Personal Loan on your mind? As long as you intend to use it for anything legal, there’s no harm. A Personal Loan is quite a saviour during a financial crisis. Whether you need to deal with a medical emergency or wish to furnish your new apartment, Personal Loans can help you tackle all kinds of money troubles. Take a look at these pros and cons, to help you decide if you really need that loan, or not.
A Personal Loan does not require any collateral or security, unlike Home Loans and Car Loans. Even if you don’t own assets (like a car or a home), you can easily apply for a Personal Loan, as long as your Credit Score is good.
Documentation required for Personal Loans is much less compared to other secured loans. All you need to submit is, your ID proof, Income proof, Address proof and age proof. As no property is being mortgaged, the paper work needed reduces drastically. In fact, some banks even offer pre-approved loans and e-approvals.
Personal Loan approval is very fast. Nowadays, you can also opt for something called ‘e-approval’. The e-application process is faster and hassle free. Some banks even approve and disburse the loan within 24 hours. These loans are perfect to deal with a financial emergency when funds are urgently needed. Don’t you agree?
Unlike Home Loans and Car Loans, Personal Loans give you the freedom to use the money for whatever you need. Once the bank credits the money to your account, you can use it as per your needs. Be it for wedding preparations or decorating your house or anything else, you decide.
You’d be surprised to find out the numerous offers that financial institutions offer when it comes to Personal Loans. Personal Loan sales and free gift vouchers are very common on online platforms. So make sure you check out all the options before finalising a lender.
In order to be eligible to avail a Personal Loan, a good Credit Score is a must. While the guidelines vary from bank to bank, they are quite strict. A good credit history will most certainly work in your favour. If you haven’t been regular with your Credit Card payments and other EMIs, the chances of rejection are higher.
High Interest Rates
While the interest rates on Personal Loans are lower compared to the interest rates on Credit Cards, they are still higher compared to secured loans. Personal Loans are considered to be high risk loans by lenders as there’s no collateral involved, which is why they charge a high rate of interest.
Sometimes, you opt for a Personal Loan because you are in urgent need of funds, but within a few months, you are able to repay it. We agree that it’s a good idea to pay off your debt instead of spending so much money on interest, however, some banks don’t allow prepayment of Personal Loans and even if they do, they usually charge a prepayment penalty.
Now that you know the pros and cons of involved in taking a Personal Loans, you can make an informed decision about whether or not you want to apply for a Personal Loan.