A personal loan is an unsecured loan that is available to both salaried as well as self-employed professionals. An unsecured loan means the loan does not require any collateral or security. The loan is generally applied to meet emergencies like financing medical emergency, debt consolidation, paying credit card bills, financing new business, improve credit score, meeting wedding expenses, or funding a child’s education. One needs to have a good credit score to get quick loan approval. A score of above 750 is considered good for a personal loan. The rate of interest on a personal loan is comparatively higher as compared to other secured loans like home loans, car loans, mortgage loans, and business loans.
Here are some of the reasons to apply for a personal loan
To Consolidate Multiple Debts
This is one of the most common reasons to apply for a personal loan. If you have availed multiple loans like a car loan, home loan or education loan from various lenders, managing these loans can get tedious and confusing because of different payment dates, varied rate of interest and EMIs. Missing any one payment could affect your credit score adversely. That is when a personal loan comes into the picture where you can smartly consolidate your multiple debts into a single debt and balance all your finances.
Improve Your Credit Score
Credit score plays an important role when it comes to loans and credit cards. If you do not have a decent credit score, a personal loan could help you have one. Most of the individuals apply for small personal loans to improve their credit score by paying the loan on or before time to create a good payment history, which shows the lender your creditworthiness. Paying a loan on time will ultimately raise your score, which will help you to apply for a higher loan amount in the future.
To Pay off Credit Card Debt
This is arguably one of the best reasons to apply for a personal loan. You can pay off your entire credit card debt by choosing a personal loan at a lower rate of interest. A lower rate personal loan will help reduce the amount of interest you pay on your card each month, thus saving your time to clear off the accrued debt.
To Finance New Business
Insufficient funds can hinder your dream of starting a new business. Apply for a personal loan to get started. A personal loan provides you with the flexibility of using the funds. Be it purchasing new machines, hiring a new place for setting up your business, etc. Additionally, one can apply for a business loan also, but in that case, you need to prove your financial history and tax-related documents, which is not possible for a new business. So, a personal loan would be the most feasible option to apply for.
For Home Renovation
Refurbishing or remodeling is comparatively cheaper than owning a new house. But it also requires a substantial amount of cash to give a new look to your home. This is where a personal loan can help you and meet your requirements. You can use the funds to modify the interiors of your house, add a floor, revamp your kitchen, or change the old furniture. Additionally, one can enjoy tax deduction advantages, also under section 24(b) of the Income Tax Act.
Meeting Unforeseen Medical Expenses
Medical emergencies can come at any point in time where you need instant funds to meet medical expenses. There might be a chance that your health insurance policy might not cover certain treatments. Applying for a personal loan in such cases would be a great option as you get access to instant funds in less time.
Higher Education Abroad
Taking a personal loan would be a right choice if you want to go abroad to continue your higher education. The loan can be applied to meet all the education-related expenses like paying the education fees and other purposes like accommodation and daily living expenses in a hassle-free manner.
Take a Dream Vacation
A personal loan can be an excellent way to finance your dream vacation. You will get a personal loan quickly if you have a good credit score of 650 or above. Getting a loan is a suitable option rather than exhausting all your savings which you can use it in the future for some other emergency requirements.
To Pay for Personal Events Like Wedding
Since weddings are an expensive affair, one requires a substantial amount of funds to manage unexpected wedding-related expenses. Personal loans are suitable to get in such cases instead of exhausting all your savings. All you need to do is decide the loan amount and check your eligibility for Personal Loan by using an online eligibility calculator.
When it comes to meeting finances, personal loans could be of great help as it helps you to meet a variety of purposes like debt consolidation, pay for your medical or credit card bills, to finance your new business, pursuing your higher education abroad and many more. The best part is borrowers do not require any collateral or security to get a loan. So, when you are going through a severe cash crunch in your life, you can avail of a personal loan to meet your emergency or personal expenses.