A personal loan is one of the most popular loans in India. Many leading banks and NBFCs in India offer a quick personal loan to their customers. If you are thinking to apply for a personal loan, we suggest you to know all the pros and cons of persona loan. Here you can read them below and make a right decision…
Pros of personal loan:
It’s a multi-purpose loan
A personal loan is also known as multi-purpose loan. The loan borrower does not require disclosing the reason behind taking the loan. You can take a personal loan to pay for your wedding, pay medical bills, sponsor your child’s education, have a luxurious trip, pay multiple utility bills, renovate your home or pay off credit card outstanding. Bank/NBFC would not ask you for the reason behind taking a personal loan. Thus it’s known as a multi-purpose loan.
Can improve credit score
Personal loan is the easiest way to build a strong credit score. If you pay all your personal loan installments on time, you can build a strong credit score. So in future if you are planning to take a bigger loan like any mortgage loan, you will need a strong credit score; which can be achieved by taking and paying your personal loan. So take a personal loan to improve your credit score.
Can negotiate interest rate
Personal loan is the only loan product where you can negotiate the interest rate. In other types of loans, banks/NBFC decides the interest rate and you do not get a space to negotiate the same. But in personal loan you are offered a range of interest rates and you can negotiate and get one as per your desire.
Quick approval and disbursement
The main reason for a personal loan’s popularity as it’s easily available. Almost all the leading banks and NBFCs in India offer a quick and instant personal loan for their customers. The application process is very simple. You need minimum documents to submit with your personal loan application. Once you submit all the required documents, your loan application is approved with 48 hours*. The disbursement takes place immediately within 24 hours*. This way you can tender your emergency needs and their expenses with an easy personal loan.
No collateral required
Personal loan is a type of unsecured loan. As it’s not a type of mortgage loan, you do not require providing any collateral. Banks and NBFCs approve a personal loan based on the loan borrower’s credit score, financial history, current financial obligations and the capacity to pay back the given loan amount. That’s why personal loan does not require any collateral.
Cons of personal loan:
High interest rate
As personal loan is a type of unsecured loan, it does not require any collateral. Thus the banks and NBFCs charge higher interest rate as no mortgage is given. The interest rate in a personal loan starts from 14.75% onwards*.
Strict eligibility criteria
The banks and NBFCs have very specific and strict eligibility criteria when it comes to personal loan approval. If you do not fit into the criteria, your personal loan application might get rejected. You can check your personal loan eligibility here.
Can have adverse effect on credit score
As mentioned above, personal loan is the best way to build a strong credit score. But if you miss even one EMI or decide to pre-pay or part-pay your personal loan, it can affect your credit score badly. You may have to pay extra fees for missing out an EMI and pre/part payment of your personal loan. So keep reminders and pay your decided personal loan EMIs on time.
Apply for an instant personal loan