Personal loans are gaining momentum in India. This is evident by the fact that the Times of India reported 24% of total bank lending are personal loans as per RBI data. There is something in this credit arrangement that makes it popular amongst the borrowers. Let’s see how!
Personal Loans – An Overview
A personal loan is a type of credit facility where the banks lend to the borrowers without any security. Usually, the personal loan interest rate is affordable, considering its unsecured nature, and the funds can be utilised by the borrowers for any purpose. These loans are usually for a short duration ranging from 2 years to 5 years.
Why Are People Opting for Personal Loans?
The topmost reasons that make personal loans attractive amongst the borrowers are:
● Debt Consolidation
There may be times when a borrower may be overburdened with multiple debt arrangements. Any negligence in repayment may negatively affect their credit scores. This burden can be relieved by availing a personal loan which can help clear out other lending arrangements and reduce it to one.
● Easy Repayments
Personal loans come with easy repayments where the EMIs are affordable, and tenure is flexible. One may either select a higher personal loan EMI or a longer tenure as per their convenience.
● Freedom of Expenditure
There are no restrictions on the utilisation of personal loans, and you can use them for anything like marriage, home renovation, travel, education, repayment of other lending arrangements, etc.
● Easy Approval
Getting any loan approval is a tedious task considering the banking system. However, availing of a personal loan is a lot easier owing to fewer formalities and documentation. You may even get the loan sanctioned within a few minutes.
● Minimum Documents
As personal loans do not involve much paperwork, they are easily approved. No documents are needed for security as there is no requirement of security in the first place. Basic documents may include KYC, bank statements and income tax returns (depending on the bank).
● Friend in Emergency
In case of any emergency, a personal loan may turn out to be a saviour. Short-term fund requirements, especially in case of any emergency, can be easily met with personal loans. They are comparatively cheaper to various cards and other unsecured lending arrangements, thereby making them a friend in need.
Should You Apply for a Personal Loan?
Owing to the above benefits, you may truly consider personal loans in case you require funds. Availing of a financing arrangement should align with the monthly budget of the borrower so that it doesn’t create a financial burden. If you want to plan your finances and want to apply for a personal loan, then you can use a personal loan EMI calculator, which will tell you the EMI based on the interest rate and tenure.