A personal loan is an unsecured loan that can be utilised for a variety of purposes. They allow a person a free hand in times of need. They provide fast cash with no restrictions on how the money must be spent. People have often preferred to opt for personal loans. And not borrow any money from family members and friends in recent times. People take out personal loans to help them get through financially challenging periods. When they don’t have enough money in their savings account.
There are various advantages of taking a personal loan, other than providing you with immediate funds. One of the major benefits of this type of loan is that you won’t have to offer any collateral for it. Furthermore, it is true that personal loans, being unsecured, come with interest rates that are higher compared to secured loans. But they are still not as expensive as private lenders. However, unlike secured home loans, education loans or vehicle loans, personal loans can be utilised for a wide range of purposes.
Top 10 reasons for taking personal loan in India
Here are 10 of the most common reasons for taking out a personal loan.
Clear credit card debt big-ticket
Because personal loans offer lower interest rates than credit cards, the total interest amount, as well as the term, is reduced. If you are unable to pay off your credit card debt due to a variety of circumstances, consider taking out a personal loan to pay it off completely. You won’t have to pay the hefty interest rates or penalties that credit card issuers demand if you don’t pay off your bills on time this way. Even if a person only has one credit card and no other debts, it may be advisable to take out a personal loan with a lower interest rate to pay off the entire balance with a monthly payment that reduces your debt month after month.
Finance a new venture
Many people consider starting a new venture in their career. One important factor for doing so is gathering the required funds. Personal loans, as well as commercial loans, might assist us in obtaining the necessary finances to establish our own firm. Once the business starts to grow, the personal loan can be repaid on a regular basis. Many organisations provide small business loans in the form of personal loans in order to assist small and medium-sized businesses in developing their operations. For example, if your present business earns a minimum of Rs. 15, 000 per month, you can apply for a personal loan to expand your business without putting up any collateral.
Improving credit history
The promptness with which a person repays loans and credit cards determines his or her credit score. You can help your credit score by opting for a small personal loan and repaying it within the selected tenure. With a small personal loan, you can establish your repayment ability to a potential lender. This will improve your credit history and creditworthiness. This also raises your chances of being approved for a larger loan in the future. Building credit in this way will help you get cheaper interest rates in the future and thus help you save money in the long term.
Emergencies strike without warning. Worrying about money is not something that can in the event of a medical emergency. At times, even health insurance may not suffice. Personal loans, on the other hand, allow us to get funded in a matter of hours and assist us and our loved ones in overcoming their difficulties. If you don’t have enough money to fall back on, a personal loan might provide you with the funds you need in a timely manner. Many fintech companies provide personal loans instantly in a paperless and digital process. These loans are usually sent to your account in a short period of time, ranging from a few hours to a few days.
Going on a vacation
The monotony of daily life can take have negative impacts on us by influencing our stress levels and work productivity. As a result, taking breaks from the busy routines becomes necessary. Travelling or taking a vacation alone or with our loved ones can help us relax and unwind. However, planning a vacation can be expensive and also, even if you have some money saved, you may be unable to afford your dream vacation. At times, a constraint limits our schedule or a lack of finances becomes a significant obstacle. If you’re in severe need of a vacation but don’t have the funds, a personal loan may be a viable choice.
In India, a large wedding with all of your distant friends and family is rather common. People usually do not hold back when it comes to spending money on their weddings or the weddings of their children and they frequently borrow money to pay for their dream wedding. A wedding also has a number of unanticipated costs. Borrowing from private moneylenders or family is no longer a feasible choice as there are numerous options for borrowing from better sources.
Financing big ticket purchases
At any time, you may require a new refrigerator, washing machine, laptop or television. Similarly, even if your budget does not allow it, you may need to get a new car or two-wheeler. All of these costs aren’t inexpensive and necessitate a substantial sum of money. If you don’t have the cash on hand right away, take out a personal loan for the required amount and repay it in monthly EMIs to better manage the financial impact of a large-ticket purchase.
Traditional education loans are subject to a number of terms and limitations. Some loans, for example, are only available if you are accepted into a specific group of colleges or universities. They also have severe payback terms and it takes years for students to get out of debt. A personal loan can be a better alternative in these situations because there are very few requirements for obtaining one. When you need money to continue your education, you can take out a personal loan with a short loan term and a low interest rate.
During the festivals, most people have their home restorations or modifications completed. What is also crucial is the amount of money that one is willing to spend on house renovations. Once you’ve determined the amount, you can apply for a personal loan to give your property a complete makeover. It’s common knowledge that a home loan covers 80% of the cost of a home. As a result, homeowners should expect to pay 20% out of pocket. Registration, legal expenses and other taxes could add another 15-20% to the total. If you’ve had to go into your savings account for some reason, you’ll need a loan to cover these additional expenses. Your annual bonus may be sufficient to repay this tiny loan, but it will be months before you receive it. Taking out a personal loan makes sense in this situation. A personal loan can be available with very minimal documentation.
Every month, we have a lot of unexpected bills. We should always maintain a modest kitty for emergency and unforeseen expenses, depending on how critical the issue is. In case, you don’t have any emergency funds but an emergency requirement occurs, a personal loan can be your solution.
Many people are turning to personal loans instead of taking out car loans, home loans or other types of bank loans because they are offered at a low interest rate, have a shorter loan term, require no collateral and have minimal paperwork. These factors make a personal loan a very convenient way to gain quick access to funds. The best thing is that you have complete freedom over how you spend the loan money. Just make sure to apply for a personal loan, compare personal loan interest rates online to get the best possible deal!