What is a personal loan, and what are its benefits?

A personal loan refers to money obtained from a lender that can be used for almost any reason. This includes debt repayment and financing a substantial purchase such as a car or a boat. You may also use it to pay for the expenses of a major occasion, such as a wedding or a vacation.

Loans are available from internet lenders, local banks, and credit unions, with cash supplied in a flat amount. Once you get the funds, you must keep making payments until the loan is entirely repaid.

One of the most significant advantages of personal loans over credit cards is that they possess a set interest rate and repayment duration.

What is a personal loan?

A personal loan is a specific amount of money that you can borrow for many purposes. Usually, personal loans are unsecured. This means you won’t have to put up any collateral to get the money. For example, you may utilise a personal loan to restructure debt, pay for home improvements, or arrange your ideal wedding. Personal loans are available through banks, credit unions, and online lenders. Borrowed funds must be returned over time, generally with interest. Personal loans may also be subject to fees from some lenders.

What are the benefits of a personal loan?

1. Quick Approval

A personal loan takes far less time to process than a home loan. Home loans might take 3–4 weeks. As a result, they are your best choice. Personal loans can be used to satisfy your immediate cash or payment requirements.

Keep your credit history solid (CIBIL score of 750+). If so, lenders will have no trouble accepting your personal loan application.

2. Minimal paperwork and accessibility

One of the most significant benefits of applying for personal loans is the lack of paperwork requirements. 

Not only that, but the application procedure is designed with the customer’s convenience in mind. These loans may be obtained online in minutes. Amounts range from Rs. 5,000 to Rs. 5,00,000. Payback terms extend up to 60 months.

3. Enhances credit score

Do you have a poor credit score or are you new to credit? If yes, taking out modest personal loans is a wonderful method to improve your score. Also, you have to be careful to return them on time When you pay your EMIs on time and at the agreed-upon interest rate, your credit score will go up.

However, you must obtain a loan balance that falls within your repayment capacity. If not, skipping EMI payments might harm your credit score.

4. Versatility

A personal loan will be useful regardless of the use case, whether it is for an iPhone purchase, a Swiss vacation, or a house renovation. Also, unlike loans for houses or cars, a single loan can be used for more than one thing.

One of the reasons personal loans are so attractive now is because of their flexibility.

5. There isn’t any need for a collateral

Personal loans are unsecured, which means they do not require collateral to be obtained. This is why personal loans are easier to obtain than other types of loans such as house loans, vehicle loans, and so on.

However, as a consumer, you should be aware that unsecured loans are risky for lenders, so interest rates are often higher to reduce the risk and are typically 1.33% or more each month.

What should you remember before taking a personal loan?

Now that you’ve learned about some of the advantages of personal loans, here are a few tips to help you pick the ideal loan for you:

• Check that the amount available is within your ability to repay.
• Before taking out a loan, be sure you understand all of the terms and circumstances.
• Personal Loan Interest Rate Calculator from reputable fin-tech businesses or bank sites and select the best alternative for you.

What are the different types of personal loans?

Unsecured personal loans: The majority of personal loans are unsecured, which means you do not need to put up any collateral to qualify. With an unsecured personal loan, you’ll get a lump sum of money and then return it with fixed monthly instalments over a certain period.

Credit-builder loans: Credit-builder loans do not provide you with a line of credit. These loans are put into a lender-controlled savings account, and you make the payments on your account for the length of the loan. Lenders submit your payments to credit bureaus during this time to assist you in creating a history of appropriate credit utilization. At the end of the term of the loan, you will get your complete payment. This payment shall be after all loan costs are subtracted.

Secured personal loans: Secured personal loans necessitate that you put down collateral to qualify. You could be able to employ other assets as security instead of cash, such as a house, a boat, or a car. If you fall behind with the payments, the creditor may be allowed to confiscate such assets.

Specialized lenders: Some service-oriented businesses provide personal loans to their customers to help them fund their products or services. For example, a home improvement company may provide financing when you purchase a new appliance. These loans are usually easy, but they may not always provide the best rates and conditions.

Conclusion

Personal loans are among the most popular types of loans available today. We’ve only discussed 5 of the various benefits of personal loans. There are many more that contribute to their popularity. Not only are rates of interest reasonable, but the paperwork requirements are simple, and loans of up to Rs. 5 lakhs are available. Simply go to the Piramal Finance website for more information and make sensible economic decisions now!