Debt consolidation, home renovation, education and more: 8 top purposes personal loans serve

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Personal loans fall under the category of unsecured loans, meaning they lack collateral such as a car or house to back them up. While this makes them more accessible compared to secured loans, they often result in higher interest rates.

Also, in contrast to other loan alternatives, personal loans are frequently easier and faster to acquire. The online personal loan application process can be simplified, and approval times tend to be quicker compared to secured loans such as mortgages. You can apply for an instant personal loan too as these types of loans often require minimal documentation, making the application process less cumbersome.

Why take out a personal loan?

Personal loans can serve as a valuable resource for navigating your finances when unforeseen needs emerge. Below are some prevalent motives for individuals to opt for personal loans:

  • Debt consolidation: This serves as a widespread purpose for personal loans. By merging various debts with higher interest rates into a solitary personal loan, you may save on interest expenses and streamline your monthly payments.
  • Home improvement: Personal loans offer a means to fund home renovations, repairs, or upgrades that might not meet the criteria for a home equity loan or line of credit.
  • Major purchases: Personal loans present an avenue to finance significant expenditures that you’re unable to cover outright.
  • Money spent on emergencies: Unforeseen occurrences such as car repairs, medical bills, or sudden travel requirements can impose financial strain. A personal loan can assist in covering these emergency expenses.

Added reasons for personal loan applications 

Here are some additional motives behind individuals opting for a personal loan:

  • Moving expenses: The initial expenses linked with relocating to a new residence can be substantial. A personal loan can assist in covering moving truck rentals, security deposits, and other relocation-related costs.
  • Wedding costs: Weddings often entail substantial expenses, and a personal loan can aid in covering costs such as venue rental, catering, or photography.
  • Vacation expenses: Personal loans offer a means to finance a dream vacation, particularly if you prefer spreading out the costs of flights, accommodations, and activities over time.
  • Educational costs: While student loans are commonly utilised for higher education, a personal loan could serve as an alternative for non-accredited programs, short-term courses, or other educational expenditures.

Personal loans should typically not be utilised for frivolous expenditures. Given their high interest rates, you might end up repaying a considerably larger sum than you initially borrowed. Before opting for a personal loan, thoroughly evaluate all your alternatives and the potential ramifications.

Frequently Asked Questions (FAQs)

Q. What is a personal loan EMI calculator?

A personal loan EMI calculator is a tool designed to assist you in estimating the monthly instalment (EMI) for a personal loan. It calculates the EMI based on the factors you input, including:

  • Loan amount: The sum of money you intend to borrow.
  • Interest rate: The annual interest rate imposed on the loan by the lender.
  • Loan tenure (Repayment period): The overall duration, in months or years, over which you plan to repay the loan.

Eligibility criteria for personal loans may vary slightly among lenders in India. However, here are some general factors that are commonly taken into account:

  • Citizenship: You need to be a citizen residing in India.
  • Age: Typically, the minimum age requirement falls within the range of 21 to 25 years, while the maximum age limit can vary between 58 and 60 years, depending on the lender.
  • Income: You must meet a minimum salary threshold, which may vary based on factors such as your city of residence, type of employer, and the loan amount.
  • Employment status: Typically, salaried individuals employed in private companies, public sector undertakings, or multinational corporations (MNCs) are eligible. Some lenders may also extend eligibility to self-employed individuals or professionals.
  • Credit score: Maintaining a good credit score, usually above 700, is crucial for obtaining a personal loan and potentially securing favourable interest rates. A higher credit score reflects your creditworthiness and capacity to repay the loan promptly.
  • Debt-to-income ratio (DTI): Lenders assess your existing debt obligations when gauging eligibility. A high DTI ratio, signifying excessive debt relative to your income, can diminish your loan approval prospects or result in higher interest rates.

Q. How can you apply for a personal loan online?

The process of applying for a personal loan in India generally encompasses the following steps:

  • Compare loan options
  • Assess eligibility
  • Compile documents
  • Submit loan application
  • Document verification
  • Credit score assessment
  • Loan approval and fund disbursement

Q. What are the common personal loan interest rate factors?

Personal loan interest rates in India can fluctuate based on various factors, such as

  • Borrower’s credit score
  • Loan amount
  • Loan duration
  • Lender’s risk evaluation
  • Processing fees and additional expenses

Q. Emergency personal loans, explained.

Emergency personal loans are a specific type of personal loan crafted to provide swift access to funds for unforeseen financial requirements. Here’s an overview of several key attributes of emergency personal loans in India:

  • Quick processing
  • Eligibility criteria
  • Loan limits
  • Elevated interest charges

Here are some scenarios where an emergency personal loan might be appropriate:

  • Medical crises
  • Immediate home renovations
  • Automobile repairs

 

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Published: 29 Mar 2024, 12:12 PM IST

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