A personal loan is an unsecured loan which can be taken without any security and with minimal documentation from any bank or non-banking financial institutions to meet your personal needs. Other than a personal loan, there are various types of loan such as home loan, car loan, educational loan to fulfill your requirements. So, before moving towards the scenario in which personal loan can be beneficial, let’s understand the difference between a personal loan and other loans.
A personal loan is available for a short tenure, with a higher rate of interest and for lesser amounts when compared to other loans. It’s a kind of unsecured loan because there is no collateral involved which increases the risk factor for banks, that’s why the rate of interest is high and good credit report is a mandate when compared to other available loan options.
Even after the high-interest rates, it is getting popular among customers because it is easily available with minimal documentation and without depositing any security and can be used for any personal reasons. There are scenarios, when you may find yourself stuck in an impasse and don’t have money to pay the expense but there will be sheer consequences if you don’t pay, the personal loan comes as a life-saver in such moments.
An emergency can knock any time at your door and there are chances you are not prepared with the savings to come out of such circumstances. You can take a personal loan to cater to those financial emergencies, a medical emergency is one of them.
The situation majorly arises if you don’t have medical insurance to pay your bills. It’s a situation when you don’t have much time as well as peace of mind to collect papers and apply for a lengthy loan process, personal loans are the best source of money in this scenario.
You don’t have to bother about documentation or collateral and if you are a trusted customer, you can get personal in a single call to your bank. All the formalities can be done on the phone and you will get the loan easily without even visiting the bank.
Higher Education or Taking your career to the next level.
The education loans are available from banks as well as other financial institutes but with a high-interest rate and you have to deposit the security against it. Also, banks generally fund for selected and prestigious institutions only. Also, there are situations when an educational loan is not enough to cover other expenses such as tuition fee, relocation expense, living costs, etc. A personal loan can be used to cover the extra costs.
It’s always a good idea to invest in yourself, so it makes sense to take a personal loan. If you don’t have enough money to pay for the fees and want to upgrade your professional skills by enrolling in a course or a higher degree. It is worth because ultimately it will help you in climbing up in your career ladder swiftly and get a high paid job.
In our country, weddings are a matter of pride which makes it an expensive affair. People spend a huge amount in it and unfortunately, there is no such loan known as “wedding loans”. As a result, people are more inclined towards opting for a personal loan to pay for their wedding, reception or even honeymoon.
When people don’t have enough saving, personal loan ensures all the needs to be met without compromising on their special day. The lenders are there but remember you have to pay them back so don’t splurge too much on your wedding.
Home renovation sometimes is a justifiable scenario to go for a personal loan, especially if it adds value, lower your monthly utility bills or prevent future expenses. Instead of utilizing all your saved money, you can go for a personal loan and save your money for the future.
Also, your home loan will only cover the cost of your home, it will not support additional expenses like woodwork or bathroom fittings cost or cost to refurbish a room, a personal loan can help you with that.
Moving to a new house or relocation.
This is an important scenario when you should save your funds and opt for a personal loan to manage the expense. Moving into a new home either in the same city or in another, both situations demand a lot and if your job demands this change you can’t avoid it, or the expense associated with it. But you can ask the company if they can help you with the expense or else go for a personal loan while saving the money you have in your bank.
Clearing a high-interest loan
You can avail a personal loan to pay an overdue amount and avoid the late payment penalties.
The trend has changed, and people are availing a personal loan to clear other debts or previous loans or outstanding credit card payments, but it will only benefit if the personal loan has a lower interest rate than the earlier loan. Also, it comes handy to get rid of expensive credit card charges that multiply every month because the interest rate of a personal loan is lesser than credit card late payment charges.
That’s how easy borrowing money is in today’s world. However, the amount you will get, tenure and rate of interest largely depends on your credit score. Personal loans may be tempting, but it is advisable to go for it only if it’s an emergency and when your monthly budget allows you the EMI payment. Also remember, never borrow extra amount just because you’re eligible for a higher loan amount, stick to your need. Forget to do the proper market research, compare all available options and then select the best one that matches with your requirement.
There are certain emergency situations where cash is required urgently and everyone doesn’t have savings to match such emergencies. In such scenarios, Personal loan can be a life-saver, if you’re smart enough to manage the funds.