Personal loans are quick and easy to avail of and the greatest advantage is that the product requires no collateral. Moreover, the documentation requirements are minimal with faster approval and disbursement. Compared to other kinds of loans, such as home loans, personal loans are more convenient. Most financial institutions provide this product in their offering; however, understanding when to avail of this option is crucial.
Personal loans are ideally not the most convenient financing option when it comes to fund consumption needs like purchasing a used car or a television. Choosing personal loans only for emergencies is recommended and that too only if you are assured of being able to repay it in a timely manner. The 5 situations when Personal Loans come useful are:
When is Personal loan useful?
- Settle high-cost outstanding debt
Choosing to apply for a personal loan to pay a more expensive debt obligation is advisable. For example, some people borrow money from private lenders where the interest rates are exorbitant. In such cases availing a personal loan becomes a more cost efficient choice and reduces the total outflow. Moreover, this product is offered by financial institutions and servicing the loan in a timely manner can help you build a good credit history, which can be beneficial in the future.
- Paying large credit card balances
If you are rolling over your credit card balance for several months, opting for an online personal loan can be beneficial. Paying minimum amount on your credit card significantly increases the servicing cost, which can be very expensive. Instead, a personal loan can help you pay off the credit card balance at a lower rate of interest.
- Higher education
Availing a personal loan to fund higher studies can be an option. The reason is that with higher education you will be able to earn more, which can be beneficial in repaying the loan amount.
- Funding short-term requirements
Some salaried individuals often use personal loans to bridge the gap while buying a property. This can be a good option only when you are assured of receiving the money for a short duration. Moreover, the amount should be small and should not in any manner result in financial difficulties for you.
- Business owners who are unable to provide security
Most lenders require collateral while providing loans to business owners. However, start-ups and service providers often do not have any security to provide lenders. In such situations, availing a small personal loan to ideate your business and provide it the push needed to succeed may become necessary.
Personal loans are offered by most financial institutions. It is, therefore, important to do a personal loan compare study to ensure you find the best product at the most affordable cost. There are a few leading players in the market that provide personal loan services, with whom you don’t have to worry much: Mahindra Finance, Capital First and Fullerton Finance. Capital First is a leading NBFC providing instantaneous loan approvals and the loan amount can be credited into a borrower’s account in as early as 48 hours. Know more about it here.
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