June 6, 2018
Personal Loan Handbook: All Questions Answered
What Is A Personal Loan?
(Let’s break it down for you)
Remember running low on pocket money as a kid and then cautiously approaching your dad or mum for a little bit more to tide you over for the month? Well, a Personal Loan works a little bit like that. Only, you will need to repay what you borrowed and a wee bit extra as ‘interest’. A Personal Loan provides you capital whenever you are in need of money. You can take a Personal Loan to pay for expenses arising out of a medical emergency, for higher studies or just to pay for a fancy vacation (we do not recommend the latter).
There is usually no condition imposed by the lender on the usage of funds. It is entirely at the discretion of the borrower. No questions asked by the bank. It’s for this very reason, a Personal Loan is also called an “All Purpose Loan”. Well, as long as you’re using those funds within the framework of the law, it’s all good. So, a Personal Loan to support your gambling habit or fund your brainwave to brew some moonshine in your backyard probably isn’t a good idea. We’ll tell you more about the common reasons people take a Personal Loan for in the next section.
Purpose Of A Personal Loan
(Just what on earth does one use it for?)
Personal Loans are usually taken to fulfil some kind of financial obligation or expense on the part of the borrower, or at times when funds are urgently needed. Some of the most common causes for getting a Personal Loan are:
- Paying off debts: One of the most common reasons to get a Personal Loan is to pay off existing debt or to consolidate multiple debt under one umbrella. Usually the borrower takes out a Personal Loan to pay off debts like Credit Card bills or other loans, and bring them all under one single loan at a lower rate of interest.
- Marriage Expenses: This is a common reason for a Personal Loan since weddings are an expensive affair (especially if you’re the kind of groom whose shoes are constantly hidden away). Personal Loans are usually applied for by parents or young couples looking to cover the expenses of the wedding.
- Family Holidays or Vacations: It is also commonplace to apply for a Personal Loan to cover expenses stemming from a big holiday. A Personal Loan allows individuals to make repayments over a fixed period of time at a lower rate of interest in compared to using a Credit Card. Tip: We don’t recommend taking a Personal Loan for a holiday – it isn’t the best financial decision you’ll make, believe us.
- Household Appliances and Renovation: Personal Loans can also be taken to pay for big household expenses such as the purchase of furniture or expensive electronic items such as television sets, refrigerators, electric stoves etc. It can also be used to undertake renovations or major repairs around the house after you invited The Incredible Hulk to your last birthday party.
- Health Expenses: The cost of healthcare is skyrocketing every year. You’ll be wise to ensure you have adequate Health Insurance. Nonetheless, people do take Personal Loans to pay for medical expenses and bills that need to be paid on an urgent basis.
- Jewellery: In India, gold and other jewellery is seen as a long-term asset and are greatly coveted by a large section of the population. Many individuals take Personal Loans to purchase gold or gold jewellery in large amounts. Tip: Again, this is not something we endorse.
So if you’re thinking of a Personal Loan to pay off that hitman you ordered to take down Johnny Bravo, you might want to revisit that idea.
Features Of A Personal Loan
(What’s the fuss all about?)
Personal Loans, like onions in India, are always in great demand. If you meet the eligibility criteria and have all your documents in order, you can get a Personal Loan in a matter of a few days or even a few hours. Listed below are the features of a Personal Loan:
- Collateral-Free Loan: You don’t need collateral to get a Personal Loan. Collateral is an asset pledged to a lender in exchange for a loan. This asset can be your house, car, bike, gold, or anything else of value. In the case of a Personal Loan, it is not necessary to secure it against an asset. You can rest assured that a lender isn’t going to demand you pledge everything short of a kidney and your first-born son as collateral.
- Fewer Documents: You don’t need to submit a suitcase full of documents to get a Personal Loan. Just a few will suffice. If you have these few in order, getting a Personal Loan will be a piece of cake.
- Quick Approval: If you visit your bank with a well-prepped file, you’ll get your Loan in no time. Personal Loans are disbursed faster than any other type of loan.
- Cheaper than a Credit Card: Agreed, Credit Cards are a way of life but, often, taking a Personal Loan is cheaper than swiping your card as they carry lower rates of interest than Credit Cards.
- Uniformity: Personal Loans are given most often at a fixed rate of interest and are to be repaid within a fixed time period. This ensures that your EMI amount remains more or less uniform. This will help you to plan your budget judiciously.
- Easy Availability: Personal Loans are readily available. Not just banks but independent lenders give Personal Loans, too.
Eligibility For A Personal Loan
(Do you make the cut?)
You know you’re just right for a Personal Loan if you’re homely, domesticated and convent-educated. We’re kidding. Knowing the eligibility criteria before applying for a Personal Loan will help you avoid the possibility of rejection of the application on the grounds of eligibility. Moreover, if everything is in order, banks will be able to process your application faster and without a hassle. To be eligible for a Personal Loan, you must be:
- A professional drawing a regular income or salary or
- A self-employed individual