A personal loan is a type of unsecured loan offered by financial institutions such as banks, credit unions, and online lenders. It is a multipurpose loan that can be used for any immediate expenses, including home improvements, debt consolidation, medical bills, or unforeseen expenses.
For example, if you come across an unexpected medical bill that your insurance doesn’t fully cover, a personal loan can help ease the stress. You can borrow the amount you owe and repay it in flexible installments, allowing you to focus on your health without worrying about a large upfront cost.
Now, let’s understand personal loans in more detail.
How Does a Personal Loan Work?
You must apply for a personal loan online and submit the required documents. The funds will be transferred immediately into your account after approval of the application.
With a personal loan, you can use the funds as you like: for a vacation, big purchases, a medical procedure, renovating your house, a wedding, paying for your education, etc.
What are the Factors to Consider when Taking a Personal Loan?
A personal loan is a quick and hassle-free way to get funds when you need them urgently. But there are a few things you must consider before applying for a personal loan. Below are some of the factors.
Interest Rate
Interest rate is one of the major factors to consider before taking a personal loan. It can affect the overall cost of your loan, and lower interest rates can save you money. Some factors influencing your interest rate are your credit score, income, employment history, and lender’s policies.
Fees and Charges
It’s important to understand the lender’s fees and charges. Also, make sure to check if a lender has any hidden fees, prepayment penalties, late payment fees, or annual fees. Understanding how these charges can impact your total loan cost is essential.
Loan Tenure
Choosing the right tenure for your loan is important, as it can affect your loan amount. Longer tenure means lower monthly payments, but higher interest paid over the loan tenure. Shorter tenures have higher monthly payments but can save you money on overall interest. Choose a term that fits your budget and financial goals.
Credit Score
Your credit score is an important factor to consider while taking a personal loan as it determines the interest rate. It is used by lenders to evaluate your borrower risks and creditworthiness. You may be able to get a loan at a lower interest rate if you have a high credit score. When you are planning to get a personal loan, make sure to check your credit score to see if there is any discrepancy.
What Is a Personal Loan Used For?
Below are some situations for which you can use a personal loan.
Medical Emergency
Medical emergencies can arise at any time, and financially, they can burn a hole in your pocket. A personal loan can be a great solution at the time of emergency. It is a quick and easy way to get the funds instantly.
Wedding
Indian weddings are typically extravagant affairs. Arranging a grand wedding can be financially stressful. Don’t worry if your spending exceeds your budget. A personal loan can be helpful for all the wedding expenses, and can cover wedding expenses like catering, decoration, or outfits.
Vacation
Who doesn’t enjoy taking trips? But are you worried about budget constraints? You do not have to give up on the dream of traveling due to a lack of funds. A personal loan is an easy solution. Apply for a personal loan, and you’ll receive funds in your account within a few hours! It only takes a little documentation to have a hassle-free vacation.
Home Renovation
A personal loan is a great solution if you want to renovate your home but have been delaying it for a long time due to a lack of funds. You can use a loan for home upgrades, renovations, or urgent repairs.
Large Purchases
A personal loan can assist you in purchasing a new computer, appliance, or other necessary items when you lack the funds.
How to qualify for a LonTap personal loan?
A personal loan can be a helpful tool if you need urgent funds. You must fulfill the following eligibility criteria to apply for a LoanTap personal loan.
- Nationality – Borrower should be an Indian citizen
- Age – The minimum age of the applicant must be 23 years
- ITR – Individuals must have filed the latest ITR
- Income – The minimum take-home salary of the applicant must be ₹30,000 per month
- Credit Score – A credit score of 700 or higher is typically required in order to be approved for a personal loan.
Conclusion
A personal loan is a multi-purpose financial tool for covering necessary expenses. However, it is important to understand several factors, such as interest rates, credit score, fees, loan terms, and repayment schedules, to make informed decisions. By evaluating these aspects, borrowers can choose loans that best meet their financial goals and capabilities.
FAQs
What impact does getting a personal loan have on my credit score?
Ans. Because of the hard inquiry, applying for a personal loan may initially cause your credit score to drop slightly. However, over time, responsible payments can improve your credit score.
How long does it take to get approval for a personal loan?
Ans. The duration of approval varies and may take several days for traditional banks and several hours for online lenders. With LoanTap, personal loans are approved within 24 hours.
Could I repay a personal loan earlier?
Ans. Most personal loans have penalty-free early repayment options, but to be sure, check with your lender in advance to avoid any problems later.
How much can I borrow with a personal loan?
Ans. The lender, your credit history, income, and other variables affect the loan amount. With LoanTap, you can borrow ₹50,000 to ₹10 Lakh.
How can I use a personal loan?
Ans. Personal loans can be used for debt consolidation, home renovations, medical bills, educational fees, weddings, vacations, and other private requirements.
