A personal loan helps you use funds for a variety of purposes. It is an unsecured loan given to people with clean financial and stable credit records. Although it is easy to apply for a personal loan these days, you must remember to do the due diligence to avoid financial stress later on.
When taking out a personal loan, you need to know your goal and your needs. Once this is done, you need to know the tenure you plan to repay this loan based on your income. The interest and the amount of the loan determine how long it will take you to repay the debt.
You can use personal loans for multiple purposes. There are no restrictions on how you can use the funds. You can use it for travel, home renovation, paying off your debt or other personal needs. Here are some advantages of a personal loan.
No collateral required
You don’t have to freeze your assets. Unlike secured loans like home or car loans, a personal loan doesn’t require you to pledge anything with the lender. You can continue to enjoy your wealth without restrictions.
Freedom to use the loan
A personal loan can be used for any financial need, e.g. For example, to pay your medical bills, your child’s tuition, or travel. It gives you the freedom to use the funds when you need them. For eligible individuals, the funds are readily made available by lenders.
Unlike other types of loans, a personal loan takes a minimum amount of time to be approved. You can get a personal loan in a few hours to a few days, provided you meet the bank’s basic eligibility criteria. A personal loan can help you arrange funds promptly when you need funds to deal with an emergency.
Good for a short time
A personal loan can be borrowed for shorter periods of time. You can take it from a few months to a few years. You do not have to service the loan over longer terms. However, it is important to choose the term of the loan according to your ability to repay so that it does not burden your other expenses.
Take it for business needs
A personal loan can come in handy if you are a businessman who often needs instant money to meet day-to-day expenses. You can pay the down payment for a new office or expand your business with a personal loan.
Pre-approved personal loan
Many lenders offer pre-approved personal loans to existing customers with a clean financial history and good credit scores. If your credit score is good (700 or more), it’s easy for you to qualify for pre-approved credit.
A personal loan is the best option for both employees and the self-employed. It takes less time and requires a minimal documentation process. This is an unsecured loan, so the lender approves the credit basis of your eligibility, such as age, income, existing debt, and creditworthiness, among other things.
It is best to compare the interest rate with different maturities for the amount you need before concluding the loan agreement. Also, don’t forget to negotiate lower interest rates if you have good credit. Keep the tenure shorter for lower-interest liabilities. The table below compares more than 20 banks for personal loans from Rs 5 lakh for three years. You can compare interest rates and EMIs on the loan. One can decide based on his requirements.
Interest rates and EMI for personal loans
Compiled by BankBazaar.com
Note: Interest rate on personal loans for all listed (BSE) public and Pvt banks considered for data compilation; Banks for which data is not available on their website are not included. Table contains the lowest interest rates for personal loans (regardless of the loan amount). Data collected from each bank’s website as of 25 October 2022. Banks are listed in ascending order based on interest rate, ie the bank offering the lowest personal loan interest rate is at the top and the highest is at the top below. EMI is calculated based on the interest rate shown in the table for a Rs 5 lakh 3 year loan (processing and other charges are assumed to be zero for EMI calculation); The interest and fees mentioned in the table are indicative and may vary depending on the bank’s terms and conditions.