Personal loans are taken for multiple purposes—from associating debt to pushing in that pool your family has always wished for. But your personal choices have reasons of its own.
You should learn how a personal loan works in case you are thinking of taking it.
Personal Loans Vs. Other Financing Options
As personal loans are unsecured loans, there is no requirement to offer collateral if you cannot repay the loan. The creditor won’t be able to seize anything if you take an unsecured personal loan and are unable to repay it, but there will be some consequences. Your credit score will drop, and your loan could go into default. On the other hand, collateral is required for secured loans, like your home as a mortgage or your car if there is an auto loan. If you fail to repay your secured loan, your property will be seized by the lender.
Your credit score credit history is used by unsecured loans and to determine your qualification. Home loans and auto loans need you to use those loans for definite drives, whereas personal loans don’t have identical necessities. Personal loans can be used to fulfil most of your purposes within the terms and conditions framed in the agreement of your loan.
As personal loans come with a considerable amount, monthly payments are made till the loan is completely repaid. This is not the same as credit cards. People use credit cards up to a definite amount till your credit limit. If you are able to pay monthly, you are able to use your credit card as per the limit.
Benefits of Taking a Personal Loan
Personal loans can be used for any of your requirements if you are aligning to the reasons and terms and conditions of your loan agreement. Don’t use the money for purposes like gambling or post-secondary education. Here are reasons and benefits of taking a personal loan.
Assistance for Emergency Cash
If money is required to cover bills or there is any emergency issue that needs immediate monetary attention, a personal loan is the solution for you. You can apply it offline and also through an instant loan app like PaySense where your application will be approved in a few minutes. You could receive funding that day or within a few business days, depending on your lender. PaySense provides personal loan to cover various emergencies like
- Payment for previously due home payments and utilities
- Bills for medical expenses
- Expenses for funeral
- A sudden car repair
A personal loan works as a substitute for a payday loan. Payday lends are short-term and high-interest loans that generally necessitate repayment after you get your next paycheck. There is no mandate to submit a credit check, but you will get the funding instantly. But the worst part about payday loans is the interest rate can reach up to 400%, and as many borrowers, you might not have the required funds to repay the loan within the required timeline.
Consolidation of Debt
People owe an unbelievably huge amount in credit card debt. It comprises the purchases people made, as well as their interest and fees. If all of these add up, it can hold many consumers back from compensating off their credit card liability.
As a form of debt consolidation, personal loan can be used, especially when you have credit card dues. If you have a good credit score, personal loans will charge lower interest rates as compared to credit cards. The best personal loan will charge you low interest in the single digit as compared to credit card loan, which will set you in double-digit. In an emergency, take out a personal loan and pay off the outstanding balance of your credit cards and then pay your personal loan contractor.
Home Improvement and Repairs
You can ask for a home equity loan in need if you own a house. On the other hand, you can also opt for a personal loan through an instant loan app and get instant approval. Home equity loans are perfect for home projects, but as they’re secured, you have to use your home as collateral. But due to pandemic, few lenders have constricted requirements for a home equity line of credit. If you don’t want to get into stress and complication of losing your home, a personal loan is the perfect alternative. Additionally, if you have an instant loan app, it will be easier for you to get the approval of the loan along with the disbursal of funds as compared to home equity loan.
If you are shifting from one city or state to another, there will be significant expenses involved due to which you would need extra cash. In such a case, you can take a personal loan as it will cover costs for your moving and packing, transporting luggage, and also the cost of the new apartment which will have an advanced payment and a huge amount of security deposit.
Finance Requirement for Vehicle
If you want to buy or lease a car, you can take auto loans. Although auto loans have lower interest rates, you have to keep any of your vehicles as collateral because it is a secured loan. But if you are too worried, go for a personal loan because it won’t require any collateral; but remember that the interest rate will be higher than a usual auto loan.
Expenses to Finance a Wedding
Try to cover your wedding expenses within budget rather than taking a loan. You can borrow money through credit cards and personal loans. But credit card loans will have higher interest rates than personal loans. If you take out cash in advance on a credit card, the interest rates and fees will be higher. Try going for a personal loan in this case as it will be less expensive.
Apply for Loans of upto ₹5 Lakhs easily using your phone or laptop, and pay back on low EMIs