Unlocking the Benefits of Personal Loans

Unlocking the Benefits of Personal Loans - Unity Bank

Personal

5 min read | 10 months ago

There is a massive demand for quick personal loans these days. More Indians, especially young professionals and families, rely on these loans to fund diverse requirements. These include medical emergencies and higher education costs to travel, home renovations, gadget purchases, and more. Hence, knowing some of the crucial benefits of personal loans is vital.

Here is a guide to the same in this article.

Seven Benefits of Personal Loans

Along with finding a reputed personal loan bank, you should also keep an eye on the terms and conditions. Note the eligibility criteria and interest rates as well. But what about the benefits of these loans? Here are some of them.

Convenient and minimal documentation: Most quick personal loans have minimal documentation requirements. It is a welcome change from conventional loans that require lengthy paperwork and formalities.

Fast disbursal: Lenders usually disburse instant personal loans in hours. If you fulfil the eligibility criteria and meet the requirements, you may get the funds swiftly without any hassles.

Zero Collateral: Personal loans are unsecured forms of credit. It means that you do not have to provide security or collateral to obtain them.

Helps with consolidating debts: If you have pending credit card debts and other loans, you can take a personal loan to consolidate the same. It will help you repay high-interest debts swiftly and boost your credit score. You do not have to keep track of multiple repayments. A personal loan with a convenient tenure and comfortable interest rate is all you need.

Dynamic usage: One of the most crucial benefits of personal loans is that you can use them for any purpose you feel fit. You do not have to demonstrate any specific purpose to the financial institution while applying for the loan.

Improve your credit score: If you have never taken a loan before and do not have a credit score, then a personal loan is a good option. It will help you build up your credit history and maintain a high credit score (provided you make timely repayments). It will help you get loans conveniently in the future. At the same time, those with slightly lower credit scores can improve them by taking and repaying personal loans in a disciplined way. They can also use these funds to consolidate other debts.

Flexible repayment tenures: Another benefit of choosing a quick personal loan is the flexible tenure options. You can select tenures up to 36 months or less, depending on your convenience. Some lenders may offer longer tenures, subject to their policies and your eligibility.

So how do all these benefits pan out in the real world?

Examples or Case Studies Illustrating Each Benefits

Here are some instances or case studies that help you understand all these benefits of quick personal loans.

Minimal Documentation: While applying for a personal loan, you will only have to upload a few documents. Most lenders will ask for your age proof and identity and address proof for KYC purposes. You will also have to provide your employment and bank details (statements for the last 3-6 months).

Zero Collateral: Suppose Ravi needs funds for a new motorcycle valued at Rs. 2 lakhs. In this case, he can apply online for a personal loan without providing collateral/security. He only has to check whether his monthly income is sufficient as per the bank’s guidelines to repay the loan. If it is, he will not have to depend on collateral like gold, insurance policies, property, or investments to get the loan.

Debt Consolidation: Rajesh is a professional with credit card debts of Rs. 3 lakhs and other unsecured loans of Rs. 2 lakhs with multiple repayment dates and high-interest rates. His total EMI works out to almost Rs. 13,247 per month, assuming an average interest rate of 20% and a tenure of 5 years. In this case, if he opts for a personal loan of Rs. 5 lakhs with an interest rate of 14% for the same duration, he can clear these debts and repay a single loan. His monthly EMI will also be lower at approximately Rs. 11,634. Hence, he will save money on his monthly outgo.

Any-Purpose Usage: A personal loan bank will not ask you about the loan purpose. You can take these funds for home renovations and repairs or to buy new appliances or gadgets. Some also take them for travel or higher education costs. They may also be handy in medical emergencies or even to pay for weddings.

Improving credit scores: If you have a low credit score, a personal loan will help improve it steadily. It represents instalment credit as opposed to revolving credit like credit cards. So, if you have only credit cards in your credit report, your score will be lower. If you diversify your credit mix by adding a personal loan, your score will improve gradually. You can also take a personal loan and build your credit history. Repaying it on time will help you maintain a high credit score.

Flexible tenures: Siddhi is an investment banker who needs Rs. 2 lakhs to pay her MBA course fees. She has an option of breaking her SIP investments that have amounted to Rs. 1.5 lakhs, along with using her savings of just above Rs. 50,000 for the remaining amount. However, she has an income of Rs. 40,000 each month. She can thus apply for a personal loan of Rs. 2 lakhs for a tenure of 36 months without depleting her savings or investments. Assuming an interest rate of 12%, she can comfortably repay the EMI of Rs. 6,643 (approx.) each month.

Conclusion

In conclusion, it is crucial to state that you should borrow responsibly without going over the top. Choose a personal loan amount that meets your requirements and select your tenure carefully. Repay the loan promptly without any defaults to maintain a high credit score.

FAQs

About Unity Small Finance Bank

Unity Small Finance Bank is committed to making banking simpler and more accessible for everyone. Our services include Savings Account, NRI account, Current Account, Fixed Deposits, and Personal Loans offering flexible tenures and attractive interest rates. We also offer financing options like MSME Loans and Microfinance to support businesses and underserved communities. Learn more about Unity Small Finance Bank here.