Personal Loans: Are They For You?

Personal Loans have never been as popular as they have become in the past few years, and with good reason. After all, these loans are the only credit forms which can be availed in less than 2-3 days’ time. Moreover, the amount disbursed under this loan can be conveniently used as and when you please, towards any financial obligation that you wish to fulfil, which isn’t the case with most conventional credit types such as car, education or Home Loans. However, they do attract a comparatively high rate of interest, which might make you think – Is this loan made for me? Well, we are here to answer just that!

What is a Personal Loan?

A Personal Loan can be primarily defined as an unsecured loan, which can be obtained from a bank, non-banking financial company (NBFC) or an online lender, in order to fulfil one or more financial obligations.

This loan does not bind the user with respect to the end use. Usually offered for a period of 1 to 5 years, a Personal Loan offer can be obtained at a rate of interest ranging from 11% to 22%, depending upon the repayment history and credit score of the borrower. Needless to mention, the stronger one’s credit history, the lower will be the interest rate.

The loan amount that can be obtained under this loan usually ranges from 50,000 to 25 Lakhs. However, some financial institutions offer a loan amount of up to 50 Lakhs, on the basis of the income as well as the credit history of the borrower.

Also read : Impact of Aadhar Card on Personal Loan

The loan amount is disbursed in a lump sum and needs to be repaid over a stipulated period of time, as stated in the loan agreement. The repayment is made in the form of Equated Monthly Instalments or EMIs.

As is the case with almost all types of loans, it is mandatory for the buyer to repay every single EMI on the designated dates, without fail, as this may lead to a blow on their credit report. Moreover, repeated defaults may hamper their ability to get fast loan approval in the future.

Why Do You Need a Personal Loan?

A Personal Loan is a credit which can be used for medical emergencies, for financial troubles as well as to meet some expected or unexpected expenses efficiently.

Medical expenses are often of urgent nature, and may even need you to shell out a large sum of money in case your insurance doesn’t cover the same or just offers a partial cover. Since a Personal Loan can be availed in as little as a day’s time, it can prove to be somewhat helpful when you don’t have the time or resources to arrange for the required sum of money.

As far as financial issues are concerned, a Personal Loan can offer you the much-needed respite, especially if you wish to consolidate your Credit Card debt. Considering that Personal Loan interest rates are lower than that for Credit Cards, it could be a wise decision for you to pay all of your existing Credit Card bills, and repay a Personal Loan instead.

Troubles and emergencies apart, Personal Loans can also be used to meet a varied range of expenses, including but not limited to:

• Sponsoring your child’s education
• Meeting the expenses of a wedding celebration
• Mending or renovating your home or office
• Expanding your business
• Buying new gadgets or appliances
• Going on a holiday
• Meeting working capital requirement of your business

How to Use Personal Loans?

Now that you know the multitude of areas that you can use the disbursed loan amount, the question is, how to use the loan in the right manner.

To begin with, it is crucial for you to understand, that regardless of how readily available and how flexible a Personal Loan is, it is still a debt, and it still attracts a reasonably high rate of interest. Hence, you should only opt for it, if you have no better or inexpensive way of meeting your financial obligations. Besides, in no circumstances, should you make it a habit of relying on Personal Loans time and again. They should be treated like a one-time help that you only seek in times of desperation.

Hence, it is highly discouraged that you take a Personal Loan to pay off Credit Card bills when you aren’t sure of maintaining the required level of financial discipline in the future. Moreover, you should avoid taking loans, when for leisure purposes such as traveling or throwing extravagant parties. Then again, taking credit for buying new gadgets such as the latest smartphone or gaming console is a strict no-no.

Even when you take this loan for the purpose of fulfilling unavoidable obligations, you should always have a plan in place to pay it back, at the earliest possible.

We hope that you now have a fair idea of what a Personal Loan is, and how exactly can it help you sail through a difficult situation! Simply put, if you are someone who abides by payment schedules and has a certain level of financial discipline, with a decent credit history – Yes, Personal Loans are made for you!

Also Read:  What Documents Do I Need to Get a Personal Loan?

To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 70+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.