A personal loan can be defined as a debt taken from an authorized bank or organization which might not require a lot of documentation and collateral or security. You can take up one to fulfill any kind of financial needs. However, like any other loan, you must repay the loan amount along with the applicable interest in easy equate installments. The time period of paying back the loan might vary from a few months to up to several years as per the agreed terms.
What can these
be used for?
The first and foremost advantage of taking up this loan is that you are free of using the funds on any of your personal financial needs, be it for a long-awaited holiday tour, buying equipment, renovating your home interiors, or in any other way you want to, unlike the terms applicable for other forms of loans.
How to get a
Applying for these loans is pretty much similar to applying for any other loan. Fill up the application form, submit the required documents, depending on which, the bank might perform a check on your credit score and financial history, depending on which a loan offer might be made or the proposal might be rejected in case of any discrepancies. In case of approval of your application, the loan amount would be transferred directly to your bank account. However, before applying for a personal loan, all the applicable terms and conditions, including the applicable interest rate, the tenure of repayment must be carefully checked.
Being provided without any security, personal loans usually have much higher interest rates as compared to the other forms of loans.
However, the interest might also be dependent on each individual’s financial history and credit score. A person with a really good credit score might be applicable for lesser interest rates as compared to a person with not as strong credit score.
How can these
*Lower Interest Rates than Credit Cards: If you compare the applicable rate of interest with the interest rates applicable on a personal loan, it might save you a lot of money. If you are going to spend through your credit card, knowing that you might have to pay the interest, in spite try out your eligibility and save yourself that extra interest.
*Paying Off Debts: These can be really helpful in case of paying you any kind of overdue debts that might be costing you fortunes. You can use your loan funds for any purpose as it does not limit its use on any personal purpose.
*Getting a personal loan and paying off the EMIs regularly also boosts up your credit score which will enable you to get easy financial help in the future.
Personal loan might help you out of a lot of financial problems, however, using the same for non-important purposes might just land you up paying high interest rates. Moreover, before getting a personal loan and getting its EMIs and repayment period fixed, you must have an assurance about the money flowing in, else it may backfire, decreasing your credit score and landing you in higher debts.