How Personal Loans Help Your Finances
Personal loans are the easiest and most practical solutions for short term financial needs. They are easier to get than other loans, and they can be used for a number of purposes.
- Personal loans can be taken for personal and professional reasons. The lender does not ask why you need the loan, how you plan to use the money, or show proof of having used the funds (this last is required for home construction loans)
- They are easy to get – if you have a credit score, a regular income and good repayment history, you can get the loan from a leading loan app
- They have minimal documentation and the loan is processed much faster than secured loans like home loans. The set of documents is picked up from your home and submitted for processing, so you don’t have to make a physical visit to the app’s branch office
- They are repaid via monthly EMIs debited from your salary, on the loan app
Apart from the benefits listed above, the following points illustrate how personal loans help your finances:
* Keep your savings intact from short term needs.
There will always be situations where you need to raise money quickly for a short term need or emergency. Your first instinct – like most people’s – is to check your bank account to see if you have sufficient savings. If you do, you withdraw the money and use it for your immediate requirement. But exhausting your savings is not ideal – it takes years to build a large savings corpus. Instead, take an instant personal loan from a good loan app and meet your needs.
* Consolidate debt.
A new trend in personal finance is to borrow a personal loan if you have multiple loans to your name. The more the number of loans, the more EMIs you must pay from your salary or business income. Thus, the expendable income becomes less with EMI payments while these loans are being serviced – and you are left with lower money for other expenses. Managing multiple EMI payment dates is an additional hassle. Instead of falling down this spiral, you should seek debt consolidation. This means that you bring all loans under a single one. Take a quick loan that repays smaller debt, so you have only one loan to manage. This makes personal finance management much simpler. However, do not exercise this option if the instant personal loan will not cover all the earlier debt.
* Become debt-free faster.
Quick loans have a much shorter tenure than secured loans like car loan, home loan, home construction loan, etc. Secured loans may have tenures ranging from 5 to 15 years, depending on the principal borrowing. With a shorter tenure, the personal loan makes you debt-free faster.
* Improve your credit rating.
Most first time loan borrowers reach an impasse with traditional lenders like banks, because they do not have a credit history on record: the lender is unwilling to extend the loan because the applicant has no credit score to speak of, and the applicant cannot build a credit score unless they borrow a loan! But leading loan apps in India are more flexible about their lending terms, especially for new borrowers who do not have a credit score due to never having taken an institutional loan. This is the first step towards getting an instant loan, and also starting to build a credit score. But you must repay the loan within or before tenure to have a positive credit report.