Personal loans are a popular financial tool for addressing various needs, from consolidating debt to funding major purchases. Understanding the who, why, what, and when of personal loans can empower you to make informed decisions and optimize your financial health.
What is a Personal Loan?
The personal loan is much sought after loans in the banking scenario. It is one such credit device from the banks that can be of great help for you in case of emergencies as well as need. There is no restriction on the expenditure of the loan amount that you receive from the bank. You can use it for any purpose.
Why is it considered an Unsecured Loan?
These loans are termed as unsecured loans by the banks and NBFCs. This is for the same reason: banks and NBFCs charge a higher rate of interest for online personal loans. Not only a higher rate of interest, but you will also need to pay for higher processing fees as well as higher verification charges.
There is no requirement of any collateral in order to avail personal loans. Collaterals refer to any security deposit that the bank keeps with itself till you repay the total loan amount along with the chargeable interest. When you apply for a personal loan, the banks lend you money with a promise from you that you would repay the amount in the given repayment duration.
Who can qualify for a Personal Loan?
Online personal loans are available for each and everyone who possesses the necessary eligibility criteria. If you are not sure about the eligibility criteria to avail a personal loan, then you can easily check the online personal loan eligibility terms over the internet.
The first and foremost thing that is an essential requirement for being eligible to avail personal loan has an impressive credit score and credit history. Credit history refers to past events when you have taken loans from banks and how have you repaid them. If your repayment history is good, then it is apparent that you would have a good CIBIL score, which can help you get personal loans quickly and with lesser rates of interest.
The next thing that would also play an important role in giving you better deals on personal loans as well as increase the chance of your loan application being approved has a stable and decent monthly income. If the bank feels that you are financially stable and will be able to repay the loan in the given repayment tenure, then it may provide you with a loan.
When can Personal Loans be of Great help?
A personal loan can be used for anything and everything. Individuals often make use of personal loans for the following reasons:
- Pay up debts
- Fund educational expenses
- Invest in business
- Down payment for the car and home loans
- Weddings
- Vacation tours
Advantages of Personal Loan
- Easy application procedure
- Simpler documentation process
- Faster processing of loan application
- No collaterals and guarantors required
- Flexible terms of repayment
- Help you build a decent credit score
Read Also: How are EMI breakups done in Personal Loans?
