A personal loan allows you to have funds available for a multitude of purposes. This is an unsecured loan given to people with clean and stable financial backgrounds. Although it’s easy to apply for a personal loan these days, you need to remember to do your due diligence to avoid any financial stress later on.
When you take out a personal loan, you need to know your purpose and the amount you need. Once this is done, you must know the duration over which you want to repay this loan according to your income. The interest and the amount of the loan will determine how long you pay off the debt.
You can use personal loans for multiple purposes. There are no restrictions on how you can use the funds. You can use it for traveling, renovating your home, paying off debts or any other personal need. Here are some advantages of taking out a personal loan.
No collateral required
You do not need to lock your assets. Unlike secured loans like home or auto loans, a personal loan doesn’t require you to mortgage anything to the lender. You can continue enjoying your assets without any restrictions.
Freedom to use the loan
A personal loan can be used for any financial need, such as paying your medical bills, your child’s school fees, or travel. This gives you the freedom to use the funds as you need them. For those eligible, funds are easily made available by lenders.
Unlike other types of loans, a personal loan takes minimal time to be approved. Within hours to days, you can get a personal loan if you meet the bank’s basic eligibility criteria. A personal loan can help you get funds quickly if you need funds to deal with an emergency.
Good for the short term
A personal loan can be borrowed for shorter periods. You can take it for a few months to a few years. You do not need to service the loan for longer terms. However, it is important to choose the duration of the loan according to your ability to repay so that it does not interfere with your other expenses.
Take it for business purposes
A personal loan can be useful if you are a businessman who often needs instant cash to manage day-to-day expenses. You can make the down payment for a new office or expand your business using a personal loan.
Pre-approved personal loan
Many lenders offer pre-approved personal loans to existing customers with clean financial histories and good credit ratings. If your credit score is good (700 or above), it becomes easy for you to become eligible for pre-approved loans.
The personal loan is the best option for both employees and the self-employed. It takes less time and requires a minimum documentation process. It is an unsecured loan, so the lender approves the loan based on your eligibility, such as age, income, existing debts, and credit rating, among others.
It would be better to compare the interest rate with different terms for the amount you need before signing the loan agreement. Also, if your credit score is good, remember to negotiate lower interest rates. Keep the term shorter for lower interest liabilities. The table below compares over 20 banks for personal loans of Rs 5 lakh for three years. You can compare interest rates and EMIs for the loan. You can decide according to your needs.
Interest Rate and EMI on Personal Loan
Compiled by BankBazaar.com
Note: Interest rates on personal loans for all listed public and private banks (BSE) taken into account for the compilation of data; Banks whose data is not available on their website are not taken into account. The table includes the lowest interest rates on personal loans (regardless of loan amount). Data collected from respective bank’s website as of October 25, 2022. Banks are listed in ascending order based on interest rate, i.e. the bank offering the lowest interest rate on the personal loan is placed at the top and the highest at the bottom. The EMI is calculated on the basis of the interest rate mentioned in the table for a loan of Rs 5 Lakh with a term of 3 years (processing fees and the like are assumed to be zero for the calculation of the EMI); The interest and charges mentioned in the table are indicative and may vary depending on the general conditions of the bank.