A Personal Loan is your Man Friday. It can step in to sort out your financial issues. You can apply to any bank or financial institution and get your Personal Loan approved in a jiffy. Being an unsecured loan, applying for a Personal Loan does not demand any security or collateral. All that you do is apply to the bank, determine your Personal Loan Eligibility using an Eligibility calculator, choose the terms of loan (interest rate and tenure) and wait for the bank to accord approval. The bank uses the facility of a Personal Loan calculator and quantifies the loan that you’re eligible for.
Need for a Personal Loan
A loan is essentially a financial liability. Then why take Personal Loan? As sound investors making the optimum use of the money earned, we would have parked our savings in the money market, capital market, mutual funds, gold and bank deposits. Liquidating these in times of any emergency is a bit difficult and takes some processing time and administrative formalities. That is when a Personal Loan comes handy.
As the name says, you can use the loan for any personal purpose, without divulging any details to the lender. Whether you’ve to tackle a medical emergency or enjoy a family vacation or pay your child’s education expenses, a Personal Loan can be used to cover any kind of expense.
Personal Loan benefits are indeed many—easy funds, minimum documentation, no questions asked, fast approval, quick disbursal and the convenience to put the funds to a use that you deem fit.
Listed below are the pros and cons of a Personal Loan
Points in Favour of Personal Loans
- Personal Loans offer the flexibility to be put to multipurpose uses. Unlike a home loan that can be utilized for buying a home, a Personal Loan can be used for just about anything medical, travel, buying jewellery, home improvement.
- If you want urgent funds, Personal Loans qualify. Their quick availability, access within 24 hours makes personal choice the best for emergency funding.
- Personal Loans require minimum documentation. With the result, the processing time is faster. All that is needed is your identity proof, address proof, bank statements and salary slips.
- You don’t need any security or a collateral in the form of an asset or a guarantee to avail a Personal Loan. This makes it easy for those who do not own any assets to apply for a Personal Loan.
Cons of a Personal Loan
- High interest rate is the flip side of Personal Loans. As they are unsecured, these loans carry high risk. To mitigate the risks, lenders levy high interest rates on Personal Loans.
- Part payments are not allowed. As a result, the loan liability rests on you for a long time. You also pay a greater portion of interest.
- Personal Loans are approved based on your creditworthiness. If you are unable to service the Personal Loan repayment, the default can affect your credit score and your future borrowings as well.
- Personal Loans are subject to variable interest rates. The quantum of loan approved also varies based on the borrower’s creditworthiness. Low credit score borrowers who have no choice but take a Personal Loan that have stringent norms to be satisfied.
Personal Loans are indeed the best choice to bail you out when you are in a cash crunch. Use them prudently and only take one if you are really in need of a Personal Loan.