These days, many people are resorting to personal loans when they are unable to arrange money from other sources. Unfortunately, there are lots of misunderstandings about personal loans that prevent people from making the best use of this financial instrument. Let’s see the what(s), when(s), where(s) and how(s) of personal loans to better understand the actual reality.
Personal loans are unsecured loans that are offered to applicants after assessing their credit history and loan repayment capacity. Since these are unsecured in nature, (i.e. the borrower does not need to bring in any collateral), the personal loan interest rates are higher than those of other secured loans.
Since there is no collateral, there is not much documentation or physical verification to be done. All that is needed is ID proof, Income proof, Address proof and age proof of the borrower to apply for a personal loan. Over the years, the loan processing has improved a lot and these days, banks regularly approve and disburse loans within 24 hours. These loans are perfect to deal with a financial emergency when funds are urgently needed.
Unlike home and car loans, personal loans do no restrict the end use of money. There is full freedom to use the money for whatever it is needed.
But one very important point to understand here is that because the personal loans are unsecured, one needs to have a good repayment (credit) history to get this loan. A good credit history is the main personal loan eligibility criteria and proves that you will pay the EMIs on time and not default. So if you have been irregular with your credit card payments and other EMIs, the chances of rejection of your personal loan application are quite high.
As already mentioned, a personal loan can help you with all kinds of fund needs, be it for wedding, house renovation, business expansion, medical emergency or anything else. A Personal Loan will provide money for almost anything (ofcourse legal). But one must not forget that no matter what, the borrower has to repay the loan on time. So in order to not borrow beyond what you can comfortably repay, it makes sense to approximately calculate your personal loan EMIs in order to judge the feasibility of your loan needs. For this, it’s best to take help of online emi calculator for personal loans or financial advisors.