Why Should One Go For A Personal Loan?

Posted by amrina alshaikh on January 2nd, 2021

Why Should One Go For A Personal Loan?

Personal loans are given without much formalities like legal documentation, guarantee, hypothecation, mortgage, etc. Most of the time one is not even required to share the purpose for which a personal loan is being applied for. Though personal loan are usually advanced for small amounts say up to Rs. 10 Lakhs, they come in handy for any unforeseen expenditures which cannot be deferred, e.g. sudden need to go on a foreign trip or buying a new vehicle, etc. They can also be used to consolidate 2 or more existing debts of a minuscule amount.

Various Reasons for going for a Personal Loan

Personal loans can be used for practically any need you have—within reason and according to the terms of your loan. You can’t use the money for anything illegal, to gamble, or, in most cases, for postsecondary education expenses. Here are some good reasons to get a personal loan:

  • Debt Consolidation

Consolidating various debts into one consolidated debt, thus not required to manage various debts at the same time. A personal loan can be used as a form of debt consolidation. It is also a popular reason why people take out a personal loan. Further, personal loans charge lower interest rates compared to credit cards, particularly if you have good credit. The best personal loans charge an interest rate as low as 5%, well below the double-digit percentages most credit cards or secured loans charge. You can take out a personal loan, pay off the balance of your outstanding credit cards, and then make one payment every month to your new personal loan servicer.

  • Enhancement of the repayment period of existing loans

To increase the repayment period of one’s existing debts in case one is unable to repay heavy loan instalments at any time due to any reason like sudden illness in the family lay off or pay cuts due to financial slump or closure of business during lockdown declared by the Government during any pandemic, etc.

  • Unforeseen Expenses

If one needs money right away to cover sudden illness, emergency travel, or something else that needs immediate funds, one can go for an online personal loan in India. Most financiers/banks provide Personal Loan Apps that facilitate knowing whether one’s loan application has been approved by the lender or not. One could receive funding instantly or within a few business days, depending on the lender. One can use a personal loan to cover emergencies like a sudden death in the family, prolonged illness, purchase of a new vehicle, etc.

A personal loan is a good alternative to a payday loan. Payday loans are short-term, high-interest loans that usually require repayment when you receive your next paycheck. One can apply online for personal loans in India using Personal Loan Apps without any need to submit a credit check, and one can get funding instantly or within one business day. However, payday loans could do more harm than good. Interest rates might skyrocket. Personal loans come in handy when any borrower does not have the funds to repay the loan in full as applicable for payday loans.

  • Home Renovation and Repairs

If you own your home, you could take out a home renovation loan to make additions or make improvements. However, you can also take out a personal loan. Home renovation loans and lines of credit are designed specifically for facilitating home projects, but they have secured loans and use your home as collateral security.

If you don’t want to risk losing your home in case you fall behind on payments, a personal loan is a good alternative. Sequel to that, it might be quicker to get a personal loan compared to a home renovation loan.

  • Shifting Costs

If you’re shifting your house close to where you live now, you might not need to cover any major expenses. However, if you’re shifting to a faraway city, you may need extra money to pay for shifting costs. Shifting far away means covering the cost of packing up your belongings, possibly hiring movers and packers for transporting your things to your new location.

A personal loan also can help fund the process of finding a new place to live. For instance, if you find an apartment, you might need to cover the costs of the first month and a security deposit. You may also need some money to furnish your new home.

  • Marriage Expenses

It is not recommended to borrow too much money to pay for a marriage event. Instead, consider paring down your wants to fit your budget and if required, go for a personal loan instead of taking a secured loan to keep your assets secure.

However, if you do need to borrow money, you have a few options, like credit cards, secured loans, and personal loans. Credit cards tend to have higher interest rates and secured loans usually have much more formalities compared to personal loans. Taking out a cash advance on your credit card can have much higher interest rates and fees. A personal loan is a less expensive and faster option for borrowing if you need the money to cover the cost of a marriage ceremony.

One ought to evaluate all available options before deciding to take out a personal loan. Borrowing money shouldn’t be done without a pre-thought. One must review one’s financial situation to see if a personal loan is the right choice or not.

It is evident from the above that a Personal Loan is the best option especially for sudden/short-term funding requirements since the rate of interest is not prohibitive and repayment is over within a short period. Another advantage is that one can apply online for personal loans in India using personal loan apps which is the fastest mode of the loan application, approval, and disbursement of the loan. On top of that, personal loans are personal, which means your reasons are yours and what to talk of submission of proofs, one does not have to even inform the purpose of taking a personal loan.

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amrina alshaikh

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amrina alshaikh
Joined: April 24th, 2018
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