A personal loan is a multipurpose credit option that allows individuals to fund varied financial requirements and sail through any unforeseen expenses. The fund obtained from the lending organisations can be used to fund medical exigencies, child education, debt consolidation, etc. and repaid to financial institutions as per agreed conditions.
Unusual circumstances can be easily mitigated with the robust financial backup offered under a personal loan for unplanned expenses. The versatility of personal loans, aided by a hassle-free application process, makes this credit option feasible for borrowers to manage both planned and unplanned expenses.
Advantages of Availing a Personal Loan
Personal loan bestows borrowers with several benefits, proving ideal for managing unanticipated circumstances.
- Flexible end use
Be it for renovating a home, managing medical exigencies, travelling, expanding business, or funding any big-ticket purchases, borrowers can use the loan amounts to fund any monetary requirements. This versatility is one such reason that makes personal loans an effective credit choice during a contingency.
The most notable benefit of availing of a personal loan is that borrowers do not have to pledge their valuable assets as collateral to access loan amounts. This reduces lengthy documentation, facilitating a seamless loan application process, and helping them avail of considerable loan amounts. In addition, this unsecured credit option is ideal for those who want to avoid risking their valuable assets or not having any collateral to pledge.
- Extended repayment term
Borrowers availing of an instant personal loan can repay the loan amount over an extended period, reducing the EMI burden and enabling them to repay sanctioned loan amounts on time. To choose optimum loan tenure as per repayment capacity, borrowers can use a personal loan EMI calculator.
- High-value loan amounts
A personal loan allows borrowers to access considerable loan amounts. However, the maximum loan amounts and the affordability of the lending rate depend on the borrower’s credit profile.
- Lenient eligibility criteria
Individuals can avail of substantial loan amounts by catering to the easy-to-meet personal loan eligibility criteria. Borrowers must be from India. Furthermore, he or she must cater to the predefined age bracket and have stable income status. In addition, individuals must have a CIBIL score of 750 and above. It will help them get quick loan approval at affordable interest.
- Simple documentation
The paperwork needed to avail of an instant personal loan is much simpler than that required to avail of any other credit option. Borrowers have to submit KYC papers, identity proof, income proof, and address proof to receive approval for the loan amount.
- Tax benefits
Individuals who opt for personal loans can reap tax benefits if they use the sanctioned amount for specific purposes like purchasing or renovating a home. Under Section 24 (B) of the Income Tax Act, individuals can claim tax exemption of Rs. 2 Lakhs on the interest component, helping them save a significant amount on the overall cost of borrowing.
Besides helping bridge financial gaps, personal loan proves effective in improving borrowers’ credit score.
- Easy online application process
With rapid digitisation, the application process for personal loans has become convenient. Individuals can follow the mentioned steps to avail of the credit option.
Step 1: Visit the official website of preferred lender and select personal loan from the product page.
Step 2: Now, head to the online application form and fill it out with the necessary personal and professional details.
Step 3: Mention the desired loan amount and select suitable loan tenure.
Step 4: Attach the required documents and submit the application form.
On successful application and verification, loan amount will be disbursed to the mandated account.
Ways to Use a Personal Loan
There are several in which individuals can use the sanctioned personal loan amounts.
- Debt consolidation
Keeping track of too many loan repayments and outstanding credit bill payments can be tedious and lead to financial trouble. To come out of such debt laden situations, individuals can opt for personal loan.
- Medical exigency
Medical emergencies can crop up at any time, prompting one to drain their lifelong savings. To escape such scenarios, individuals must apply for a personal loan.
- Home renovation or construction
Purchasing or renovating a house involves long-term financial commitment. To avoid a monetary burden, one can fall back on a personal loan to manage expenses that result from home repair or renovation.
Individuals can use a personal loan to compensate for the expenses that result from higher education. For example, one can use the sanctioned loan amounts to cover course fees, accommodation charges etc.
The credit option can also be used to fund marriage expenses, travel arrangements, buy expensive gadgets and more.
Things to Consider while Availing Personal Loans
Before availing of a personal loan, borrowers must consider specific parameters as discussed below.
- Compare interest rates
The first and foremost thing that borrowers must do before applying for a credit option is to research and compare different lenders and their offerings. Exploring varied options will help borrowers settle for one extending a competitive interest rate.
- Keep a healthy credit score
As a personal loan is an unsecured credit option, lenders scrutinise borrowers’ credit scores before approving loan amounts. Hence, borrowers must strive to maintain a healthy CIBIL score of 750 or above to receive quick loan approval.
- Consider additional costs
Besides checking the interest rate, borrowers must also consider processing fees, late payment fees, prepayment charges, etc., while applying for a personal loan. These additional charges contribute to the loan expenditure significantly. Hence borrowers must include them while planning repayment. It will help them manage financial liabilities effectively.
- Choose the right loan amount
Though borrowers have the leeway to avail of substantial loan amounts, they must be careful while choosing a loan amount. To avoid over-borrowing, individuals must prioritise their needs and list down their expenses accordingly. A personal loan comes to the rescue when one is in dire need of money. It is the most convenient way to manage expenses and overcome a financial crisis. With instant approval and no-end use restriction, this credit option scores above other credit options. However, before availing a personal loan for unplanned expenses, individuals must know the particularities of it, helping to make the borrowing process rewarding.