4 MinsDec 28, 2022
When it comes to easy loan options, Personal Loans top the chart. They are easily available, the eligibility conditions are simple to meet, and involve minimal documentation. Moreover, you can apply online and avail of the loan instantly. But just because the loan is being offered, should you avail of it? Let's understand.
Personal loans - the concept
Personal loans are unsecured and multi-purpose loans that can be availed for your personal needs. You can use the loan funds for any financial need that you might have.
Should you opt for a personal loan?
A personal loan makes sense in the following situations -
- When you have a considerable financial expense to pay off and your savings are not sufficient.
- When you want to make a big ticket purchase and spread out the payment in installments over the next months.
- When you face a financial emergency and need an instant loan.
Benefits of a personal loan
• Collateral-free loans
Personal loans are collateral-free loans that do not require you to pledge any asset to get the funds. You can get the loan simply based on your monthly income and other eligibility parameters. This makes it easy to get a loan even when you don't have any assets to your name.
• Good loan quantum
Personal loans allow sufficient funds so that you can fulfill most of your financial needs. For instance, Axis Bank allows personal loans up to Rs.40 lakhs to take care of your financial needs sufficiently.
• Flexible repayments
Personal loan repayment is easy and flexible. You can choose a repayment tenure of up to 60 months to pay off the loan without hurting your pockets.
• Easy accessibility and application
Lastly, personal loans are easily accessible and can be availed in an instant. The application process is quick, the eligibility parameters are simple and minimal documents are required. Thus, you can get a loan quickly to meet the financial demands of an emergency.
[Also Read: How to Choose a Personal Loan Interest Rate That Fits Your Pocket ]
Things to keep in mind
While personal loans have loads of benefits and can fulfill your financial needs, they have a high-interest rate. This is because personal loans are unsecured loans where the lender faces a considerable default risk. As such, the personal loan interest rate is higher to compensate for the default risk.
So, availing of a personal loan for any unnecessary expense or to splurge is not wise. You will incur high-interest expenses and your credit score will also be severely damaged if you miss any EMI.
To take or not to take?
The question remains - Should you take an instant personal loan simply because you are offered one?
The answer depends on your need.
If you need funds for an unavoidable expense or an emergency and you don't have disposable savings, a personal loan can be the right choice. It will give you the funds to meet your needs.
For instance, if you want to plan a wedding, go on a trip or face a medical emergency, a personal loan can be the right choice.
However, if you need to indulge your whims or want to splurge, it is better to stay away from the loan. For instance, going on a shopping spree with a personal loan is a bad choice. You should save and then indulge in this spending.
So, assess your financial needs before you opt for a personal loan. If the needs are unavoidable, the loan will prove beneficial. However, if the needs are avoidable, you can save first and then pay for such needs. You can also use Axis Bank’s personal loan EMI calculator to know more.
