Personal Loan is an unsecured credit provided by financial institutions based on criteria like employment history, repayment capacity, income level, profession and credit history. Personal Loan, which is also known as a consumer loan is a multi-purpose loan, which you can use to meet any of your immediate needs. For instance, you may use a personal loan to consolidate debt, pay for home renovations, or plan a dream wedding. Personal loans can be offered by banks, credit unions, or online lenders. The money you borrow must be repaid over time, typically with interest. Some lenders may also charge fees for personal loans.
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Personal Loan is an unsecured credit provided by financial institutions based on criteria like employment history, repayment capacity, income level, profession and credit history.
What is a Personal Loan?
Benefits of Personal Loan
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Benefits and features of a Personal Loan:
- Fewer documents required: Unlike other types of loans like Home Loan or Gold Loan, where you must provide several documents, Personal Loans require minimum documents and the approval process is quick.
- Immediate disbursal: With various financial institutions offering Personal Loan online services, the loan amount is disbursed within a few hours provided the lender is convinced of your repayment capacity.
- Flexibility: Another significant feature of Personal Loan is that the lenders offer you the flexibility to choose your loan tenure. Usually, Personal Loan tenure ranges from one to five years. So, you can select the loan term based on your repayment capacity. You should opt for a shorter loan, so that you can save on the interest payment and repay the amount faster.
- Free to use the funds for any purpose: One of the biggest advantages of Personal Loans is that you can use your funds for any purpose you like – be it a wedding, a holiday, a gadget, business investment, home renovation etc. A Home Loan or a Car Loan must be used for the purpose that you borrow it.
- No need to provide collaterals against the loan: Personal Loans are unsecured loans – this means you do not have to mortgage collateral such as your home or shares to get the loan.
- Easy documentation: The paperwork and the processing time required for a Personal Loan is much lower than for most other loans. You can get a loan with the following documents: ID proof, address proof and income proof. If you are pre-approved for a Personal Loan, you may not even need to submit any documents.
- Pocket-friendly repayment: You can pay off your Personal Loan in easy instalments or EMIs. The payment terms are usually flexible, and you can choose a tenure that allows you to optimize your monthly outgo according to your needs.
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Types of Personal Loans
Personal loans may be secured or unsecured. A secured personal loan is one that requires some type of collateral as a condition of borrowing. For instance, you may secure a personal loan with cash assets, such as a savings account or certificate of deposit (CD), or with a physical asset, such as your car or boat. If you default on the loan, the lender could keep your collateral to satisfy the debt.
An unsecured personal loan requires no collateral to borrow money. Banks, credit unions, and online lenders can offer both secured and unsecured personal loans to qualified borrowers. Banks generally consider the latter to be riskier than the former because there’s no collateral to collect. That can mean paying a higher interest rate for a personal loan.
Why is a Personal Loan important?
The reasons why personal loans are important:
If money is owed on credit cards with higher interest rates, these debts can be paid off using a personal loan with lower interest rates. You can clear off your debt far more quickly since less of each monthly payment now goes toward the interest costs.
Small Home Improvements
It’s entirely expected to utilize equity home advances for home improvement projects since you’re reinvesting in your property. Yet, on the off chance that you needn’t bother with a huge sum, a personal advance for home upgrades might be more affordable and simpler to apply for.
A personal loan could help you out when you need to buy something that is big or expensive, and you don’t have the money for it.
Investing In Yourself
Personal loans can provide funding when you start a new business or begin to learn more skills for your career; however, various lenders can put a limit on how you use your loan proceeds. For example, various personal loan lenders do not allow you to use the loan for higher education costs.
You may have emergency savings for unexpected occasions; however, sometimes, acquiring a personal loan may be the only choice you have. If you’re facing extensive medical bills or other emergencies, a personal loan will come in handy.
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