Personal loans have become a popular borrowing option for many people in India. According to a report by the Reserve Bank of India, the personal loan segment has grown by 16.9% year-on-year, with a total outstanding credit of Rs. 22.18 lakh crore as of January 2022. However, despite their popularity, many people are still unsure about whether personal loans are the right choice for them. In this article, we’ll explore the benefits of personal loans and when you should consider borrowing one.
Did you know that the average personal loan amount disbursed in India is Rs. 2.66 lakh? Or that personal loans for debt consolidation account for nearly 35% of all personal loan applications? Read on to learn more about the benefits of personal loans and whether they’re the right choice for you.
Here are the main points to consider:
One of the primary benefits of personal loans is their flexibility. Unlike other loans that are designed for specific purposes, personal loans can be used for a wide range of purposes, such as debt consolidation, medical expenses, home renovations, or even for funding a vacation. This makes them a popular choice among borrowers who need funds for various reasons.
2. Lower interest rates:
Personal loans typically come with lower interest rates compared to credit cards, which makes them a more affordable option for borrowers. Additionally, personal loans usually have fixed interest rates, which means the interest rate won’t change over the life of the loan, making it easier to budget and plan for repayment.
3. Easy to apply for:
Applying for a personal loan is relatively easy and straightforward. Many lenders now offer online applications, which means you can apply for a loan from the comfort of your home. The application process is typically quick and easy, and you can receive a decision within minutes or hours.
4. Fast disbursement:
Once your loan application is approved, the funds are usually disbursed quickly, often within 24-48 hours. This makes personal loans a good option for borrowers who need funds urgently.
5. No collateral required:
Unlike secured loans, such as home loans or car loans, personal loans do not require any collateral. This means that you do not have to put any of your assets at risk to secure the loan. Additionally, this makes personal loans accessible to borrowers who do not have any assets to pledge as collateral.
6. Helps build credit:
Personal loans can also help you build your credit score if you make timely repayments. This can improve your chances of getting approved for future loans or credit cards with better interest rates and terms.
When to Consider Borrowing a Personal Loan?
While personal loans offer several benefits, it’s important to consider whether borrowing one is the right choice for you. Here are some situations when you may want to consider taking out a personal loan:
1. Debt Consolidation:
If you have multiple high-interest debts, such as credit card debts, personal loans can be a good option to consolidate your debts into one manageable payment with a lower interest rate.
2. Emergency Expenses:
If you have an unexpected expense, such as a medical emergency or car repair, and do not have the funds to cover it, a personal loan can help you bridge the gap.
3. Home Renovations:
If you want to renovate your home but do not have the funds to cover the expenses, a personal loan can help you finance the project.
4. Funding a Business:
If you want to start a small business or need funds to expand your existing business, a personal loan can be a good option to raise the necessary capital.
5. Big-ticket purchases:
If you want to make a big-ticket purchase, such as a new laptop or a home appliance, but do not have the funds to pay for it upfront, a personal loan can help you make the purchase and pay back the loan in affordable EMIs.
Personal loans offer several benefits that make them a viable option for borrowing money. They are flexible, come with lower interest rates, are easy to apply for, and have a fast disbursement process. However, before taking out a personal loan, it’s important to consider your financial situation and whether it’s the right choice for you.
These tips are shared by the expert financial planners at HappyWise Financial Services, who are dedicated to helping individuals make informed financial decisions.