Personal loans are one of the best ways to obtain funds for any unplanned spending like a medical emergency or even planned expenses like weddings. Also, getting a personal loan is easy and quick if you have your documents in place and have a good credit history. Let us now look at the benefits of personal loans and why it is the best option to fulfill financial needs?
Key Benefits of Availing A Personal Loan
#1 Eligibility Criteria And Documentation is Simple
The eligibility criteria for personal loans are as follows:
- The applicant must be an Indian.
- Individuals must be between 21 to 67 years.
- CIBILTM score of 750 or above.
- steady source of income
Applicants can get high-value loan amounts at lower interest rates by submitting a few basic documents like identity proof, income, proof, and address proof. Maintaining a good CIBILTM score and a stable source of income are very important. You will be able to get easy loan approval, the desired principal amount, and the desired rate of interest.
#2 Collateral Free
A personal loan does not require any collateral to pledge. It does not have a lengthy documentation process as well. So, the time taken to process personal loan applications is less. Moreover, this is an ideal option for people who do not want to risk or have any assets to pledge as collateral
#3 Personal Loans Can Be Used For Almost Any Purpose
A personal loan can be used for anything. Some lenders may ask you to specify the end usage of the personal loan. But, most lenders will just ensure that a person has the capacity to repay it. Personal loans have hidden charges, but they can be the best option in various situations.
#4 Different Personal Loan Types
Borrowers have varied financial requirements and lenders have customized loan offers. They can thus use personal loans for almost anything – weddings, vacations, medical emergencies, big-ticket purchases, education, debt consolidation, business expansion, etc.
#5 Ease of Application
Due to increased digitization and increased demand for credit, personal loan approvals are faster. The borrower also has to be familiar with the application process to make loan approval faster.
Here are the steps involved in the personal loan application.
Step 1: Go to the official website of the chosen lender. Select a personal loan from the product page.
Step 2: Fill the application form with the required personal and professional information
Step 3: Enter the desired loan tenure and required loan amount
Step 4: Upload the required documents and submit the application
Once the application is approved and verification is completed, the borrower will get the desired loan amount in his account. You can apply for the personal loan either offline or online.
#6 Flexible repayment tenure
Nowadays, lenders extend repayment tenures for borrowers. Flexible and longer tenures will help borrowers to reduce the EMIs and make timely repayment of EMIs. If the sanctioned loan amount does not fulfill the borrower’s financial requirements, then he can opt for a balance top-up facility.
Things To Keep In Mind Before You Get A Personal Loan
- Maintain a good credit score: A credit score is a number between 300 to 900 that summarizes your repayment history. It indicates your creditworthiness to the lenders. A credit score of 750 and above is regarded to be good. If you don’t maintain a good credit score, then your personal loan application may get rejected. A simple way to maintain a good credit score is to make timely repayments. You can automate your payments so that you do not miss them. Other important ways in which you can do this is to limit the number of credit cards used and also maintain a CUR within 30%.
- Compare the Interest Rates in The Market: Before you apply for a personal loan in the market, you should research and compare the interest rates of various lenders. In this way, you will be able to get the best offers for your personal loan. Borrowers must always look for lenders who give a nominal interest rate.
- Decide The Right Loan Amount: Before you decide on the loan amount, consider the purpose for which you are going to use the loan. Various purposes for which you can use the loan are wedding, buying a vehicle, education, taking a vacation, or medical emergencies. Based on the expenditure associated with the purpose, you can decide how much to borrow. When you borrow, determine whether you will be able to repay your loan amount on time. For this purpose, you can use an EMI calculator and try various combinations of tenures, interest rates, and loan amounts.
- Look For Common Charges Related to Personal Loans: Personal loans are always associated with additional charges, such as processing charges, verification charges, goods and services tax, penalty on late payment of EMIs (defaults), foreclosure charges, and fees for duplicate statements. When individuals take a personal loan, they must plan for the repayment of the loan as well. They should then factor in these charges also.
- Don’t fall for false loan offers: Some lenders can be seen offering personal loans at low interest rates, which seem too good to be true. But, these loans may turn out to be more expensive when you check the details of the contract in fine print. Also, some loan offers come with floating interest rates, which may be low initially but increase in the long run. So be wary. Apply for personal loans from CreditMantri. CreditMantri offers personal loans with instant approval, affordable interest rates, flexible tenures and loan amounts, and minimal documentation. We show you the best loan offers matching your credit profile.
When Should You Not Use A Personal Loan?
Although personal loans are the best financing option, there are some scenarios where you should not use a personal loan. These are as follows
- When you have a low credit score: Don’t apply for a personal loan with a low credit score. This is because your application will get rejected. Instead, take steps to improve it, if your needs can wait and then apply for the personal loan.
- You cannot afford to pay your EMIs: Defaulting on EMIs will impact your credit score drastically. This will hamper your chances to obtain future credit. Also, accumulating your EMIs regularly will increase your debt burden and at one point of time, you will fall into a debt trap.
- When you are eligible for better financing options: When you need to fund your real estate, home, vehicle, or education, you may have other financing options which may be better. There are loans designed specifically for these which may come with better features and benefits. In such cases, taking a personal loan is not the best decision.
Personal loans can be used for any purpose since they don’t have end usage restriction. Whether you want to use them for debt consolidation, to pay your credit card bills, or to make an expensive purchase, you can use them freely. So, they are one of the best funding options available. But, ensure that you satisfy the eligibility criteria set by the lender. Also, it is essential to repay the loan in time, as this determines your chances to get credit in the future.