27 Oct Reasons to Apply For Personal Loan
A loan is a very common term in the world of finance. People usually take loans to tackle critical or emergency situations that may occur at any point in life. Loans are also used for major purchases, investments, and so on. Besides, the lending and borrowing of money are crucial to the economy of a country. In this blog, we will discuss the personal loan, a popular loan type, and the reasons to apply for a personal loan.
What is Personal Loan?
A personal loan is a kind of unsecured loan that gives you leeway in times of current financial circumstances. You gain access to instant cash as the lender provides you with the flexibility to use the said amount as per your need without any limitations. While availing of a personal loan you do not usually require testifying any security or collateral. Although unsecured personal loans display a higher interest rate, it is still less than what private lenders charge. Rather than borrowing money from friends and family, most people have referred to personal loans in the past few years.
What is a Personal Loan Calculator?
A personal loan EMI calculator helps you to figure out the exact EMIs (Equated Monthly Installments) and the amortization schedule of your loan repayment over a period based on the loan amount, tenure, and rate of interest. With the help of this calculator, you can calculate the sum to be paid monthly with its interest proportion and the outstanding balance. Let us now have a look at the list of loan purposes.
What Are The Reasons to Apply for Personal Loan?
Unlike the secured loans, personal loans have the advantage of being used for a wide variety of purposes. The points given below can be the answer to the question of the best reason why I need a personal loan to tell the bank.
Consolidation of Debt
If you are managing the EMIs of several small loans together, you can use a personal loan to consolidate your debts. It is not at all easy to handle numerous EMIs with a high-interest rate and then keep up with the remaining principal amounts. However, you can combine all the outstanding balances into a single rate of monthly interest by using a personal loan to pay off other multiple loans. You’ll be able to simplify your monthly finances and bring stability to your budget by this grouping of debt.
House Renovation
Taking a personal loan would be an ideal choice if you wish to pay for remodeling the architecture of your house, undertake any house repairs, or buy home equity but don’t want to face the trouble of home equity loans. You can opt for a personal loan without using your home or any other thing as collateral. This way it is less risky and besides, you don’t have to pay a substantial amount of cash in one go.
Medical Emergency
Personal loans can come to your aid in times of unexpected medical emergencies if you don’t have enough funds to rely on. You can apply for a personal loan to pay for the final expenses of your loved ones as funerals can be quite expensive. Also, you can use the loan to finance medical expenses that include surgery, treatments, medications, medical travel, etc. which can be difficult to handle even if you have the best insurance coverage.
Wedding
It is a good idea to avail of a personal loan to meet the heavy expenditure of a big fat wedding. No doubt that weddings are one of the most important events and people do spend wholeheartedly on their or their children’s wedding. But the occasion sometimes draws a lot of unforeseen expenses as well. The loan can be used for high-end items like quality dresses, venue, engagement rings, etc. as well as for moderate charges like photography, flowers, etc. This way you can prevent the depletion of your savings and experience your dream wedding.
Vacation/Holiday
Taking short breaks amidst the monotony of life has become a prerequisite to provide a breathing space to our stress levels. However, planning a good long holiday like a trip with friends, luxury cruise, or honeymoon, etc, can be money-grubbing. If you don’t have enough funds, you can go for a personal loan to plan the vacation that you have been dreaming about.
Credit Score Improvement
Since it is easy to repay a personal loan as compared to others, you can take loans in small sum and return the same within the granted timeframe to augment your credit score. Credit scores are mainly based on your agility of loan and credit card repayments. If you have an improved score and creditworthiness, your chances of applying for a higher loan in the future will increase.
Higher Education
Regular education loans pose certain preconditions and constraints like getting admission to a specific college or institution. It even gradually becomes a burden for the students because of its inflexible repayment provisions. In that case, you can always avail of a personal loan to pursue further education. The short tenure and affordable interest rates make it an easy option.
What Are The Reasons For Personal Loan Rejection?
You might face rejection when it comes to your loan application process for the following reasons:
- Lower Income: An appropriate regular income is one of the most vital eligibility criteria for a personal loan application to process. In case you don’t have a decent income or if it is volatile, you will get rejected.
- Lower Credit Score: Lenders always check the negativity of your credit score before offering you a loan. If you are enough creditworthy and have a healthy score of 700 or above, you are most likely to get a personal loan.
- Pending Debts: Your chances of getting a personal loan decreases if you have several existing debts going on. It gives a wrong impression of your financial profile.
- Unstable Job: Banks consider people with a stable employment history as worthy of a loan. If you have a background in quitting or changing jobs multiple times, your application will get rejected.
- Inaccurate Documentation: The personal details in the application should be accurate otherwise it will not be verified by the lenders. You should double-check the information you provide.
Does The Reason For A Personal Loan Matter?
Keep in mind that your loan purpose has a significant impact on your interest rates and terms. It can be higher or lower based on what you need the loan for. Besides, some lenders target specific niche customers like borrowers with credit card debts. So, the purpose of your loan is also directed to the lender type. Hence, the reason matters a lot. To get the best deal do compare all these terms between the lenders.
What Can’t You Use A Personal Loan For?
While there are so many reasons to apply for a personal loan, there are some specific things that you should restraint yourself from:
- You should not take a personal loan on behalf of any other person. You would be solely responsible for paying back the debt in case the other person fails to repay.
- Issuing any type of loan for gambling or investing is considered futile as there are high chances of losing the money.
- You should avoid placing a deposit on your property with the help of a personal loan.
- You also should not borrow money to fund your day-to-day living costs.
How to Apply For Personal Loan?
You can apply for a personal loan in many ways. Some of them are:
- Branch Application: You can request a personal loan at the nearest branch of your bank. A relationship manager will be assigned to you who will clarify the entire process.
- Online Application: You can take the advantage of paperless applications and submit the required data and documents to apply for a personal loan online.
- Phone Banking: You can carry out your inquiry about a personal loan with your bank, over the call.
- Email Banking: You can even email your bank to apply for the loan. The bank will take the application forward via email and phone.
What Questions Do You Have To Answer Before Getting a Personal Loan?
Lenders ask a few questions before giving the money to check if you are trustworthy. So make sure you give your best answers to get a loan.
Why Do You Need The Money?
– Your reasons should be genuine enough.
Can You Pay Back The Loan?
– You should be one hundred percent sure before borrowing that you will be able to make every repayment by the deadline.
How Long Will You Take To Pay Back The Loan?
– You need to analyze beforehand how long you’ll in debt and how will it affect your finance.
What Are The Terms?
– You should not consider applying if you don’t understand terms like annual percentage rate, interest rate, prepayment penalties, etc.
Tell Me About Your Personal Credit.
– As mentioned above, your creditworthiness matters.
Conclusion
To conclude, personal loans are a great alternative to finance multiple expenditures with a reasonable rate of interest and without securities or collateral. Remember that, your solvency is a determining factor in generating the loan. As you can see, there are a variety of grounds or reasons to apply for personal loan but it is your solemn duty to pay back the loan responsibly. Lastly, to avoid debt for a long time do the right research
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