Personal loan is a type of loan which can be availed for any purpose, unlike home loan which can be used for a purchase of house or vehicle loans which can be used for purchasing vehicle only. Personal loans can be availed for needs like a purchase of home appliances, marriage or for vacation etc.
Personal loans are sanctioned after considering your ability to pay, the source of income and your credit history. The processing fees will be between 1% - 4% of the loan amount.
Here are advantages and disadvantages involved in personal loans.
Immediate loan sanction
Personal loan will be sanctioned within a few minutes if you are eligible for the required amount. It can be availed at the time of urgency.
It is an unsecured loan, where there is no need to provide any collateral. What this means is that there is no need to provide any asset or any guarantee to avail personal loan.
Loan for any purpose
Personal loan can be availed for any purpose such as marriage or purchase of home appliances, etc.
Say for example, if an individual needs Rs 15,000 for marriage, Rs 5000 for the house appliances and Rs 5000 for other expenditures then one can avail a personal loan of Rs 30,000 which will cater to all his needs.
As there is no mortgage of property or any other asset, very less documents are required.
Individuals can avail loan based on the eligibility and the amount will depend on the repaying capacity. Generally, a personal loan will range from Rs 15,000 to Rs 20 lakhs which can vary from banks to banks.
The main disadvantage of a personal loan is that it carries high interest rates when compared to other loans. It is because a personal loan is unsecured loan compared to housing or motor loan.
Your application can be rejected if you have poor credit history. It is very important to have good credit history to avail any kind of loan. In case of any default in payment your credit score will be affected.
No partial payments
There is no option to make part payment of your loan, unlike a home loan. Means you have to pay the loan for full tenure even when you have able to make a partial payment.
Is personal loan a right choice?
It all depends on the situation you are. Personal loan can be availed when an individuals is in need of cash and has no collateral such as property, shares, fixed deposit or gold.