Personal loans are a type of unsecured loan which is gaining traction among young borrowers. As they do not require collateral, involve lesser processing time, and have lower interest rates than credit cards, there is an increase in the demand for these loans.
The financial institutions refer to the credit history, income proof, and then send the loan application for processing without any additional questions. Due to their quick processing, personal loan can be helpful in various emergencies. Few ways in which personal loans can be impactful are as follows:
In which Situations Personal Loan can be Used:
1. Medical Emergency:
Personal loans can be beneficial when it comes to unfortunate situations like medical emergencies. Health insurances, if taken, can come handy within such circumstances, but there might be a few instances where additional expenses might not be covered under insurance. There might also be scenarios where coverage is not applicable for specific ailments, and hence personal loans can help for their immediate processing. Compared to other sources, it is comparatively more comfortable to get a personal loan for medical emergency.
2. To clear existing loans:
Personal loans can be of greater importance for debt consolidation. In other words, one will pay multiple EMIs linked to various loans. It will be better to consolidate such loans into a single loan with the help of personal loans. You can also use a personal loan to close debts from other sources that have higher interest rates. Experts advise borrowers to choose registered financial institutions to borrow money as other unofficial sources can charge a higher rate of interest, which can be dynamic as well. Hence one can leverage personal loans to handle the closure of such debts.
3. Wedding expenses:
Everyone will agree that wedding expenses can dry up the bank balance if there is no streamlined financial management in place. There are various expenses associated with the wedding, which can cater to requirements like food, transportation, decoration, wedding venues, accommodation, pre-wedding function expenses, and other miscellaneous expenses. Although there are no dedicated loans for a wedding, personal loans can help to overcome situations that demand emergency funds. Despite substantial financial planning, personal loans can serve as a gap between requirements and funds offered by your financial advisor.
4. Educational expenses:
The most significant objective for any parent is to provide quality education to their children. In India, a child’s education can begin at the age of 2. From playschool to high school, graduation, and postgraduation, educational costs can surge at any time. Smart financial planners save an adequate amount of funds to meet their requirements, but external factors like inflation can hamper your savings’ effort. Some might not even break their FD or RD and wish for quick funds to pay for the education. Personal loans work well in the borrower’s favour to handle such requirements.
Travelling can be unprecedented sometimes. There might be several instances where you would need to travel on a business trip, which can help you in securing a great deal from your company. There might be another instance where you would need to visit immediately for a personal purpose. You may also want to take a quick break from the monotony and want to plan a vacation for yourself and your family or solo travel. For such reasons, personal loans work like a charm as the disbursal of the amount is much quicker than other sources of funds. Pre-approved loans are much faster and can make your dream come true.
Compared to multiple sources, personal loan interest rates are lower. Hence personal loans can be beneficial if you plan your repayment phase well.