In India of 2020, getting a personal loan has become a cakewalk thanks to the many applications and companies which specialize in rendering this service. And by now, you must have seen many advertisements for personal loans, and thus we can safely assume that you know a little about it. Although you know what a personal loan is, are you well versed with its many advantages?
If not, then this article is for you. In today’s article, I will share with you a brief of what a personal loan exactly is, along with some of the many benefits of this type of loan over others in the market.
Let’s get started.
What Is a Personal Loan?
A personal loan is simple terms is an unsecured consumer loan usually between the amounts of ₹10,000 to ₹500,000 and is rendered by lenders who specialize in the short term and instant loan applications.
One of the main differentiating factors between a personal loan and other types of loans available in the market is the fact that personal loan lenders often do not ask for any form of collateral or security, while most other types of loans do.
Along with this one of the main attractive factors of personal loans is that the money gets transferred to your account within 24 hours or less from the time you submitted your application, while on the other hand, most other loans take anywhere between 4 to 5 business days to get processed and then transfer the money to your account.
Benefits of Applying for a Personal Loans
Now that you know what exactly a personal loan is, let us share with you some of the most significant benefits of personal loans.
No Constraint on the Use
One of the first and most important benefits of a personal loan is the fact that there is no constraint on the end-use of the loan. In simple words, it means that you can use the amount from the loan for any purpose you want, and this is the best thing about it.
In order to understand this better, let us take the example of a vehicle loan. When you take a two-wheeler loan, you can only use the amount to buy the two-wheeler and not anything else. This essentially means that you need to inform the lender of how you will spend the loan amount, and upon their approval, you will get the loan amount.
On the other hand, when you are taking a personal loan, you do not need to inform the lender of how and where you will be spending the money, and thus you are free to spend however you needed.
This benefit makes taking a personal loan one of the best and most effective, especially when you are in a cash crunch situation.
Quick and Instant Disbursal
The second advantage of a personal loan lies in its quick disbursal process. When you approach any bank or NBFC for any loan, chances are that they will take anywhere between 4 to 7 business days to process your application and then grant your application if you meet all the criteria.
On the other hand, when you approach an NBFC like MoneyView for a personal loan, not only can you check your eligibility for the loan completely online, but also, if you meet all the criteria, you will get the amount in your bank account in less than 24 hours.
With the presence of so many lending institutions in India, the whole concept of a personal loan has been simplified in such a manner that you get the money you need in the shortest and quickest amount of time possible, no matter what.
No Need for Collateral
The third benefit of a personal loan lies in the fact that you do not require collateral when applying for it.
Most loans offered to consumers today are secured loans meaning you need to have collateral in order for the loan to get approved. The reason behind this being, if for any reason, you are unable to pay back the loan amount and thus create a default, then the lender can use the collateral provided by you to recover the loan amount either fully or partially.
On the other hand, when you apply for a personal loan, you will not be required to put forward any collateral. The reason behind this being, the amount of money rendered in a personal loan is quite less, in the range of ₹10,000 to ₹500,000, and thus the risk of loss to the lender is quite low. Thus in such situations, the lender does not ask for any collateral.
Choose Your Own Tenure
Most loans in the market come with fixed tenure options, and they are usually in even numbers, starting from 12 months all the way to 120 months. These EMI tenures are pre-decided by the company, meaning that there is hardly any flexibility on offer when you are choosing your tenure.
This rigid system of tenure is in place to ensure that whenever you take a loan, you nurture a disciplined manner of paying it back, thereby ensuring that your credit history develops and also you don’t create a default for the lender.
However, although these systems are designed, keeping in mind the greater good, for young lenders, more often than not, this system proves to be a hassle rather than a boon. Thus personal loan lenders have come up with a flexible schedule of paying back loans, and in this manner, you get a certain degree of freedom on how you back the loan amount.
For example, in a flexible repayment system, you get to choose the date and day of the month on which the loan amount will be deducted from your account and also the amount you want to pay back every month. So while a home loan may ask you to pay ₹30,000 on the 15th of every month, in a personal loan, you can choose to pay ₹1200 on the 20th of every month, thus reducing the overall financial stress on you.
Personal loans can be paid off until seven years, and thus there is a great deal of flexibility in the system.
Fixed-Rate of Interest
Due to constantly changing market conditions, oftentimes, lenders may charge you a revolving rate of interest or recurring rate of interest. This is mainly done so that the EMI you pay every month is adjusted for inflation, and the lender does not lose out on any investment due to changing market conditions.
But while this system might be good and profitable for the lender, it often forces the borrower to pay up huge amounts in the form of interest and thus is disadvantageous in nature.
On the other hand, when you take a personal loan, the amount of interest that is decided when you fill out the application will remain the same throughout the tenure of the loan, thus ensuring that you pay the same EMI amount every month and don’t end up spending too much over what you originally borrowed.
A personal loan has many benefits aligned towards empowering you, the borrower, with the maximum number of advantages. So if you are facing a cash crunch scenario and thinking of getting a personal loan, now would be a good time to apply for it and make use of all its advantages.