A personal loan is the right funding choice to meet your financial needs. It involves hassle-free processing and takes very little approval and disbursal time. The amount can be used for any purpose you deem fit. A personal loan is not only pocket-friendly but comes with several benefits. You should do a lot of research before you get a loan to ensure it is right for you so check out Qlipso for more information on loans.
10 Benefits of Personal Loans
1. No Restriction on the End Purpose of the Funds
One of the biggest advantages of personal loans is that you can utilize the funds for any purpose you want, such as a wedding, business investment, purchase of a gadget, a holiday, medical treatment, education expenses, home renovation, etc. There is no limit as to how you put the funds to use.
2. No Security of Collateral Demanded
As personal loans are unsecured, the banks and NBFCs do not demand any collateral or security against which the money would be otherwise disbursed in the case of a secured loan. The loan is given irrespective of the security and you do not have to pledge anything such as a vehicle, house, or plot of land with the financial institution or the lender.
3. Easy Documentation
The paperwork for a personal loan is pretty easy. You will require only your proof of address, identity, income, salary slips for the last three months, income tax returns for the last three years, bank statements for the last 6 months or a year, and other essentials. If you apply for the loan online, you can simply upload a soft copy of each document asked, and get done with the loan application within minutes.
4. EMI Based Repayment to Lower Financial Burden
You can repay the loan in monthly installments (EMI). The installment will include a part each of the principal amount and the interest amount. The financial institution will not ask you to pay a large chunk of the loan together. You can choose from different repayment options and select one that is suitable for your financial position.
5. Less Expensive Than Credit Card Loans
Today, a lot many people use credit cards. Taking a loan or credit card may seem quicker and easier, but it certainly is very expensive. The interest rate on credit card loans can be up to 36%, while you can get a personal loan for as low as 10.99% and the maximum rate of interest is also lower than that of a credit card loan.
6. Simple and Fast Processing
The loan is processed in less than two days sometimes. If the bank/NFBC has your duly filled application form with all the necessary documents, then a lending decision is taken almost immediately. Your credit score and credit history would be however looked into during the review of your loan application. Apart from taking applications at bank branches, some banks offer you the facility of applying online on the official website, via ATM, net banking, or an online third-party website.
7. Quick Disbursal within 24-48 Hours
Personal loans come with a fast turnaround time. The loan can be approved and disbursed in as little as a day or two. Existing customers of a bank stand a better chance of receiving the funds faster. If you apply on a weekend or a bank holiday, the application will be processed the next working day. The disbursal will depend on loan application approval.
8. Flexible Tenure
You have up to 5 years to repay the loan. Tenure is between 1 year and 5 years and depending on the loan amount and interest charged, a suitable tenure will be decided. Make sure you discuss with the lender possible tenure options so an ideal repayment schedule is decided.
9. Top Up Option Available
You can apply for a top-up loan on an existing personal loan. For instance, you have taken a loan of Rs. 3 lakhs but need an additional Rs. 1 lakh. In such a scenario you can apply for an extension of Rs. 1 lakh on the existing loan, possibly at the same rate of interest. Thus, you do not have to take out a new loan and go through the lengthy application process.
10. Different Types of Personal Loans
A personal loan is not just one standard scheme there are several types of personal loans. Some schemes are specialized for professionals such as CAs, doctors, businesspeople, etc. Women and farmers may benefit from schemes that charge lower rates than usual.
Things to Consider When Applying for a Personal Loan
The benefits of a personal loan are discussed above, but there are certain things to keep in mind before you apply for the loan.
- Keep the necessary documents ready for submission with the filled application form.
- Check your eligibility with a particular financial institution before applying.
- You can calculate the EMI on the loan after understanding the loan amount, tenure, and interest rate. Take the help of an online loan EMI calculator to get an accurate estimate.
- Apply for the loan if you have a high credit score of 700+. A credit score below this benchmark is not sufficient to get an unsecured loan. However, some lenders may be prepared to lend funds to those with lower credit scores but at a higher rate of interest.
- The interest rate of a personal loan is not the Solo factor in judging the feasibility of the scheme. You must also consider the offered loan amount, tenure, terms and conditions, processing fee, prepayment option, and penalty charges before taking a call.
Now that you understand the advantages of a personal loan, you can apply for one and make an informed decision. Do not forget to compare top banks and NBFCs before selecting the best offer. Make sure that the offer you select comfortably meets your requirements.
