A Personal loans are unsecured loans provided by lenders (financial institutions) for several purposes. They are popular for their versatility and collateral-free. After getting a loan, the lenders hardly care about the end use of the loan amount. You can use the loan amount to pay for your children’s higher education, take an international trip, or manage your or your loved one’s wedding.
When you need instant cash to meet an immediate financial need, you can opt for a loan without redeeming your savings or investments. It is the best option to manage your finances in times of financial instability. Particularly when the economic recession is induced by the unprecedented COVID-19 pandemic.
So, if you are one of those people who search for ‘I need a personal loan’ but do not know how to use it smartly, we have prepared this article for you to understand how to make better use of your loan.
Benefits of a Online personal loan
There are several benefits associated with a personal loan besides having instant access to cash. For instance, you can avail yourself of the most attractive interest rates, flexible loan tenure. But how to use it smartly depends on your plans.
Here is how you can use a personal loan smartly
- Save money
A personal loan can help you save money and avoid debt traps. If you have several other loans with remarkably high-interest rates, taking a loan with affordable rates of interest can help you clear off outstanding dues. You can also use a loan to consolidate other debts in your strategy to save money and avoid debt traps.
- Improve credit score
A credit score is an important parameter to assess the borrower’s loan credibility. A healthy CIBIL score informs the lender about your creditworthiness, your payment capacity, and also assures that you will not default in payments. It increases the availability of a maximum loan amount and a lower interest rate. If you repay the loan amount on time, you will improve your credit score and hence, a greater chance to get new loans.
- Easily consolidate all your debts
Another benefit of getting a personal loan is that it can clear off many debts at once so that you can concentrate on repaying only one loan. Many people apply for loans in the form of credit cards, utility bills, etc, which leads to further financial problems. It becomes difficult to repay several interest rates from your savings or monthly income. However, you can use a personal loan to consolidate all your loans into one loan. It allows you to pick a repayment loan tenure based on your preference.
How to better use a personal loan?
Some of the reasons you can apply for a personal loan are:
Medical emergencies
If you have to deal with a medical emergency like an immediate surgery, you can apply for a personal loan to get instant cash and assuage yourself of the worries. The best part about a personal loan is that the loan amount is disbursed almost instantly. Some lenders offer to transfer the amount within 24 hours.
Higher education
Unlike traditional education loans, there is no prerequisite for availing of a personal loan. It doesn’t include specific admission requirements. You can apply for your preferred loan amount to your college fees. However, your loan amount depends on several factors. You will need to use a Personal Loan EMI calculator to know your eligibility.
Wedding
Indian traditions mandates inviting all close relatives and friends to a loved one’s wedding. The fascinating part of weddings in India is that although the cost of it can cause financial distress, people do not hold from spending. Getting personal loans to cover the cost of a wedding is another reason behind its popularity.
Vacation
A personal loan can help you travel to your favorite destinations without worrying about money. Whether to plan your honeymoon to a faraway place or book a luxury cruise, a loan can help you fulfill your dreams.
Things to know in advance
Before applying for a loan amount, assess your requirements and your financial capacity. You should know how much you need and how much you can pay as EMI. Every lender has a online EMI calculator, which can be used to know your eligibility and calculate an EMI as your preference.
Next, check your lender’s eligibility criteria and the documents required. Most lenders have similar criteria. The basic eligibility criteria are:
- You must be an Indian citizen and currently living in India.
- You must be working at a public or private company, or you must own a company.
- Must earn a certain amount every month (in the case of a salaried person) and a minimum net profit (in the case of a self-employed person).
- Your credit score must be above 750
- The mandatory documents to furnish are identity proof, address proof, age proof, copies of ITR, salary slips, and banking statements.
In short
A personal loan is the best option to manage your finances without putting any burden on your pocket. It serves multiple purposes and can be utilized smartly to save money and prevent debt traps.
