In our present day and age, one cannot survive without having a sufficient amount of money and there may be times when you are in urgent need of funds, but do not have the necessary amount in your account. In such a situation, opting for a personal loan is the best solution.
Personal loans are unsecured loans that can be of great help when you are in need of money. Many banks and financial institutions in India provide this type of loan. Apart from traditional banks and Non-Banking financial Companies (NBFCs), a lot of third-party lenders also offer personal loans in India. These companies operate across different cities and towns offering loans up to Rs 5 lakhs in most cases. As you do not have to provide any collateral to acquire a personal loan, banks give you this loan based on your credit score. If you have a good credit score, you will be able to avail this loan easily with a low rate of interest.
What are the Reasons for Taking a Personal Loan in India?
Personal loans come with a range of benefits and help the borrowers in meeting their financial needs. They can also help the borrowers in getting access to fast cash in times of emergencies. An advantage of this loan is that the amount you borrow can be used for absolutely any purpose. There are various reasons for taking this loan and it differs from person to person.
A few reasons for which people take this loan are as follows –
- Fixed Tenure– Most personal loans have a fixed repayment period and one has to repay the amount within that time frame. The tenure of the loan usually depends on the bank and the person taking it. In most cases the tenure ranges from 1 year to 5 years but private lenders even offer loans for a shorter tenure depending on the needs of the borrowers. A person can choose to repay the money before the fixed time but he or she might have to pay a prepayment fee in that case. The pre-payment charges differ from one lender to the other.
- No Collateral Required– As mentioned above, when you take a personal loan, you do not have to provide any collateral security, which is usually common with other loans. If you provide collateral security, your lender can take ownership of it in case you fail to pay back the money you borrowed on time. As personal loans are generally unsecured loans, they are offered based on a variety of eligibility criteria such as monthly income, credit score and overall credit profile of the applicant. The eligibility criteria are also different for different types of lenders such as banks, NBFCs and private lenders.
- Debt Consolidation – When you take a loan to pay off all your other debts, it is called debt consolidation. A lot of people choose to take a personal loan for this reason. Taking a personal loan is beneficial in this case as it can lead to lower monthly payments and rates of interest, thereby helping you save a lot of money. In most cases revolving credit such as credit cards come with a relatively high monthly interest. When you are unable to pay off your credit cards debts in full, the balance attracts a high rate of interest. Thus, your overall credit card increases, and you might find it difficult to pay off your debt. In such a scenario, a debt consolidation personal loan can help you pay off your debts.
- For Travelling– You can choose to opt for a personal loan when you wish to go on an expensive trip with your family, whether in India or abroad. Most people enjoy traveling with their loved ones, but it can be expensive due to the high cost associated with booking flights, hotels and paying for other travel expenses. Also, when there are more members in a family the cost of traveling increases and so it can be difficult for an individual to pay for the travel expenses of the family only with the help of savings. A personal loan can help in such a situation by providing access to additional funds needed for meeting travel expenses.
- Down Payment of a Car or House– In our country, most people dream of owning a house and a car. Once people get a job, they start saving money to fulfil this dream of owning a house and a car. However, the down payment for a decent 4-wheeler vehicle or a flat in a good locality can cost a lot of money. And your savings alone may not be enough to make the down payment for the vehicle or flat of your choice. In such a situation, you can opt for a personal loan and make the payment without any difficulty.
- For Purchasing Something Expensive– Sometimes you might want to buy certain luxurious items like a wedding ring or jewellery, which costs a lot of money and for which you can’t pay using your credit card. A personal loan can be of great help in such a situation as you can get the money easily without having to return it immediately. If you have to make payment for your expensive purchase with your savings, you may not have any money left for financial emergencies. Hence, you can opt for a personal loan to pay for your purchase and then make payments through monthly instalments without affecting your savings.
- For Wedding Expenses – Weddings in India are quite expensive and even the simplest of weddings cost a lot of money. Starting from purchasing gifts to booking a wedding hall and paying for the food, expenses are incurred in a variety of ways. As your savings may not be enough to pay for these expenses, you can apply for a personal loan and pay for your wedding without any difficulty. For faster approval and easy application process, you can apply for a personal loan with a private lender such as Money View and access funds for your wedding instantly.
These are some of the many reasons for which people opt for personal loans. Getting a personal loan is not difficult, but one should conduct detailed research before applying for it. Comparing the offers of different banks is a smart thing to do, as it will help you in choosing one with maximum benefits. Once you get the loan, remember to pay it back on time along with interest and other charges so that your credit score remains high.
Author Bio: Surya Patra is a qualified webmaster by profession and Marathon Runner/Cyclist by passion with more than 6+ years of expertise in the financial domain. Surya is also an entrepreneur, enthusiastic in storytelling, content writing, and digital marketing professional.