A personal loan is a versatile financing choice that proves effective in times of monetary exigencies or sudden expenses. The popularity of this credit option can be attributed to the versatility and easy accessibility of high-value loan amounts.
In addition, financial institutions extend customized offerings under personal loans depending on the monetary requirement of borrowers. Hence, before opting for funds, borrowers must look at the different personal loan types. It will help them make an informed decision.
Different Types of Personal Loans
Individuals can use the sanctioned personal loan amount for different purposes. Here are the different types of personal loans that individuals can avail of depending on their needs.
1. Personal loan for home renovation and construction
Buying a home or renovating it incurs a lot of expenses. One can conveniently opt for a personal loan to tide over such hefty expenses. The sanctioned amount enables borrowers to manage the cost of maintenance, painting, refurnishing, repair, etc.
Personal loan makes it feasible for borrowers to construct their dream home. Even with the sanctioned amount, they can purchase an already-built home.
2. Personal loan for education
Individuals can face financial constraints while pursuing higher studies. They might have to bear multiple expenses, including tuition fees, living expenses, admission to extra courses, etc. However, with a personal loan, borrowers can easily continue their studies.
A personal loan enables borrowers to cover the course fees, travel and accommodation charges, etc.
3. Personal loan for debt consolidation
Carrying the liability of multiple loans and credit card bill payments can lead one to financial trouble in the long run. Individuals can conveniently opt for a personal loan to tide over such circumstances. It helps individuals escape debt-laden situations, allowing them to manage their finances better and attain a healthy financial status.
4. Personal loan for business expenses
Individuals can opt for a personal loan to fund their startup. It is due to inadequate funding that several business setups fail to sustain. A personal loan is an effective financial choice that compensates for the startup costs, equipment purchases, costs incurred from inventory and supplies, etc.
One can also opt for the credit option to expand the horizons of his or her existing business.
5. Personal loan for wedding
Personal loan for wedding or wedding helps individuals fund all marriage-related expenses instead of draining their savings.
6. Personal loan for travel
A travel loan or personal loan for travel is offered to help borrowers manage travel-related expenses. The fund obtained can be utilized to use to manage flight fares, tour and accommodation expenses. This credit option allows individuals to plan their travel without stressing their savings.
Besides bestowing borrowers with no-end use restrictions, personal loan offers several other lucrative benefits.
Benefits of Availing of a Personal Loan
Individuals opting for a personal loan can reap the following benefits.
Flexible repayment terms
A personal loan comes with an extended repayment term, thus reducing the EMI burden and helping borrowers make on-time EMI repayments. In order to choose suitable loan tenure, one can use a personal loan EMI calculator.
Since a personal loan is an unsecured credit option, borrowers need not pledge any collateral, thereby reducing the loan processing time. As the personal loan is not backed by any collateral, lenders scrutinize borrowers’ credit scores. Lenders approve the loan application based on the borrower’s creditworthiness.
Hence, borrowers must maintain a healthy credit score of 600 and above.
Faster approval and disbursal
Another notable benefit of availing of a personal loan is borrowers can enjoy quick access to substantial loan amounts and manage both planned and unplanned expenses.
Simple eligibility criteria and documentation
Borrowers can qualify for a personal loan by adhering to the following personal loan eligibility criteria.
- Applicants must be from India.
- He or she must be in the age range of 21 years to 67 years.
- Individuals must have a stable income status.
- Applicants should also have a decent CIBIL score of 750 or above.
The credit option is collateral-free and does not involve a tedious documentation process. Borrowers can avail of personal loans by submitting basic documents like KYC papers, income proof, proof of address, etc.
The easy loan application process
The robust digitization in all financial sectors has made it convenient for a borrower to apply for personal a loan online. Applicants must visit the official website of preferred lenders and fill out the personal loan application form with the necessary details. Then, they must mention desired loan amounts and suitable loan tenure.
Finally, on attaching relevant documents and submitting the form, applicants will receive loan amounts in their mandated loan account. But before making a personal loan application, borrowers must check certain parameters.
Things to Check while Availing a Personal Loan
Individuals before applying for a personal loan type must consider the following factors.
1. CIBIL score
A substandard CIBIL score can lead to the rejection of a personal loan application. Since a personal loan is an unsecured credit option, borrowers must strive to maintain a decent credit score. It will help them to fetch affordable interest rates.
2. Income status
In order to receive quick loan approval, borrowers must have a steady income status. To enhance personal loan eligibility, they can mention additional sources of income.
3. Additional costs
Borrowers must include all the additional costs while computing the total cost of borrowing, which includes processing fees, prepayment penalty, late payment charges, etc., as these charges add to the loan expenditure.
4. Loan amount
Borrowers must prioritize their needs before opting for a loan amount. Over-borrowing will lead to a monetary burden.
A personal loan is an ideal credit option that enables borrowers to meet any financial crisis. One can manage high-end expenses without denting their savings and investments. Borrowers can thus opt for any of the above-mentioned personal loan types depending on their respective requirement criteria.