Financing your big purchases with a personal loan seems to be a good idea with the easy application process and benefits. Let us look at the key features of a personal loan.
Top Reasons to Finance your Purchases using a Personal Loan
A personal loan comes in handy when you need that extra financial cushion for unforeseen expenses. Even when expenses are planned but you are short of cash, it can be very helpful.
Let us look at the benefits of taking a personal loan.
Versatility – One of the major advantages of personal loans is that they can be used for various purposes. Unlike housing or education loans, personal loans have minimal restrictions on the use of funds.
Following are some of the ways you can use personal loans.
- Wedding expenses
- Medical expenses
- Vacation costs
- Relocation costs
- Festive and occasion festive
- Home construction/renovation expenses
- Emergency expenses such as repair of your car
- Expenses incurred on purchasing/repairing gadgets
- Kids’ school/college expenses
- Business expansion/continuity expenses
- Paying off old debt
Minimal documentation – The documentation process for a personal loan is contactless and paperless. The minimum documents that are needed can be uploaded online. If needed, some banks provide doorstep pick-up services also.
No collateral/guarantee required – Being an unsecured loan, there is no collateral or guarantee needed for a personal loan.
Flexible tenure of payment – Most lenders provide flexible tenure for repayment and you can choose according to your finances.
Quick disbursal – Most personal loans are disbursed within 3 working days. The documentation is minimal and quick. This is very helpful when you are in dire need of funds.
Debt consolidation – The interest rate on a personal loan is generally lesser than that of a credit card. You can use the personal loan to pay off your existing debts.
Rate of interest – Personal loans offer a better interest rate than credit cards. In that sense, they will be cheaper as a loan offer.
Improve credit score – Paying off your personal loan dues on time will eventually build up your credit score. Paying on time is considered good credit behavior by credit bureaus.
Key highlights of a Personal Loan
- Personal loans are usually offered by banks to existing customers.
- Personal loans are unsecured loans which means you do not need a security/guarantee to obtain the loan
- Personal loans have flexible repayment tenure usually ranging between 1-5 years.
- Personal loans have a flexible end-use. They can be used for various purposes like medical expenses, wedding expenses, home renovation expenses, vacation expenses, education funding, paying off a higher-interest rate loan, purchase of electronics, etc.
- Personal loans generally have a quick disbursal time as the documentation is minimal.
- Personal loans need minimum documentation as it is generally offered to existing customers and the bank will already have their details.
Leading Banks and their Personal Loan Offerings
|
|
Loan amount |
Interest Rate |
Processing fee |
Payment tenure |
Credit score needed |
|
Up to Rs. 40 lakhs |
11% to 21% |
Up to Rs. 4,999 |
12-60 months |
750+ |
|
|
ICICI Personal loan |
Rs. 50,000 to Rs. 25 lakhs |
10.75% to 19% |
Up to 2.5% + GST |
12-60 months |
700+ |
|
IDFC Personal loan |
Up to Rs. 1 crore |
10.49% onwards |
Up to 3.5% |
Up to 60 months |
700+ |
|
Rs. 24,000 to Rs. 20 lakhs |
10.55% to 13.55% |
1.5% + GST |
6-72 months |
650+ |
|
|
Rs. 75,000 to Rs. 35 lakhs |
10.99% to 24% |
2.75% + GST |
Flexible |
750+ |
|
|
Kotak Personal loan |
Rs. 50,000 to Rs. 25 lakhs |
10.99% onwards |
3% |
12-60 months |
750+ |
|
Citibank Personal loan |
Rs. 10,000 to Rs. 30 lakhs |
10.5% to 14.99% |
2.00% |
12-60 months |
Not disclosed |
|
Rs. 75,000 to Rs. 15 lakhs |
16% to 36% |
2% to 5% |
12-60 months |
750+ |
|
|
Standard Chartered bank Personal loan |
Up to Rs. 50 lakhs |
11.49% onwards |
Up to 2.25% |
12-60 months |
650 |
|
Bank of Baroda Personal loan |
1 lakh to 20 lakhs |
10.20% to 17.55% |
1% to 2% + GST |
48-84 months |
701 |
Conclusion
Personal loans are an easy way to get finance when you need them. They are disbursed quickly and need minimal documentation. Personal loan interest rates are generally lower than credit card interest rates. Personal loans are also helpful in consolidating all debt into one. Personal loans are generally pre-approved and can be used for a variety of uses.
FAQ of Top 7 reasons to finance your big purchases using a personal loan
1:What are some of the reasons why customers get a personal loan?
Debt consolidation, lower interest rates, moving costs, home renovation, wedding expenses, education expenses, vehicle financing, vacation costs, etc. are some of the reasons why personal loans can be used for.
2:What is the documentation needed for a personal loan?
A personal loan is usually pre-approved and hence does not need too much documentation. The whole process is contactless and paperless and can be completed online.
3:What factors affect personal loan eligibility?
Personal loan eligibility is affected by age, credit score, monthly income, debt-to-income ratio, employment status, lender relationship, etc.
4:What are the eligibility criteria for a personal loan?
To apply for a personal loan, you should be a minimum of 21 years of age and a maximum of 60 years.