Life sometimes can bring unexpected expenses or once-in-a-lifetime opportunities that require immediate financial support. From planning a wedding and covering urgent medical bills to making a significant purchase and renovating your home, having the right financial support on time is crucial. While saving for such events is ideal, it’s not always possible to have the needed amount readily available. This is where a personal loan helps.
This financial lifeline offers a simple way to access the funds you need and when you need them the most. Unlike other financial options, personal loans are designed to simplify borrowing without unnecessary complications.
6 Benefits of Personal Loans
There are multiple advantages of personal loans, including:
1. Quick funding with no complex documentation
Only basic documents like proof of identity, address, and income suffice to apply for a personal loan. Moreover, the entire application process is 100% digital which means zero bank visits or hassles. Once your details are verified and the application is approved, the funds are often credited within 24-48 hours. This speed and simplicity make personal loans a practical option for managing urgent financial requirements.
2. Flexibility to use the money as you need
Personal loans come with no end-use restrictions, and hence, you can use this financial lifeline to manage multiple expenses. These could include renovating your house, consolidating multiple debts, funding your education or that of your children, covering wedding costs, and even financing trips. The freedom to use the funds the way you prefer means you can plan your finances more effectively and meet different needs with a single loan product.
3. Lumpsum funding
Unlike credit cards or other revolving credit options, an instant personal loan gives you a single payout, which eliminates the need to manage multiple transactions. This one-time disbursal allows you to plan and allocate the funds for large expenses effectively.
4. Attractive interest rates
You enjoy affordable interest rates on personal loans which are tailored to your creditworthiness, income, and repayment capacity, which ensures you get a fair deal that aligns with your financial profile. Lower interest rates mean affordable EMIs, and you can repay your loan comfortably without straining your budget.
5. Predictable repayment schedule
One of the best features of personal loans is their fixed repayment schedules. Your loan agreement details the exact amount you need to pay each month, which helps you plan your budget in an organised manner. Whether it’s a short-term loan over a year or a long-term loan extending up to 5 years, your EMIs stay fixed through the term, and you will not have to worry about sudden changes or hidden costs.
6. Positive impact on credit score
When you repay your personal loan EMIs on time, it shows that you are financially responsible. This can help you build a positive repayment history, a crucial factor in credit scoring. A good credit score is important if you plan to apply for bigger loans, such as a home or business loan, in the future.
The benefits of personal loans from YES BANK
YES BANK personal loans offer a reliable solution for different financial needs. You can access higher loan amounts to manage expenses such as weddings, medical emergencies, or education.
The loan process is fast, requires minimal paperwork, and funds are often disbursed immediately upon approval. You are free to choose repayment tenures between 12 and 72 months for better financial planning. Most importantly, with YES BANK, you enjoy transparency, zero hidden charges, and excellent customer support for a smooth and hassle-free borrowing experience.
A Personal Loan, often seen as a solution to immediate financial needs, can be a gateway to fulfilling your dreams, whether it’s renovating your home, funding a wedding, or consolidating debt. This article demystifies Personal Loans, offering insights into their workings, benefits, and how they can serve as a vital tool in your financial arsenal.
Meaning of Personal Loan
A Personal Loan is a type of unsecured loan, which means it doesn’t require any collateral. It's a flexible financial instrument that can cater to a range of needs.
Essentially, a Personal Loan means borrowing a fixed amount of money from a financial institution and repaying it over a fixed period, usually with interest. Unlike specific loans like home or car loans, a Personal Loan offers the freedom to use the funds as per your requirements.
Personal Loan example
Consider this scenario: You're faced with an unexpected medical expense. A Personal Loan allows you to quickly access funds, providing the necessary financial support without the stress of arranging collateral.
How does a Personal Loan work?
The working of a Personal Loan is straightforward. After approval, the bank or financial institution disburses the loan amount directly to your account. You then repay this amount over a predetermined tenure through EMIs (Equated Monthly Installments), which include both principal and interest components. A Personal Loan calculator can help estimate your EMI based on the loan amount, interest rate, and tenure.
What are the benefits of availing a Personal Loan?
- Quick disbursal: Often, Personal Loans are disbursed swiftly, making them ideal for urgent financial needs.
- No collateral required: Being unsecured, they don’t demand any asset as collateral.
- Flexibility of use: You can use Personal Loans for any purpose, from debt consolidation to funding a vacation.
- Competitive interest rates: Personal loan interest rates are competitive, especially if you have a good credit history.
What is a Personal Loan used for?
- Debt consolidation: To pay off multiple debts, simplifying your finances
- Home renovation: For upgrading your living space
- Wedding expenses To cover the costs of a big event like a wedding
- Medical emergencies: Providing quick financial relief in emergencies
Also Read: Choosing the right Personal Loan for your needs
Types of Personal Loan
- Secured Personal Loans: Require collateral but typically have lower interest rates
- Unsecured Personal Loans: More common, and do not require collateral
- Fixed-Rate Loans: Have a constant interest rate throughout the tenure
- Variable-Rate Loans: Interest rates fluctuate based on market conditions
What is the maximum amount that you can borrow?
When considering a Personal Loan, one of the key questions is the maximum amount you can borrow. This varies significantly across lenders and is primarily influenced by your income, credit score, employment history, and, sometimes, the purpose of the loan. Generally, lenders in India offer Personal Loans ranging from a modest ₹50,000 to a substantial ₹30-40 lakh. Axis Bank, for instance, offers a maximum of up to Rs 25 lakh for 24x7 Digital Personal Loans that you can avail instantly via an end-to-end digital process, and up to Rs 40 lakh if you apply for Personal Loan physically.
However, the actual amount you're eligible for is determined based on your ability to repay the loan. Lenders assess this by looking at your monthly income, existing debts, and other financial obligations. The higher your income and credit score, the more likely you are to receive a higher loan amount. It's important to remember that while it might be tempting to go for the maximum amount, you should borrow only as much as you need and can comfortably repay.
What about interest rates and tenure?
The interest rate and tenure of a Personal Loan are pivotal factors that determine not only your monthly EMI but also the overall cost of the loan.
Interest rates: These rates can vary widely depending on the lender, your credit profile, and market conditions. In India, Personal Loan interest rates typically range from around 10% to 24% per annum. A good credit score can fetch you a lower interest rate, leading to significant savings over the loan period.
Tenure: The tenure of a Personal Loan is another critical aspect. Most lenders offer flexible repayment periods ranging from 1 to 5 years, and in some cases, it can extend up to 7 years. A longer tenure means lower EMIs but a higher total interest outlay, while a shorter tenure increases the EMI but decreases the total interest paid.
Additional factors: Besides interest rates and tenure, other factors such as processing fees, prepayment charges, and late payment penalties also play a role. It's crucial to understand these elements, as they can affect the total cost of your loan.
Also Read: How can you get a Personal Loan online with 6 easy steps?
Conclusion
Understanding the intricacies of Personal Loans is crucial for your financial well-being. While weighing your choices, consider the Axis Bank Personal Loan for its competitive rates, flexible terms, and customer-centric approach. This choice could offer the balance and support needed for your unique financial journey, ensuring a responsible and beneficial borrowing experience.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.