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Personal loans have been a preferred way to cover any immediate financial commitments you may have. Banks offer personal loans in a more accessible way when compared to other loan options.
However, many individuals have concerns about whether applying for a personal loan online is the right choice. In this article, we have covered the 10 benefits of a personal loan and whether or not you should consider it.
1.Flexible Use of Funds
You can use a personal loan to fulfill different types of financial commitments, such as:
2. Quick Access to Cash
By availing an instant personal loan online, you can easily access the required funds without any issues. Banks typically complete the loan application process online for a quick and efficient application. Additionally, individuals can also check with their bank for any pre-approved personal loans.
3.No Collateral Required
Personal loans are generally unsecured, meaning applicants don't need to provide collateral. However, some lenders also offer secured personal loans against assets like fixed deposits or gold. It is important that you are aware of the personal loan eligibility requirements set by banks, as it can be different based on the type of employment, monthly income, and age.
4. Lower Interest Rates Compared to Credit Cards
If you are comparing credit cards with personal loans, credit cards usually carry higher charges on unpaid balances, while personal loan interest rates are comparatively lower, making them a more cost-effective borrowing option.
5. Flexible Repayment Schedule
Personal loans allow borrowers to choose from multiple repayment tenures, usually ranging between one and five years. This flexibility lets individuals set EMI amounts that align with their monthly income and financial commitments. By adjusting the repayment period, borrowers can decide whether they prefer smaller EMIs over a longer term or quicker repayment with higher EMIs.
6. Debt Consolidation
If your existing debts are at higher interest rates, a personal loan can be an effective way to pay off the debts with a comparatively lower rate. This also helps in easing financial management as you have only one EMI to track.
For example, if you are managing multiple credit card balances, the high interest charges and separate due dates can become challenging to keep track of. By applying for a personal loan of the total outstanding amount can replace all the payments with a single EMI and an overall lower interest rate.
7. Helps Build or Improve Credit Score
If you are new to credit or have limited history, repaying a personal loan on schedule creates a track record of responsible borrowing. This helps improve your credit profile and makes it easier to qualify for any future loans.
Borrowers concerned about their credit history should consider factors such as debt-to-income ratio, credit mix, and credit inquiry before applying for a personal loan.
8. Higher Borrowing Limits
If you are looking to fund large expenses, banks generally offer instant personal loan online with amounts up to INR 15 lakhs. This allows borrowers to meet their financial obligations without providing collateral or a use restriction. The availability of a large loan amount is subject to the borrower's profile, income, and credit history.
9. Stability in Repayments
Most personal loans are offered at fixed interest rates, which means the EMI amount remains unchanged throughout the loan tenure. This stability makes monthly budgeting simpler and protects borrowers from sudden increases in repayment obligations. With predictable payments, individuals can plan their expenses with greater confidence, ensuring consistent financial discipline without worrying about market-driven rate fluctuations.
10. Option for Prepayment and Foreclosure
Most banks allow you to make part-payments or foreclose the loan. This flexibility helps shorten the repayment period and better control over your finances. By adjusting the repayments based on your changing income, you can accelerate being debt-free while reducing the total payable personal loan interest rate.
What Are the Points to Consider Before Taking a Personal Loan
Before applying a personal loan, consider these key factors to assess which personal loan is right for you:
Conclusion
There are plenty of benefits of personal loans, from flexible use of funds and quick access to cash to structured repayments. By carefully considering interest rates, tenure, eligibility, and repayment flexibility, you can choose a loan that meets your financial needs while maintaining control over your finances. When used responsibly, a personal loan can be an effective tool to manage expenses, fund life goals, and build a strong credit profile.
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