While most people like to use loans to fund their requirements, a typical question that most people have is: which type of credit will provide me with the best returns at the minimum price? Not all types of credit are equal, and not every product is a good fit for your needs.
Still, the excellent thing is that today’s debtor has more financing alternatives than in the past. Personal loans and peer-to-peer lending are both appealing ways to borrow money, but which should you choose? Let’s understand what personal loans are and how they differ from peer-to-peer lending:
Personal Loan
A personal loan is a type of credit that does not need collateral, and financial organisations issue it. You can put these funds towards your needs. The funds are approved based on your qualifications, and you must repay them over a certain period under the loan agreement’s terms and conditions.
On a personal loan, you can apply for loans up to 25 lakhs. You need to use the personal loan eligibility calculator to know the amount you are eligible for.
Peer To Peer Lending
Peer-to-peer lending, often known as P2P lending, is another appealing method of borrowing that may be unfamiliar to most borrowers. P2P lending allows borrowers to borrow simply from people without financial intermediation, a significant distinction between the two. In most situations, these loans are available online and have a quick approval process.
Peer-to-peer lending has risen at a time when the traditional banking system is in turmoil throughout the world. P2P services, which are a type of crowdfunding, are becoming increasingly popular in all countries rapidly.
Here are some of the reasons for the growth, as well as why you should think about it:
Versatility and adaptability
Some loans are only for a specific reason. For example, when you get a car loan, you can only use it to buy a car. You can use personal loans for various reasons, including debt consolidation and medical bill repayment.
A personal loan would be a perfect choice if you need to finance a large purchase, but don’t limit yourself in utilising the funds. Before applying for a loan, double-check the allowed uses with your lender.
Interest rates are lower, and borrowing limits are higher
The interest rates for personal loans are frequently cheaper than those on credit cards. The average personal loan interest rate was 11.84 % in February 2021, while the average credit rate was 16.04 %. Personal loans come with rates ranging from 6% to 8%. It is available to consumers with outstanding credit histories.
There is no obligation for a collateral
You get approval for an unsecured personal loan without putting up any collateral. It means you won’t have to put up your vehicle, home, or other valuable collateral to secure the loan. You’ll face serious financial consequences if you can’t return the loan according to the terms agreed upon with your lender.
Moreover, you shouldn’t worry about losing your house or automobile due to this.
It’s a lot easier to manage
Consolidating debt, such as many credit card accounts, is a reason why some people take personal loans. A fixed monthly payment on a personal loan sounds a lot easier than many credit cards with varying interest rates, due payment dates, and other factors.
Customers who apply for a personal loan with a reasonable interest rate than their cards will be able to simplify their monthly payments while saving money.
They might be able to provide tax advantages
While personal loans may not give tax benefits in and of themselves, depending on the reason the funds are used, you can nevertheless save money with a personal loan. Get a personal loan to cover home improvements, buy or build a property, or pay for higher education. You can claim tax advantages under the appropriate sections of the Income Tax Act.
