Personal Loans are the quick monetary solution for your financial needs. The Personal Loans are the instant helping hands to the people who are in deep financial crunch situations. The best part of the personal loan is it being unsecured in nature. Thus implying, that no collateral is needed to be pledged in order to avail a Personal Loan! So should we go for the Personal Loans?
Should you avail a Personal Loan?
The answer to this query is not that simple! All depends on how needy you are and how much loan is needed and at what cost! For the people who must be seeking a clear cut resolution to this ask, must determine all the features of a personal loan, its benefits and its shortcomings! Thus, offering you some ideas, below is the list of all needed benefits and all down points of personal loans, which will help you in evaluating your decision of whether you should go for the personal loan or not?
Benefits of a Personal Loan
Below listed are the benefits of a personal loan.
It is unsecured in nature
A Personal loan is an unsecured loan in nature, thus implying that you don’t need to pledge any collateral to avail it. Thus, a person who doesn’t own a house or any asset to put on collateral need not worry. The Personal Loan doesn’t need these. Since, the Personal Loan is an Unsecured Loan; it has an edge over various other loan types. You don’t risk losing any sort of property or valuable asset, in case you don’t succeed in paying back the amount. Thus, offering the borrower with the lesser risk, the Personal Loans are the most preferred loan types, especially in case, when a person doesn’t own any asset, or shares etc!
With the easy Documentation steps, the entire process for the Personal Loan is really quick. With the minimum documents required in the form of identity proof etc, there’s nothing as required, which takes days for you to arrange.
Since, the Personal Loan is an unsecured loan and involves easy documentation; the Personal Loan is a quick disbursal loan type. While, all other loan types, requires days of hard efforts and many visits to the bank branch, the Personal Loans are the quickest approval loans. These, most often come as a pre-approved and thus within minutes, you can get the loan amount in your bank account (subject to further approval). Even, if the Loan is not pre approved, you can quite easily get the approval on your Loan Application within 24 to 48 hours. As soon as you get the approval, you will be funded with the loan amount in your account.
Available for all purposes
Nobody is going to ask you, what’s the purpose you are applying personal loan for? Isn’t that great? Not at all mandatory for an applicant to mention any reason within the application form, on what you are going to spend the borrowed amount at, it’s a complete privacy and offers a complete freedom on what things, you want your money to spend on. Here are some reasons, at which people are seen at spending their personal loan most often:
Buying a Car
For a beautiful vacation abroad
For covering medical expenses and bills
For pet treatment
For buying furniture
For buying other household items
For Marriage purpose
For educational purpose
For business expansion
For home renovation and interior decoration
For Debt Consolidation
So, enjoy your loan amount and do whatever, you want to do with the money! But still, what we advice you is to spend the money wisely. The money you borrowed is the money, you need to pay back and this money also calls for the interest. Thus, in a way you will be burdened with the payback along with the interest incurred at the Personal Loan. Spending over something, which is really not required at all, is never recommended, especially when you borrow money. Instead, opt to avail Personal Loan only in the conditions when all doors are closed and you are really stuck at and there’s no helping hand.
While, home loans are available for a longer duration of up to 25 years, the Personal loans are available up to 5 years (in some cases, it’s available for 7 years). However, considering the loan tenure, it’s still a very good loan tenure and a person can easily take a personal loan for the needs and can repay back with EMIs. With the flexibility over the choice of the loan tenure from a minimum of 1 year to 5 years, the Borrowers are offered a good supporting hand to cover their urgent needs of money.
Offers and Schemes
With the Personal Loans, there come quite a number of offers and schemes. Several Banks and lending agencies offer exciting offers and discount schemes over the Personal Loans and thus try to lure into the customers. The offers may come in the form of the relaxation in the interest rates or exemption of last EMI etc, there is no dearth of options available to the customers, when it comes to the Personal Loans.
Boosting your Credit Score
In case, you have been suffering from lower CIBIL Score and want to further improve your Credibility and your Credit score, you can opt for the small Personal Loans and repay all EMIs on time to gather some reward points for your report card. Thus, if you are planning for a bigger loan in the upcoming future, this way you can take a solid step in the preparation for the better and bigger game.
Also, those who are suffering from absence of credit history can also establish their credit history by opting for the Personal Loan for a shorter duration. However, it is advised that you should utilize the money in a better way or should plan in such a way that the interest you incur at your personal loan gets adjusted with other investment plan from the borrowed money.
