adventure activities, visa, and even shopping. The lender will not interrupt as long as you pay your EMIs on time.
An Opportunity to Improve Credit Score
The credit score is of extreme importance in the financial world. Whenever you apply for a loan, the lenders check your credit score to determine your creditworthiness. Ranging from 300 to 900, the closer you are to 900, the higher will be your loan eligibility. A high credit score may also help you grab a loan at a lower interest rate.
Since a personal loan is a collateral-free loan that is easily available from multiple lenders, you can avail one to fund your big-ticket expenses and repay its EMIs on time to improve your credit score. A personal loan is an unsecured medium-term loan that can diversify your credit portfolio and further increase your credit score. It also saves you from using your credit card, thereby keeping your credit utilisation ratio low and benefitting your credit score. So, taking a personal loan is ideal for improving your credit score and getting ready for more credit access in the future.
Easy Eligibility and Minimal Documentation
Other loan types have extensive eligibility conditions and documentation requirements that are not easy to fulfil by most people. When it comes to personal loans, many NBFCs compete against each other to make them easily available to the masses. Most lenders have easy eligibility conditions that anyone can fulfil with ease. If you are an Indian citizen within an age bracket and have a regular income with stable employment, you are eligible to apply for a personal loan. Self-employed professionals can also apply for a personal loan, provided they can prove regular income.
As far as documentation requirements are concerned, most lenders only require essential documents to verify your identity, address, and income. You don’t need to submit hard copies of your documents. You can simply scan and upload them through the lender’s website or app, and they can be verified within minutes. Therefore, easy eligibility and minimal documentation requirements are excellent reasons personal loans are better than other debt types.
Apart from these, there are several other reasons to apply for a personal loan. These include easy availability, competitive personal loan interest rates, ample loan amount, fast loan processing, and many others.
If you need funds in urgency, a personal loan can come to your rescue and make them available to you within a few hours. However, be vigilant while choosing your lender. There are several factors to consider, including the interest rates, loan amount, the application process, customer service, fees and charges, etc. Make an informed choice and easily access the required funds with a personal loan.