Personal loans have today become a preferred source of funds, especially when the money is needed on short notice. With several lenders willing to offer literally huge sums of money of even up to 30 Lakhs, these loans seem a boon for almost anyone with a steady income. Those mulling on applying for a personal loan, must however carefully weigh the pros and cons, before getting into debt.
Why Opt for personal loan?
There are several factors that work in favour of a personal loan. Let’s check them out.
- Personal loans are unsecured loans, meaning they require no collateral. It is therefore possible to get a personal loan of say 10 Lakhs without pledging a piece of land or any other property. This makes it possible to cover wedding expenses, home repairs, emergency medical expenses or even putting children through school without having to lose ownership of property.
- Also failure to honour repayments at worst will affect credit score, and not risk personal property. It is important to note that some lenders may take legal action to recover the loan.
- Lenders do not trace the use of borrowed funds. There is hence no compulsion to keep record of the expenditure. However tracking use of the money is good fiscal discipline.
- Personal loans make great refinancing options. Getting a personal loan to pay off other debts tend to prove cheaper, if done right. Managing debts are bound to be easier as borrowers now need to simply focus on repaying one personal loan instead of keeping track of several creditors.
- Creditworthy customers may get offered personal loans at a lower interest rate, especially when they avail the loan from their bank.
- Personal loans applications are cleared quickly, in most cases within 24 hours, as there is hardly any paperwork or documentation process involved. They are the best option in case of an emergency.
- Bad credit loans are available but loan amounts and interest rates are bound to vary based on credit score.
Why think twice before taking personal loan?
Despite favourable factors, there are few points that need attention.
- Personal loans attract high interest rates, hence affordability must be considered. Failure to repay the loan will affect credit rating and chances of availing future loans.
- Most of these loans cannot be foreclosed or paid up earlier, making it mandatory to stick to the original loan term and pay far more than the borrowed amount.
- Reputed lenders sanction personal loans only to eligible applicants who have a good credit score and sufficient income to repay the loan.
Are personal loans suitable for everyone? May not really be, but there are no specific restrictions from lenders as long as one can repay the loan.