Personal loans have been around for quite some time and are one of the most commonly employed means of raising funds it times of requirements. As the name suggests these loans are not meant for any specific purpose and the customer is free to use the money in whatever manner he desires. Contrary to other common loans such as car loans, home loans and educational loans the personal loans come without any compliance required in manner they are spent. This is the biggest advantage of a personal loan comes with a greater degree of freedom thus making it a preferred choice in many situations.
Specific Features of Personal loans
There are several specific features which distinguish personal loans from types of credits available in the market today.
- These loans are unsecured and do not require security against them for availing.
- The purpose is not specified by the lender giving greater degree of freedom to the customer.
- The rate of interest in case of personal loan is higher as compared to the other options.
- The repayment tenure of personal loans is usually shorter than other loans typically being less than 5 years in most cases.
Key Benefits of Taking Personal Loans
There are few distinct advantages of availing a personal loan despite the higher rate of interest that accompanies it.
- The customer is absolutely free to utilize the money in a manner that he wants without any restriction from the lender. The money can be used for a foreign trip with family, buying the latest gadget or even paying off accumulated credit card dues. Some people use personal loans to raise the capital required as down payment for home or car loans.
- This is a wonderful means to raise immediate capital when in a dire need as it require minimum amount of documentation and least processing time. A personal loan can be sanctioned within a day if the right documents are available.
- There is no requirement of depositing money or any kind of collateral security for availing a personal loan.
Points to Ponder when Applying for Personal Loan
Despite the host of wonderful features that accompany a personal loan, one needs to carefully weigh all other options when applying for a personal loan.
- Being an unsecured loan the financer will definitely charge a higher rate of interest.
- The repayment tenure being short the EMIs will be more than in case of other loans.
- Personal loans often tempt people to make expenditure which is non essential. Easy availability of the money leads to over spending which has to be paid back later with a high interest.
Banks and other financing agencies are competing with each other to enhance personal loan disbursements. Some financers even offer pre approved personal loans and other special offers to people depending on their credit rating. However the decision to avail such an opportunity must be taken after careful consideration of the need and repayment capacity.
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