A personal loan is an unsecured credit that a borrower can use for a variety of reasons. One of the benefits of availing a personal loan is that a borrower doesn’t have to provide any collateral.
In this article, we will explain a few circumstances in which a personal loan can be a viable option.
Most loans are earmarked for a specific purpose. For example, a house loan can only be availed to purchase a home. An automobile loan can only be availed to buy a vehicle. However, personal loans can be used for several purposes like to pay for medical expenses, to fund a marriage ceremony, etc.
With that in mind, here are a few benefits that personal loans offer-
- No Collateral Needed
Since a personal loan is an unsecured loan, a borrower doesn’t need to provide any security. The borrowers will not lose their asset in case they are unable to repay the debt. However, if a borrower defaults on a personal loan, then his/her Credit score will be impacted.
- Can Be Availed for Multiple Reasons
A personal loan can be used for several objectives. The funds received from a personal loan can be availed as per the borrower’s requirements. There are no restrictions on fund usage.
- Quick Loan Disbursement
If a borrower has a good credit score and has the capacity to repay the loan, then a bank can quickly disburse the loan amount.
When Is It a Good Idea to Take a Personal Loan?
- To Pay for Home Renovation
You can take a home loan or a personal loan to renovate your house. However, if you borrow a home loan, then you will have put your home as collateral. Thus, availing a personal loan is a great option to finance home renovation.
- To Pay Medical Bills
In case of a medical emergency, expenses can shoot up quickly. Thus, it is necessary to have enough money to pay for medical bills. Personal loans can be extremely useful in such situations.
Furthermore, a personal loan is a great option for people who don’t have a health insurance plan.
- To Pay Off a High-Interest Loan
Availing a personal loan is a good idea if you wish to repay a high-interest loan. For example, you can pay off your credit card debts by taking a personal loan. Thus, by availing a personal loan, you can reduce your financial burden.
- To Pay for a Wedding Ceremony
Funding a marriage ceremony can be expensive. Such an event can consume all your savings in no time. However, you can avail a personal loan to finance a wedding. It is a better option than using a credit card to pay for the expenses. This way, you can save a considerable amount on interest charges.
Documents Required to Apply for a Personal Loan
- Age Proof (Aadhaar card, PAN card, passport, birth certificate, etc.)
- Address Proof (Aadhaar card, electricity bill, passport, etc.)
- Identification Proof (Aadhaar card, passport, PAN card, driving license, etc.)
- Salary Slips and Form 16
- Bank Statements
- Latest ITR
- Credit Report