We live in a society where man has unlimited needs but we have limited means to satisfy them. We have been given a facility where we can borrow capital or money from lenders at paying them later with some interest. There are many types of loans such as home loans, student loans, educational loans, personal loans, and many more.
The most basic form of it is “ personal loan “
A personal loan is a type of loan which does not require any collateral or security offered. Also called an “ instant personal loan” It requires minimal documentation. And as stated this loan can be used for any personal use. It may be paid back in form of monthly installments with a stipulated period. These types of loans are offered by banks, credit unions, and even online lenders. You can use these loans to cover expenses such as vacation costs, medical bills, wedding expenses, any repairs, and even unexpected expenses. In some cases, you might be asked to show for what personal purpose and they might restrict you so read terms and conditions properly before accepting it.
Types of Personal Loans
Secured loans – This kind of loan requires collateral or some kind of security to be kept with the lender. You may keep assets like cash or saving account certificates. Also, physical assets may be kept in the form of car or house papers. If you default the loan lender can take on these assets officially to recover the debt.
Unsecured loans – It requires no collateral or security to be kept while taking loans. This may be considered riskier as there is no means to recover the loan. But still, these types of loans are offered but with a backdrop of charging higher interest rates which might help them to cover their margin.
We can further divide these loans based on their use
Pension loans – These are meant for retired personnel. Basic eligibility for this is giving pension proofs. They are allowed to take it for any expenses such as medical bills or any general expenses.
Travel loans – These can be called holiday loans. In this type of loan, the amount can be customized as per our need and even insurance benefits can be added.
Wedding loans – weddings are an inevitable event in human society. It might require huge expenses and money won’t stop from making this day memorable, it can be taking any family member.
Education loan – As the rising need for education, its expenses are not easily incurred by everyone. Fees of institutes of medical colleges and IITs are very high and these loans might come as a savior
There are many more loans categories under personal loans which can be taken or even be specially customized by your lender for you just the interest might vary from bank to bank and even lender to lender. it’s always advisable to take loans from authorized banks rather than taking from unauthorized lenders which might trap you in viscous circle of poverty.
Advantages of Personal Loans
These loans are handy financial options that are helpful in situations of urgent financial crises. Some of its advantages are as follows
- Financing up to 25.lakh Rs – it is provided by most financial institutions. The limit may vary a bit but overall the same is followed by all. These funds are being used for various purposes like education, housing, medical expenses, and many more.
- No collateral required – these loans mostly come under unsecured kinds of loans where it is not necessary to keep security or collateral with the lender. It is the easiest form of a loan.
- Fast approval – as it doesn’t need collateral and security such loans are approved quickly. Also, complexities are less.
- Attractive rates of interest – such loans have a competitive market as many lenders are providing these services. They bear low rates of interest which helps us to keep our EMI affordable.
- Minimal documents – only quite a few documents are needed as these do not need security papers. The main documents needed are KYC documents and Bank account statements which will show you financial stability.
- Flexible and versatile nature – these can be used for any purpose as no restrictions are to be followed. It can also be borrowed for the short term ranging up to 60 weeks. These are easy to manage and also having a good credit history might help you gain a low rate of interest.
Top 5 reasons for opting for Personal Loans?
You can compare the interest rates of loans and then apply. Some factors such as fees, repayment terms, borrowing limits, security requirements are to be checked before applying. Once approved y your side and even from the lender’s side, the loan amount is transferred to your bank amount within 24 hours to 72 hours.
- Debt consolidation – It is one of the most common reasons why people opt for personal loans. In layman’s terms,s this loan money can be used to pay other multiple loans. It helps us to make debt payments in time and also saves our credit score from deteriorating. Also, interest is low which won’t add more to our hardships. It can also be treated as an alternative to payday loans. Payday loans have a very short period to repay which often makes it difficult for borrowers to repay it before the due date. They are charged with high rates of interest on payment failure. In comparison to these, personal loans have a longer time to repay and are also cheaper.
- Home remodeling and moving costs – one who is looking for the fund which can help you to upgrade your home or any other project can opt for these loans. It consists of repairing and renovating the exciting house not rebuilding a new one. It includes painting, electrical circuit repairing, plumbing, etc
The same fund can also be useful to those who are playing to move out of their current place. It also takes a series of other tasks such as buying new furniture, transport of vehicles, and some additional expenses. If you are out of cash for this can be your perfect choice.
- Emergency expenses – surprise medical bills are another reason to take personal loans. Even common medical expenses might cause us huge money which might not be readily available. Even veterinary expenses are covered through these loans.
- Vehicle financing expense and appliance purchasing – The automobile industry is still a luxury for many. There might be cases where you might be able to afford a car but only on EMI payments in such cases, these loans help us a lot. Also, little electronic gadgets which have become today’s need such as mobile phones, washing machines, dishwasher and many more.
- Wedding purpose – According to Indian society marrying is a compulsory ritual and everyone dreams of getting married royally. These personal loans make this true by providing you with loans at low-interest rates.
To sum things up, personal loans are an easy and handy tool that can be used by us to meet our daily expenses and their low-interest rates makes it an attractive deal.