- May 21, 2020
- Posted by: Ganeshcbani
- Category: Blog
Your financial needs can occur without warning if you are an employee or a businessman. You could have saved enough money, but there are situations where you need some extra money. In this scenario, it can be a good choice to take a personal loan. There are benefits of choosing this loan, especially if you have a good credit score.
What is an individual loan?
This is an unsecured loan, so you don’t have to offer a collateral for your borrowing. If the credit score is good, the banks and financial institutions can offer this loan at a lower interest rate.
Low interest rates — Interest rates for this loan are significantly lower compared to the repayment of a credit card or credit card loan. This is particularly true for larger quantities.
Variety of use — Funds you receive can be used for a number of purposes through this loan. You can opt for a personal loan to meet any of these needs, either to fund an international trip, buy a gadget or reimburse your friend.
Consolidated debt – Consolidating all existing debts is one of the best ways of using personal loans. It is wiser, by opting for a lower interest loan, to pay down smaller high interest debts such as student loans and credit cards.
Improve credit score – this is particularly true for similar credit types. A personal loan can be helpful in maximizing your score by including a number of different accounts.
Create an emergency fund-you could find yourself in a pay-cheque without any savings funds. In this situation, it is wiser to get a loan to set up an emergency fund rather than waiting for an emergency. It could be medical costs or a sudden trip, a rainy day fund is always a good idea.
To what ends may it be used?
It can be used for any personal financial necessity and the bank will not monitor its application. It can be used for the renovation of your home, marriage, a family holiday, education for your children, buying the latest electronic gadgets or home equipment, meet unexpected medical expenditures or other emergencies.
Personal loans are also useful when it comes to business investment, car fixing, payment for new homes, etc.
How do banks decide the maximum amount for loans?
Even if the conditions for loan sanctions differ from bank to bank, some of the main factors deciding the maximum amount of loan you can pass on include your loan ranking, current income rates as well as liabilities. A high credit score (closer to 900) means that you have properly served your previous loans and/or credit card duties, which makes the lender feel secure and leads to a higher amount of credits being penalized.
The level of your income and liabilities (existing credit card duties, unpaid loans, current EMIs, etc.) directly affect the repayment capacity of your card. Therefore, you will be rewarded with lower personal loans than those with higher income and lower financial obligations if you are in a lower position or have substantial unpaid credit card bills or outstanding EMI loans.
How to receive an individual loan
Applying a personal loan is a relatively easy procedure, and many lenders now encourage you to apply online to try shopping for the best interest rates and fees with multiple sources. You will need to specify how much you want to borrow on will loan and you will need to include information on your wages, employment and also on your unpaid debt and monthly costs.
As part of their lending decisions most lenders can check your credit score or credit records, so it makes sense that you review your credit reports and ratings, and you have an idea of what lenders see when looking at your application, unless you have an emergency situation.
Like almost all types of credit, lenders reserve their lowest interest rates for people with excellent credit rates. If your loan is fair or good, it can be challenging to find a personal loan at a low rate and if your loan is in the bottom of your spectrum, then you may have to take the time before you qualify for a personal loan.
Why does a personal loan impact your loan?
If you apply for a personal loan , lenders must usually conduct a difficult inquiry into your loan report to verify your financial background and the credit score. This triggers a fairly slight drop in your score, which usually recovers within a few months, thus keeping up with all your bill payments.
Benefits of Availing Personal Loan
There is no need for collateral: the great thing about personal loans is that personal loans are non-secured, so no collateral is needed to qualify for the loan. The lender does not ask for any security if you need Rs 50000 or more.
Fast approval: When you meet the eligibility requirements and file your application on time, your loan will be approved within a few hours.
Flexible tenure: personal loans come from large to small in any bundle. You can choose tenure according to your needs. When you take a Rs 1lakh loan, you can select the period for repayment as convenient.
Set interest rate: In general, lenders offer personal loans at low interest rates and your EMIs remain the same for the entire repayment period.
Tax advantage: Under Section 24b, whether you use the sum for the building, renovation or down payment of your home, you will use the tax gain on your interest rate.
No cap on end use: The key benefit of the personal loan is that there is no restriction on the use of the loan. You can use the amount of the loan as you like.