When you’re trying to get your finances in order before buying a home or starting a business, an instant personal loan can be a helpful source of capital. However, most personal loans tend to come with higher interest rates and fewer borrower protections than other types of loans. This means that if you plan on borrowing money from a personal lender rather than securing an alternative loan through a bank or other financial institution, you should do your research and find the right one for your situation. In this blog post, we’ll cover everything you need to know about getting the right type of personal loan online for your financial goals and needs. The following information will help you understand how personal loans are structured, which factors lenders take into account when assessing your application, and what to expect from the different types of lending available to consumers.
What is a Personal Loan?
A personal loan is a type of unsecured loan that you get from a lender or online loan app or bank or credit union, that you’ll repay with interest. With a large number of unsecured lending options and loan apps, including credit cards, auto loans, and home equity loans, lenders tend to favour those who have a solid credit score and a viable repayment plan in mind.
If you have a good history of paying off past loans and have decent credit, you can apply for a personal loan from a bank, credit union, or an online loan app. Unlike some other types of loans, you don’t have to put up any assets as collateral to get a personal loan. The loan amount is typically based on your income, credit score, and financial needs.
How to Choose the Right Personal Loan for You
There’s a difference between borrowing and loaning, and it’s important to keep this distinction in mind when choosing a personal loan.
- How large is the loan amount? Large loans can be more expensive in the long run.
- What’s your monthly payment amount? If your monthly payment is higher than your monthly bill, it could put you at risk of late payments and increased interest payments.
- Eligibility conditions matter – your income, your debt-to-income(DTI) ratio and your ability to repay the loan within the agreed time.
- Know your Interest rates charged and fees included in your loan, the length of time you’ll have to repay the loan.
- Understand your repayment schedule – how much you’ll have to pay in interest, what happens if you miss a payment or are unable to repay on time or if you have to declare bankruptcy.
How to Make the Most of A Personal Loan?
Whether you decide to take out a personal loan or not will depend on a variety of factors specific to your individual financial situation. If you’re financially sound and you can afford to repay the loan, a personal loan can provide a valuable source of funding.
- You can pay off debts in a consolidated manner
If you have taken multiple loans and are struggling to pay off the debts, it is a good idea to take one big personal loan and clear off the smaller debts. While doing so, it streamlines your financial management while bringing about financial discipline and also, improves your credit score in the process.
- You can take a family trip or personal vacation
Personal loans can be used for so many purposes not necessarily always in situations of distress. It often happens that our salary is just enough to cover the monthly expenses and savings plans and we do not have enough money to plan a holiday just for ourselves or with friends and family. A personal loan is that much needed relief to plan a holiday and not worry about how to meet that expense with your salary. The repayment options do not pinch much if we do our due diligence.
- You can undertake a medical procedure
We often postpone any health related minor day procedures because we worry our salary cannot cover these expenses or we don’t take those health hiccups too seriously to address them. A personal loan comes in very handy to undertake that dental procedure or medical attention which may not be covered in a health insurance plan.
- You can take care of an expensive purchase for the home
Have you been delaying the purchase of a favourite piece of home furniture, or learning a new hobby, buying a piece of jewellery, or a two-wheeler? A personal loan can bridge that gap for you.
- You can take a personal loan in times of an emergency
Last but not the least, a personal loan becomes the most essential piece in times of an emergency. An emergency does not come announced or with any sort of warning. With no collateral attached, the approval process and the easy application process of instant personal loans from these popular online loan apps, personal loans are here to stay.
Zubin is really passionate when it comes to producing content. He produces content on various subjects like finance, insurance, health, sports etc. Other than creating content, Zubin works with a 360-degree digital marketing agency as a Lead Content Strategist for various Websites.
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