You can use it for vacation, home renovation etc. If you’re aiming at higher studies abroad or in a big private college, you might need extra money to finance it. In such situations and a lot of others , personal loans can become the most reasonable, fast and easy choice.
Here is a list of ways personal loans can be used:
1. Crisis Support
Accidents don't come with any prior warning and more than often people find themselves at a point where due to an accident the sudden requirement of money is large and they do not have that much savings at that point of time. Instant Personal loan is the savior in such times. With minimal documentation and fast processing they are the most preferred option in such times.
2. Family vacation
Covid has allowed us to rethink how life can be so uncertain. There's still so much in this world we've never seen, never experienced. When you have the support of personal loans, why wait for another few years for savings to pile up? Use a personal loan to finance a family vacation and spend your time with your loved ones.
3. Debt consolidation
If you have other multiple small debts to pay, and it's difficult for you to manage those multiple debts, you can consolidate all of your debts and pay them using a personal loan. When you consolidate them, you pay a lower interest on them compared to what you were paying on all of them combined.
4. CIBIL score
If you are thinking of maintaining a credit score or you already are maintaining one, managing your personal loans well will improve your credit score. If you repay all your EMI instalments on time, your credit score would improve otherwise it would dip.
If you have taken other loans earlier such as Gold loans, credit cards etc. your credit report would show credit mix, which means you have taken different loans and you know how to handle them. This improves your credit taking capacity in the future.
Following are a few points to take care of before applying for a personal loan:
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Pick the lender carefully
Due to the ease of starting business and more informed people, there are a lot of loan lenders now and all are competing to get customers . With so much competition around, they use different marketing gimmicks every now and then to make the customer think that they have the treasured offer for them. But in reality, it's more of the same thing or might turn out to be even worse
Therefore, it's important to pick one after proper analysis.
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Ignore 0% EMI schemes
These supposedly were meant to put this notion in the minds of the customer that here they won't have to pay any interest but this was just a marketing gimmick and made a lot of customers enrage when they got to know the truth that they are paying the interest.These are now termed as no cost EMI and work on the same principle. Hence ignore these schemes.
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Calculate the other charges
Remember that credit lending agencies charge other fees too such as prepayment charges , processing charges etc. which amounts to a good number when combined. Therefore be a smart borrower and calculate all the amounts before applying for a loan. Use an EMI calculator too to calculate the actual EMI you would be paying. There are EMI calculators by different lenders specifically for their company like hdfc personal loan emi calculator etc.
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See if there are other charges
Along with interest rates, you would also have to pay processing fees, but that's not just the case. A lot of money lenders charge extra charges as well. It's very important to ask your relationship manager about every other thing that is associated with the loan product'.
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See if there are foreclosure charges
Foreclosure means closing the liability by paying all the outstanding amount at once before the due date.It saves a lot of interest for the borrower but at the same time attracts a penalty by the credit lending agency.
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See if there are prepayment charges
Prepayment means paying extra money in addition to your EMI of that month.This extra money is deducted from the principal amount thereby decreasing the interest.On doing this, a lot of lenders charge fees in the name of prepayment fees.These are some points which are the most crucial characteristics of a personal loan and help you to be an informed borrower.
