When You Should Opt For a Personal Loan | Personal Loan Stories

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23 NOVEMBER, 2022

Personal loans practically can be used for any purpose, ranging from debt consolidation to funding your child’s higher education/marriage or your medical expenses as per the loan’s terms and conditions. However, you cannot use the loan proceeds for speculative purposes like gambling, investing in fixed-income assets or markets, etc. Mentioned here are some good reasons to opt for a personal loan.

Emergency monetary assistance

If you require money instantly to pay your long pending bills, then you can opt for a personal loan. Many lenders allow you to go for the online route to easily apply for the loan without the requirement of visiting the branch. Such online applications, if preapproved, may get approved on the same day of placing the application. Also, post-approval, you may receive the personal loan proceeds on the same day in your bank account. Major financial emergencies that you can cover with personal loan proceeds are –

· Pay your past pending loan dues

· Meet your immediate medical expenses

· Make a payment of expenses for an unexpected home or car repair

Debt consolidation

A personal loan serves as an excellent medium to consolidate your debts, especially your outstanding dues on various credit cards. Personal loans incur lower interest rates than credit card finance charges, particularly if your credit score is 750 and above. Currently, the lowest personal loan interest rate available in the market by most lenders is 10.99% p.a. while the highest personal loan rate is 24% p.a. In the case of credit cards, finance charges may go up to 42% p.a., which is comparatively higher than personal loan rates.

Consolidating your credit card’s outstanding dues using a personal loan would not just allow you to save on your overall interest outgo but also permit you to repay the borrowed proceeds in the form of EMIs over flexible repayment tenures that span up to 5 years.

Wedding expenses

A wedding is a vital milestone in life. It requires in-depth financial planning. Creating a financial plan for your wedding assists you to arrange the events as per your budget. However, at times, despite prudent planning, you may face monetary mismatches. Here’s where a personal loan can rescue you. As a personal loan can be used for any purpose, you can avail proceeds of up to Rs 25 lakh to fund your wedding shortfalls. Doing so saves you from dipping into your emergency fund or investments for important financial goals to otherwise fund your marriage expenses.

Fund your abroad trip

Owing to the high travel packages, many may turn down your plan of visiting abroad for a family vacation. By opting for a personal loan, you can easily finance your financial shortfalls without the need for waiting for long to arrange your travel fund..

Home repairs and improvement

In case you are a home loan borrower, you have the option to opt for a top-up home loan to use the loan proceeds to repair and improve your home loan. However, if you are not a home loan borrower, the only best option to avail quick funds for your home repairs and improvement is through a personal loan. As a personal loan is unsecured in nature, you do not need to pledge any collateral to receive the proceeds. As there’s no need for collateral, the documentation for this loan is minimal, which allows the lenders to disburse the proceeds faster. In the case of a regular personal loan, the proceeds may be disbursed within 2-7 days.

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Moving costs

In case you are moving to another city, you may require additional money to pay for the moving expenses. Moving to another city means covering expenses incurred in packing your belongings, hiring movers to transport your things, uninstalling electronic gadgets, cupboards, beds, etc. and then installing those in your newly moved home. A personal loan can help to finance the process of moving your belongings to a new city.

Old vehicle financing

Instead of opting for a preowned vehicle loan, you must opt for a personal loan to finance the cost of purchasing an old car. This is because the interest rate of a preowned vehicle loan is usually higher than a car loan and even a personal loan. Used car loans have higher rates because of the involvement of higher risk as used cars do not come with any warranty like a new car, which makes lenders highly apprehensive. Opting for a personal loan in such a scenario may allow you to get a lower interest rate than a used car loan as lenders decide your rate on personal loan based on your credit profile and income.

Ending note

A personal loan is probably one of the prudent and simplest mediums to opt for loan proceeds with simple documentation, fast processing, and loan disbursal. However, before you hit on the personal loan apply online option, ensure to use the online personal loan EMI calculator to get an idea about the appropriate personal loan EMI and repayment tenure as per your cash inflows and budget.