9 Ways in Which Personal Loans Can Help You Manage Your Finances
A personal loan is an unsecured loan provided by financial institutions to individuals for personal use. Unlike mortgages or car loans tied to a specific purchase, personal loans can be used for various purposes, such as consolidating debt, financing home improvements, or covering unexpected expenses. Now, you don’t have to stand in long queues or run after representatives to apply for loans or wait for verification and disbursal procedures, as everything is possible at the click of a few buttons.
In 2023, the amount of personal loans in India is Rs. 40 lakh crore, which is a 20.4% increase as compared to the amount in 2022. This depicts the growing popularity of instant personal loans, which help take care of several financial obligations and liabilities.
In this article, we will learn about why people apply for more personal loans every year.
9 Reasons for the Growing Popularity of Personal Loans in India
Here are the top nine reasons why personal loans are gaining popularity in India:
1. Unrestricted Use of Personal Loans
One of the primary reasons why instant personal loans are growing in popularity is their unrestricted use. Whether using the loan for emergency medical expenditures, weddings in the family, business needs, home renovation, or vacations with family and friends, there is no restriction on its use.
2. Unsecured Loans with Flexible Elements
Another reason for the popularity of personal loans is that they don’t require any collateral or security to be submitted. Unlike in home loans or loans against property, you don’t need to pledge anything. These unsecured loans are offered with flexible elements like loan tenure, loan amount, and interest rates that depend on your credit rating, repayment history, employment, and flow of income.
3. Low Rates of Interest
The interest rates of personal loans range between 10.50% to 24%. The allocation of interest rates varies based on various factors like credit score, income, the company you are employed with, the age of applying for a personal loan, loan tenure, and loan amount.
Suppose you want to obtain a personal loan with lower interest rates. In that case, you can work on keeping your credit score higher, maintain a healthy financial position, and have a lower loan amount and a longer loan tenure.
4. Ease and Comfort of Online Applications
Gone are the days when you would have to stand in long queues and wait for the representatives of financial institutes to get back to you for verification and disbursal of instant personal loans.
Thanks to technology, applying for loans and checking for updated personal loan status is possible at the click of a few buttons from the comfort of your home. The approval comes within seconds, and the amount is instantly disburb into your bank accounts.
5. Paperless Documentation with Uncomplicated Eligibility Criteria
The eligibility criteria for applying for personal loans is simple, wherein your age, nationality, employment, and monthly income are considered. There aren’t too many checkboxes when applying for personal loans. Besides eligibility, the documentation process is simple and can be uploaded digitally while filling out your loan application.
All you need is identity proof, age proof, and address proof, along with proof of your professional and financial information. The process is paperless, user-friendly, and extremely convenient.
6. Low Fees and Charges
Many financial institutions offer personal loans with low processing rates, low application expenses, and zero or negligible foreclosure charges. It is highly recommended to apply for loans from the financial institution you are already associated with, as it gets easier to negotiate terms and conditions on applicable fees and charges on instant personal loans.
7. Quick Verification and Disbursals
One of the key elements of personal loans that have led to their growing popularity is the verification and approval of loans within seconds and the disbursal of loan amounts within minutes in your bank account. It becomes even quicker with pre-approved personal loan offers.
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8. Benefit of Debt Consolidation
Another reason why many are relying on personal loans today is for debt consolidation. If you are in high debt from various sources like other loans, credit card loans, cash withdrawals, and overdrafts, transferring the balance of all such accounts into one is recommended. Instead of paying interest to many sources, you pay interest to only one. This eases your burden and reduces your financial liability.
9. Improvement in Credit History
A personal loan is recommended for someone with a NIL credit history. Paying your installments on time and maintaining a good repayment history helps you enhance your credit rating. Paying your EMIs on time and getting loan approval is a good reason for enhancing your credit scores.
68% of people in India prefer applying for online personal loans, and 77% of the surveyed population claims that interest rate is the primary factor consider before taking an instant personal loan.
As people discover the benefits of applying for personal loans in India, they depend on personal loans for various reasons, which has eased their personal and professional lives to a large extent. Both salaried and self-employed individuals can apply for these personal loans. The procedure is simple, and the interest rates are attractive; thus, several depend on online personal loans to secure extra funds to fulfill their short-term and long-term financial objectives.