Shortcomings of Personal Loans
All important aspects and salient features of a Personal Loans have been discussed above. But, one must remember that with every loan, there are some USPs, but they also accompany some downsides of their own. The same is the case with the Personal Loans. Offering several advantages to the people, who are searching for the Financial Helping hand, the Personal Loans comes with some limitations of their own. Here are they:
High Interest Rates
One of the important downsides of a Personal Loan is the rate of Interest. The rates of Interest as charged on the Personal Loans are very high when compared to the Home Loans, or any other such Loans. While, these Personal Loans still is cheaper than other loan types like Credit Cards etc, still the rates of interest being levied on personal Loans are much higher than various other loan types. The Reason – It being unsecured in nature. While, home Loans etc are the secured in nature, the personal loans are the unsecured in nature and thus cover that risk, the rates of interest being laid down on Personal Loans is high comparatively.
Since, the Personal Loans are unsecured loans, the banks and other lending agencies take an extra care in approving it. Most of the highly reputed banks, take a deeper insight into the credit history of a person before approving for the Personal Loans. Thus, a person having no credit history or the one having a low credit score, have the chances that the personal loans approval might get affected. The banks always try to remain sure, that the loan amount should not go default. Thus, it has been that the person having the CIBIL Score of less than 600 faces issue, in getting approval for the Personal Loan. A Good Credibility is needed to get an approval for the Personal Loans.
A person needs to have a bank account if he/she is looking to avail a personal loan. However, the person is not required to have it in the same bank, where you applied for the personal loan at!
Short Loan Tenure
Generally the loan tenure of the Personal loan is up to 5 years, which we find it to be okay. However, some people may find it little shorter on their part. However, this is very limited to a small section of the people.
Since, the loan tenure is shorter, the EMIs will be higher. Even, if you take a small loan amount of 2 lacs for a duration of 5 years at an interest rate of 13%, the EMIs can be come anything near INR 4500, which can be considered as higher if the salary structure of the person doesn’t allow to pay this amount. Also, with some stricter loan repayment terms, the Personal Loans can be considered as a little tricky for some to handle at least!
Prepayment not allowed
Most of the banks don’t allow the preclosure of the Personal Loans, or even if they allow, they charge a penalty of 1% or so, for the prepayment of Personal Loans. However, check the available terms and conditions on this particular aspect, as every bank have their own policy in prepayment terms and conditions. Things are changing very rapidly in the loan market, and who knows, by the time you are reading this article, this particular downside of personal loan doesn’t exist anymore!
Should you go for the Personal Loans?
So, here arises the same question, if a person should really go for the Personal Loans? The answer to this query still lies in your own mind.
How needy are you?
Are you on your own again?
Are you left with no options, other than opting for the Personal Loan?
How much emergency funds are you in need of?
What are your emergency situations, you want to sort out with the Personal Loan?
If, you can really take a note of the answers to these questions, you will surely get a satisfactory answer to the question ‘Should you go for the Personal Loans?’.
When not to take Personal Loans
Here are some recommendations, which we would like to offer to the People on when not to take the Personal Loans:
To pay off credit card debts (you will make a habit of doing so, in the long run)
For investing in Stock Marketing
For buying Cryptocurrencies
To lend fund to others
We always recommended readers not to take Loans of any kind, just for recreation purpose. If you are really in need of the money and have no other resort, than opting for the loans by any banks, only then opt for it. Take all considerations before opting for the Personal Loans. The factors like your job stability, your income, your expenses, your savings, your responsibilities, and more importantly your needs and desires are the ones, which a person should consider very deeply before making a final decision on the Personal Loan.
When going for a personal loan, compare all the offerings by different banks and lenders. Check their repayment terms and conditions, their rates of interest, any offers and schemes, attached with the personal loan offerings and all other important aspects, which might affect you positively or negatively. Taking a rash decision towards choosing a lender, can be costly for you during the entire loan tenure and you may end up paying higher loan amount coupled with higher interest comparatively to what you should have.
Weigh down the Pros and Cons of the Personal Loans and check what factors are in your favor. Make a decision based on your wise sense of judgement!
Your credit report is one of the most important factors when it comes to deciding your eligibility for a particular loan.
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