A personal loan can bail you out of many financial emergencies. Here’s taking a look at why you should avail of one.
Most people balk at the idea of taking a loan, because they are not comfortable about a part of their income going towards monthly repayments. But there comes a time when borrowing money becomes imperative. You might be faced with an emergency or may want to realise a long-cherished goal: and an infusion of funds at this point can help out. A personal loan is a good option in this case.
If you are unsure about taking a personal loan because you have only rudimentary information about it, then read on:
* It is expensive because it is unsecured. You might have heard that personal loans are expensive, with a high rate of interest. This is true, and the rate of interest is higher because personal loans are unsecured loan products. Unlike a car or home loan, where the car or house is the collateral against the loan, your personal credentials and eligibility are the only factors on which the bank issues the loan. Thus, the higher rate of interest and smaller tenure are put in place to ensure that the loan is repaid faster and without default.
* The rate of interest determines its affordability. But you must shop around for the lowest rate of interest on personal loans. The lower the interest rate, the more affordable the loan becomes because the EMIs will be lower. You can also repay the loan faster if you borrow a smaller amount to begin with.
* It diversifies your credit portfolio. Loans are just borrowings for you, but lenders are tapping each of your loans to determine your credit worthiness. Thus, taking a personal loan, apart from home loan and others, diversifies your credit portfolio.
* It can be used for a variety of needs. The best benefit of the personal loan is that the lending institution does not concern itself with the purpose for which you are availing of the loan. The bank will only check your financials and credit risk before issuing the loan. If you have been a high worth customer with a well-maintained savings account, then you might even have a pre-approved loan waiting for you. You only need to give your approval for the loan and the bank sanctions it at once. You are now free to use the money for any of your requirements.
* It is the fastest mode of money procurement. When you require money quickly, you might empty your savings account or try to get private loans from friends. But most other options, such as your market-linked investments and even the FD account, will take some time for you to liquidate them. As opposed to this, the personal loan can be procured in under a couple of hours from the time you apply for it.